Overcapacity Could Worsen Mindanao Power Crisis
Mike Banos
May 28, 2006
Taxpayers could end up footing the bill for expensive power they don't yet need if the country's power development plan is implemented as scheduled.
Economist and power industry expert Maitet Diokno-Pascual claims in a study for WWF's power switch campaign that the Department of Energy's (DoE) power demand projections under the 2004 Philippine Energy Plan (PEP) was off by some 7,000 megawatts (MW), which could eventually cost Filipino taxpayers as much as $7.6 billion in unused capacity.
Pascual notes that at an average of $1-million per megawatt, there is already an excess investment of $5-billion in the power sector based on the current national surplus of about 5,000MW.
This includes foreign loans to Independent Power Producers (IPPs) (like the JBIC loan to Steag State Power, Inc. which is building the coal-fired power plant in Villanueva, Misamis Oriental) that would eventually be charged to the power consumers in addition to purchased power adjustments for electricity not actually used but committed by the NAPOCOR to IPPs, said Sustines Magallanes of the National Electricity Consumers for Reform (NASECORE) Cagayan de Oro Chapter.
"While the demand forecast model uses historical data and sales forecast from distribution utilities and has moved away from more abstract data such as GDP and elasticity figures, the process would be improved with full stakeholder participation," says WWF-Philippines Climate and Energy Campaigner Ina Pozon.
DoE claims the power development planning process now includes a bottom-up approach with the inclusion of data from distribution utilities, but Puzon said stakeholders should have a more direct, hands-on participation in the planning process and not merely be asked to validate demand projections in public hearings where data from a 15-minute power point presentation is all the data they have access to.
"We've been held hostage too long with talks of imminent power shortage," says Pascual. "DoE should fully disclose to the public all the details behind its demand forecasts for Luzon, Visayas and Mindanao."
Former NEDA Director General Cielito Habito, a board member of WWF-Philippines, echoes WWF's call for a multi-stakeholder approach to planning.
"This is the best means to minimize, if not avoid the errors of the past. By doing so, we would all promote wider ownership and accountability for whatever mistakes we may honestly make in the course of planning our future. But by doing so, we would also probably significantly reduce the scope for making such mistakes in the first place."
Energy consultant Dean De la Paz said "the IPPs do not trust the figures of the DoE forecasts and there is a need to go beyond these abstract economic concepts which don't reflect reality. In a sense, the participatory approach brings all stakeholders to the table, and bridges the disconnect that exists between government and the IPPs."
He cites the claims of STEAG State Power's TV ad which warns of an imminent 14 percent increase in energy demand for Mindanao.
"That is more than 200% of the (growth rate for the) country's Gross Domestic Product (GDP). Misamis Oriental must be the economic engine of the country," De la Paz said. The Philippines GDP in 2004 was 6.2 percent.
"We used data STEAG itself submitted to the Japan Bank for International Cooperation (JBIC), one of the foreign banks that is financing the project, yet we cannot see how STEAG came up with 14 percent," said BenCyrus G. Ellorin, spokesman for environment watch dog Task Force Macajalar.
Ellorin said the STEAG figures assume they would be the only new power plant to go on line in the Mindanao Grid for the period 2004-2013. But other data provided to Japanese Diet member Noburo Usami by the coal-fired power project proponents when they applied for financing with the Japan Bank for International Cooperation (JBIC) show other power projects coming on-stream for 2005-2014 (75MW in 2005 and 2006, 285MW from 2007 to 2014. (see tables below).
JBIC provided TFM a copy of their reply to Usami after the Japanese lawmaker sought an investigation into possible irregularities in the approval of the JBIC loan to the project.
The Philippine Energy Plan projects demand for power in Mindanao to increase by 11.8 percent for 2005 ? 2011 and actual increase in energy demand was three percent in 2003 way below the DoE's projected 9.8% increase for the period.
"For a much lesser cost of only $70-million, 270MW could be available in the next 18 months from the geothermal fields of Leyte," De la Paz said. "Compare that to the $300-million, 210 (net) MW Mindanao Coal-fired Plant and do the math," de la Paz said. "Another 70MW is readily available from the geothermal power plants in Mt. Apo, Davao."
"We should stop the talk of an impending power crises in Mindanao, in 2002, they were saying that if no new power plant is coming, by 2005, Mindanao will have 10 hour brown-outs, but do you have brownouts now?" de la Paz said.
