Mindanao Power Crisis: Vicious Cycle

MANILA, Philippines - The wrangles over cost impacts, exacerbated by political grandstanding, have been bedeviling the power supply crisis being experienced by Mindanao consumers.

Sure, something went amiss that's why the recurrent brownouts are happening. But stakeholders must realize that continuing the blame-game will not solve the problem.

Once and for all, this should be the time to include public conscience in the debates and discussions in determining the real cause of the Mindanao problem; as well as in exploring the short-term, mid- and long-term solutions.

It does not matter much really if the brownouts are just one to three hours as defensively stated by Malacañang; or if these are stretching up to eight hours as claimed by other quarters. The fact remains that Mindanao consumers are gnashing their teeth out of frustration on these incidents of power outages. Worse, the region's economic gains are also in danger of being wiped out if the more permanent solutions are not put in place.

Opinions as to what triggered the grid's power dilemma have been varied: some quarters said the Department of Energy (DOE) failed to plan on how to avert the crisis; while others opined that the defiance of the electric cooperatives to enter into supply contracts left their consumers groping in the dark with the protracted power interruptions.

The rest pinned the blame on the government (or the National Economic Development Authority) on its delayed action on the approval of the rehab of Unit VI of the Agus plant; and that the Power Sector Assets and Liabilities Management Corporation (PSALM) slept on its job on the mandated privatization of the power barges - that if based on the instructions of Energy Secretary Rene D. Almendras, this could have been done as early as last year so the government can call on its transfer when additional capacity is needed by Mindanao this summer.

Groups with more 'savage imaginations' went as far as inferring a "conspiracy theory" between the government (the DOE in particular) and the power investors - that they supposedly invented the 'crisis scenario' in the grid to justify their proposed power projects. If this is true, these investors will just be throwing away their billions because a "makeshift crisis" cannot be kept for long. Who will buy their generated electricity then if there is really no shortage in supply?

The 'devil' is in the rates

As far as the Mindanao crisis is concerned, this is already some sort of a déjà vu. We have seen this same situation happening in the summer of 2010. The real question now is: have we learned our lesson from the past? The answer, it seems, is NO!

And since the problem recurred, what came next came were offers of myriad solutions by various sectors. Advocacy group Greenpeace surmised that renewables could solve Mindanao's problems. Wittingly - or unwittingly, this has been getting support from politicians, with some proposing that solar power is one of the 'easiest to install' options.

Suddenly, there have been rise in the number of pseudo experts trying to dip their hands as to how Mindanao'a dilemma can be solved. No problem with that if they are really trying to help, but they must understand that this is a very complicated and technically-challenging issue just for it to be confined as publicity stunt for those setting their sights on the "road to 2013." Or to be more blatant about it, to exploit the issue so they can gain brownie points for next year's elections.

In weighing all the proposed solutions, everybody appears to be in need of "truth serum" to ascertain what really works and what won't work as options to finally end the Mindanao crisis.

Renewables will definitely have their place in the country's energy mix. But lining them up as solution to the Mindanao crisis has to be restudied. Solar, in particular, is also an intermittent energy source. Plus, what the proponents have not been saying is that they are eyeing to pass on the cost-burden for the Mindanao solar installations even to the electricity consumers in Luzon and Visayas.

The DOE, for its part, opted for the more traditional and tested option - running the power barges and call on the capacity of the embedded power generators to be made available to the grid during peak hours (the second partly calls for demand side management or DSM approach). That power barge solution has been difficult to accept for Mindanaoans though, especially so since they are used to paying the lowest electricity rates in the entire country for the longest time.

An estimated P0.50 per kilowatt hour increase in their bills had been enough to put the DOE at the receiving end of bitter criticisms. The energy secretary has not also escaped the wrath of the afflicted consumers - as well as some politicians, who went as far as fiercely asking for his resignation.

As a supplementary measure, the DOE also issued a Circular enjoining the cooperation of all power generators to make their capacities available (and adhere to the load-to-maintain matrix); and for the distribution utilities to nominate their supply requirements so system operator National Grid Corporation of the Philippines (NGCP) can efficiently adjust on its dispatch schedules.

