Brownie points out of ‘green’ energy

Finally, nearly four years after the passage of the Renewable Energy Act, the Congress-approved law gets off the ground, that is, on a hopeful note. President Benigno “Noynoy” Aquino III unveiled his administration’s roadmap to move the Philippines toward a more sustainable use of clean or “green” energy in the ceremonial launch of the National Renewable Energy Program (NREP) last week.

The President, assisted by Department of Energy (DOE) Secretary Rene Almendras Jr., formally laid down the Philippine government’s bid to fully implement the country’s transition toward a “green economy” through the shift to more environment-friendly fuel and power sources.

In launching the NREP, President Aquino obviously seeks to downplay concerns regarding the economic realities that his administration has to deal with. They must assure not only Filipinos but also the foreign business community here that his administration would not allow runaway electricity rates to be imposed on them as the Philippines increases its use of renewable energy sources like solar, wind, ocean and hydro.

The capacity to meet the country’s growing electricity needs is definitely a major challenge at hand for the Aquino administration. But the high cost of putting in place enough “green energy” to keep pace with the global trend puts much pressure on the government to realize this in the long run. Before we can fully enjoy clean but reasonably priced electricity, we have to deal with the birth pains of paying for the cost of start-up operations for such a capital intensive shift to renewable energy sources of power.

The shift to “green energy” is also complicated by the ambitious economic growth targets put in place by President Aquino and his economic managers. The President’s economic managers set at least 8 percent growth in gross domestic product (GDP) annually as target. They calculated that by this much GDP growth rate, millions of “poorest of the poor” Filipinos would hopefully be pulled out from their endless cycle of poverty by the end of P-Noy’s term in June 2016.

To make this possible, P-Noy has to first deal with the serious realities on the ground. To push economic growth by this much in the next five years, the Aquino administration has identified huge amounts of energy and infrastructure spending under the so-called Public-Private Partnership, or PPP for short. The PPP is a priority list of huge investments from the private and public sectors to meet the country’s requirements while ensuring better quality of life for Filipinos through lower cost of living and a cleaner environment.

The Joint Foreign Chambers of the Philippines blamed the high cost of electricity in the country for the reluctance of foreign investors to locate their businesses or expand their existing operations here. With labor costs in neighboring Asian countries becoming more and more competitive, the high cost of electricity adds to the woes of the Philippines to attract foreign investors. Worse, investors may ultimately relocate their businesses if the cost of doing business here does not make them competitive.

The International Finance Corp. of the World Bank Group also noted that electric cooperatives in the Philippines are undercapitalized and thus provide poor and unreliable service. So it’s no surprise why there is unstable power supply in many rural areas around the country.

A reliable supply of electricity in rural areas for households and small and medium enterprises (SMEs) is necessary in creating economic opportunities. It is estimated that the poor performance of electric cooperatives causes at least 10 percent productivity loss among SMEs. This inefficiency contributes to the high electricity cost.

How can the Philippines deal with the competitiveness issue when it is embarking on an ambitious “green energy” program without being clear how it would address the higher electricity cost in the short run?

President Aquino has to ensure the focus on renewable energy should be synchronized with his own economic growth targets. Daily blackouts now occur in Mindoro and intermittent power outages take place in Luzon and Mindanao due to the unreliability of old power plants of the National Power Corp. (Napocor), the bulk of which have already been privatized.

For the past 10 years since the Electric Power Industry Reform Act (EPIRA) was approved into law, many of these once state-run power plants were sold to the private sector as mandated. While EPIRA partially solved the financial problems of Napocor with the sale of its power plants, this, however, did not result in the construction of new power plants to put additional capacity on-stream.

A decade since EPIRA took effect, Mindanaoans suffered daily blackouts as a long dry spell caused by El Niño drained water supply in Mindanao’s Agus hydroelectric complex, and only the end of El Niño eased the low water level.

Even the new power plants reportedly being put up by Alsons/Conal owned by the Alcantara and Dominguez families, among the new projects promising to use the so-called “clean coal” technology being pushed as alternative to the costlier solar and bio-fuel energy sources, won’t be enough to cope with the expected increase in the demand for electricity in Mindanao.

Yesterday, President Aquino signed into law the amendment to the EPIRA, specifically extending for another 10 years the so-called “lifeline rate” provision, or subsidy on electricity consumption for low-income households.

Extending the “lifeline rate” proviso of EPIRA does not result in cheaper electricity, neither would it address the need to put in new and additional power capacity. Hopefully, P-Noy’s pursuit of “green energy” under NREP would do the trick.

Populist measures such as this may help arrest P-Noy’s dipping public satisfaction rating that went down to 46 percent as he marks his first year in office next week. P-Noy has a lot of making up to do from his personal high of 64 percent public satisfaction rating posted in November last year.

But could P-Noy win brownie points out of “green energy” that he vowed to pursue under NREP if it turns out to be much costlier for us? If he has to earn back public approval on his performance in office, P-Noy must make sure his vision for a “green economy” for the Philippines can be achieved at a reasonable price for power consumers like us. –Marichu A. Villanueva (The Philippine Star)