Energy poverty

We have the highest energy costs in all of Asia — maybe even the world. That should be a consuming concern for government. More and more sectors are worried that reducing energy costs ranks very low in this administration’s priorities.

Last week, business groups, trade unions and economic advocacy groups such as the Foundation for Economic Freedom (with which I am affiliated) banded together to demand a strategic plan from government for bringing down energy costs. No such plan exists.

Energy costs are now a major poverty-inducing factor. As energy costs rise, consumers are forced to reallocate their household expenses away from other essential needs such as food and education. The phenomenon is called “energy poverty.”

At the moment, of course, the authorities are scrambling to ensure enough generating capacity to meet rising demand. Nothing, of course, is more expensive than having no power at all. For too many years, however, we have been in this mad scramble to meet rising energy demand that we accepted higher costs for power.

The key turning point towards the dysfunctional and inefficient energy infrastructure we endure happened in 1986.

After the Marcos regime was overthrown, the new government led by Cory Aquino decided to mothball the Bataan Nuclear Plant. For good measure, and for some unfathomable reason, Cory also abolished the Ministry of Energy, the government agency in charge of strategically planning our energy future.

The Marcos government’s energy plan was anchored on two major but controversial projects: a series of hydroelectric dams along the Chico River and the Bataan plant. After both were scrapped by the Aquino government, no alternative plan for baseload power capacity was put together.

By the late eighties and early nineties, the country was plunged into darkness. The economy dramatically contracted as the brownouts stretched to cover most of the working day.

When Fidel Ramos took over as president, his first priority was to restore energy sufficiency. He sought emergency powers from Congress to accomplish that goal within the first year of his administration.

We did achieve energy sufficiency — albeit at great cost to the consumer. Investors were willing to come in and put up power plants only on a “take or pay” basis. The quickest things that could be put on line were oil-fired plants that produced energy at the highest cost. They also had large carbon footprints.

After oil-fired plants, the next quickest thing to build were coal plants. These, too, had large carbon footprints. There was no political consensus to rehabilitate the Bataan nuclear plant, the cheapest source of energy. Nor was there political will to continue with the Chico River hydroelectric project, the cleanest possible source of power.

Now, claiming the mandate of the law on renewable energy, government is considering subsidizing renewable energy projects. The subsidies, of course, will be shouldered by all power consumers. It will push up energy costs in this country beyond all economically tolerable levels.

The Foundation for Economic Freedom is opposing the proposal for “feed-in tariffs” to subsidize expensive renewable energy programs. That will only bring up energy costs even more and encourage white elephant projects undertaken while the costs of technology for renewable energy are at their highest.

At the present energy cost regime, there is no way we can attract serious direct investments into our economy. The economic opportunity costs will simply continue to pile up until we are able to bring down energy prices to acceptable benchmarks. –Alex Magno (The Philippine Star)