The Energy Regulatory Commission (ERC), has in turn, issued an underpinning policy that enforces penalty to violators of the DOE Circular.

Failed planning or failed implementation?

In the scheme of things, Mr. Almendras is definitely not faultless. In his interviews with the media, he assumed "accountability" and already assumed part of the blame on the power crisis befalling Mindanao. Yet, he is not entirely receptive to criticisms that he has not done his job to invite power investments in Mindanao or his department has not planned well to preclude the inevitable.

He told his critics that "contrary to allegation of inaction, the DOE has consistently taken measures to address the emerging concerns in Mindanao."

He straightforwardly stated that he is ready to quit his post anytime, but it is not on the basis that his detractors are just telling him to do so. "I am not going to resign just because people are saying that I have not done anything for Mindanao. That is not true. We have cornered investments for Mindanao that will solve its longer term dilemma on power supply," he said.

The energy secretary enumerated to the longer term solutions they have worked on, such as the capacity additions of 500 megawatts from greenfield coal-fired plants which shall be coming on stream by 2014 and 2015. These comprise of the 300-MW project in Davao of the Aboitiz group; and the 100-MW Saranggani and another 100-MW Zamboanga coal plants of the Alsons group of the Alcantaras.

His preference for coal technology to address the baseload capacity needs of Mindanao has also drawn the harshest remarks from his detractors. For it, he has been labeled a "coal boy" and that also ignited the "coal-versus-renewables debate" in the domestic energy scene.

As to the short-term remedies, Almendras had some solutions in mind even during his early days in office. As early as 2010, he wanted the power barges remaining under PSALM's charge to be privatized and require the buyers to relocate them so they can temporarily augment Mindanao's supply. Plus, he had asked state-run NPC to enforce the rehab of the Agus plant so its capacity can be uprated.

In the uncirculated (or unpublished) Power Development Plan (PDP) of 2011, the energy department reiterated the need to implement these short-term solutions; along with the longer-term policy directions of studying the appropriate electricity model for Mindanao for the establishment of modified Wholesale Electricity Spot Market (WESM) in the region; and revisiting the Leyte-Mindanao transmission interconnection project.

As an added solution, the same PDP also flagged the need "to dredge and clear obstruction at the Agus-Pulangui river system to improve water levels for the hydro plants.

What happened to the plans then? How come that in March, the DOE appeared squeezing blood out of stone so it can stave off power interruptions of longer durations?

The fumbles of its attached energy corporations finally came in the open. What were carefully-crafted as solutions never really moved from the drawing board. When the crisis went out of proportion, it was only then that concerned energy officials scrambled to finally implement them.

Solutions take longer time to implement

For two of the short-term solutions presented by the DOE to the Joint Congressional Power Commission (JCPC), energy officials admitted that it will take time before these can be implemented - short of saying that these cannot be lined up anymore to ease portended worsening power shortages in the Mindanao grid this year.

The National Power Corporation (NPC) issued its own press statement detailing plans for the rehab of the Agus VI generation plant. With a capital outlay of P2.6 billion, this is targeted for completion until 2014.

For the power barges, the energy department came up with a less-confident statement that the facilities may need repair prior to putting them in operation upon transfer to Mindanao - a thing that asset-seller PSALM would have assessed early on so government officials will not be giving false hope that there are alternatives, when in reality, there are actually none.

The DoE, in particular, has cited a 2010 study by NPC that the relocation of the power barges will require P740 million. "We emphasize that operating these plants will also require its upgrade because of the condition of the PB (power barges)," the department added.

For the planned dredging at Pulangui River, energy officials emphasized that it already released the P3.0 billion budget for it. This is the clincher: "The reforestation of the surrounding areas will require time."

With all of government's current pronouncements, Mindanao appears to be bracing for a power crisis until next year.

But this is the real bottomline: unless Mindanao learns to pay the true cost of power and judiciously weigh the solutions apt to ensure its energy security, the vicious cycle of brownouts in the grid will never see its end.

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