Power off

Published by rudy Date posted on April 10, 2012

Mindanao is now experiencing frequent power failures. Given the nature of the problem, the situation is expected to get worse before it gets better. That should not come as a surprise. As early as two years ago, energy experts have been predicting such power outages in Mindanao and the Visayas. Yet, the government has failed to do its job.

The generation of new power supply capacity takes a lead time of at least five years, much longer if it’s hydro or geothermal. The demand for power is a derived demand. It’s driven by some assumptions of the growth of the economic and the sources of such growth.

By now, a decision should have been made on how fast or slow economic growth would be, and on which part of the country such growth will take place. By now, a decision should have been made on the government’s preferred mix of energy source: how much will be imported, how much will be indigenous, how much will be for base supply, and how much for peak ones.

By now, the trade-offs between various supply options should have been considered. Power barges are quicker to deliver but very expensive. Hydroelectric takes a longer time to deliver, are dependent of the weather cycle (El Niño and La Niña), but is cheaper. Geothermal power supply is also relatively cheaper and sustainable, while indigenous natural gas is relatively cheaper but exhaustible, though it comes in sufficient quantity.

How important is Mindanao in the development process?

The Aquino III administration has to make up its mind on what its appropriate role should be in the country’s economic development. If Mindanao is such a critical piece in the overall economic grand plan, then providing Mindanao with a reliable, affordable and sufficient power supply should be on top of its priorities.

The power barges are short-term, band-aid solutions, made inevitable by past neglect and indecision to address this widely anticipated problem. The Mindanaoans have no choice but embrace this very costly option. But power supply reliability has be secured first, while reliable, affordable and sufficient power supply at basis has to come next. The reverse is not technologically possible.

The blame game has started and will continue every hot, energy-deficient, day. This should stop, but only if the government is willing to take on the challenge of coming up with long-term, doable solutions.

The government has a role in providing for an energy infrastructure highway that would link Mindanao to the rest of the country, solely or jointly with the private sector. I remember there was a plan as early as during the first Aquino administration for establishing a link that would connect the Visayas to Mindanao. The Visayas-to-Luzon link has been established, but the Visayas-to-Mindanao link remains an elusive dream.

The government has a role in rationalizing the development of various sources of energy through its power to administer energy prices. The state-owned National Power Corp. and National Grid Corp. of the Philippines may dictate the rates and which areas [are] to be supplied with or deprived of electricity.

At present, the electricity generated from coal was priced at P6 a kilowatt-hour, while the power from diesel and power barges cost P12 a kilowatt-hour. Geothermal power cost P2.80 while hydrothermal power cost only P2 a kilowatt-hour.

It is clear that a profit-maximizing energy firm would have the incentive to invest in short-gestating diesel and power barges and avoid the more expensive but less profitable investment in geothermal and hydroelectric energy. But from the public policy viewpoint, it is clear which type of investment in energy generation should receive government incentives and which shouldn’t.

CHOOSE THE ‘BEST’ MIX OF SOLUTIONS, FORGE AHEAD

There are proposals to rehabilitate the Agus-Pulangui hydropower plants. If they run at full capacity they can generate as much as 600 megawatts. There are proposals to enhance the geothermal capacity of the Mt. Apo geothermal plants. And there are proposals to set up coal-fired plants in the region. All these proposals should be heeded.

To be avoided are untested proposals that might fatten private sector’s pockets but might only drain the public purse. On top of these to-be-avoided list is the jatropha plant project. Not too long ago, under the previous Arroyo administration, the government set aside P1.4 billion for the jatropha project. Military camps even set aside land for jatropha plant, locally known as “tuba-tuba,” in a program meant to take advantage of the plant’s potential as a biodiesel source. To date, P1 billion has been spent, with no discernible evidence that the project might work.

The Aquino III administration should make up its mind on what to do with the serious energy shortage in Mindanao. It has to start with a recognition that a problem exists. A denial might only reinforce fears that the government is unable or unwilling to find a permanent cure. From such admission, some solutions might flow. Government authorities should then choose the “best’ combination of fixes, and implement it diligently, steadfastly and tenaciously.

The choice of the solution should be guided by what’s good for the people of Mindanao and the entire country, not by what’s good for the opportunistic, short-term power suppliers who are now in a celebratory mood, even as the Mindanaoans and the entire economy suffer.

Benjamin Diokno is professor of Economics at the School of Economics, University of the Philippines(Diliman). He was formerly secretary of budget and management in the Estrada Cabinet and undersecretary for budget operations in the Aquino 1 administration. –Benjamin E. Diokno, Businessworld

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