Peak power demand in Mindanao this summer topped 1,100 megawatts but the NPC only managed to supply an average of 1,050 megawatts to Transco for distribution to the Mindanao Power Grid. As a result, whenever there's a glitch in the distribution system, power is cut in some areas as the grid seeks to balance the remaining available power throughout the delicately balanced system.
De la Paz believes Mindanao power crisis is not one of generation but transmission, since excess supply is found Northern but energy demand is growing fastest in Southern Mindanao, with no reliable means to transmit excess power where it's most needed.
"We are afraid that this talk of power shortage is a prelude to the entrance of new coal-fired power plants," Ellorin said. "We have learned that a Thai investor has expressed willingness to construct a coal-fired power plant in Iligan."
"Mindanao should not have problems with electricity if NAPOCOR (National Power Corporation) puts its resources where it is needed and government look for investors in renewable energy," said Ellorin said.
In fact, that is exactly how the National Transmission Corporation (TransCo) aims to address the projected growth of power needs in Mindanao, although Transco officials said the original cost of the interconnection project was $450 million, and not $70 as De la Paz believes.
The Leyte-Mindanao Interconnection Project is the final phase in the unification of the Luzon, Visayas and Mindanao grids. The 250 kV HVDC bipolar link will make available to Mindanao about 500 MW of power from Luzon and Leyte. It emanates from the existing Ormoc Converter Station in Leyte and terminates at Kirahon Converter Station in Northcentral Mindanao via Southern Leyte and Northeastern Mindanao .
A feasibility study commissioned two years ago by Transco to Japanese firm Chubu Electric showed it is feasible to trim down the estimated budget for the planned Leyte-Mindanao transmission line inter connection project to $ 275 million from the original $ 450 million by initially making a "one-way" interconnection that only permits the dispatch of load from Leyte to Mindanao.
Though the study showed it was not feasible to pursue the project due to the green light already given to the 210MW Mindanao coal-fired project; Alan T. Ortiz, TransCo president and chief executive officer, is now asking the Department of Energy to "revisit" the Leyte-Mindanao interconnection project because consumption trends indicate power demand and supply in the island would be reaching an "equilibrium position" by 2009 fueled by growth in Mindanao.
Ortiz said it should be more "cost-effective" to proceed with the interconnection project rather than look for private sector investors for new merchant plants in the island.
Parallel to this, Ortiz has also recommended DoE move up the proposed Cabalian geothermal power project in Leyte (200-300MW) to 2009-2010 (instead of 2014), so it could serve as anchor load for the link-up of the transmission lines.
Despite the DoE's continued indecision whether to push through with it, Ortiz said TransCo is committed to pushing the project as a key component in their ultimate goal to establish a single national grid.
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Economist and power industry expert Maitet Diokno-Pascual claims in a study for WWF's power switch campaign that the Department of Energy's (DoE) power demand projections under the 2004 Philippine Energy Plan (PEP) was off by some 7,000 megawatts (MW), which could eventually cost Filipino taxpayers as much as $7.6 billion in unused capacity.
Pascual notes that at an average of $1-million per megawatt, there is already an excess investment of $5-billion in the power sector based on the current national surplus of about 5,000MW.
This includes foreign loans to Independent Power Producers (IPPs) (like the JBIC loan to Steag State Power, Inc. which is building the coal-fired power plant in Villanueva, Misamis Oriental) that would eventually be charged to the power consumers in addition to purchased power adjustments for electricity not actually used but committed by the NAPOCOR to IPPs, said Sustines Magallanes of the National Electricity Consumers for Reform (NASECORE) Cagayan de Oro Chapter.
"While the demand forecast model uses historical data and sales forecast from distribution utilities and has moved away from more abstract data such as GDP and elasticity figures, the process would be improved with full stakeholder participation," says WWF-Philippines Climate and Energy Campaigner Ina Pozon.
DoE claims the power development planning process now includes a bottom-up approach with the inclusion of data from distribution utilities, but Puzon said stakeholders should have a more direct, hands-on participation in the planning process and not merely be asked to validate demand projections in public hearings where data from a 15-minute power point presentation is all the data they have access to.
"We've been held hostage too long with talks of imminent power shortage," says Pascual. "DoE should fully disclose to the public all the details behind its demand forecasts for Luzon, Visayas and Mindanao."
Former NEDA Director General Cielito Habito, a board member of WWF-Philippines, echoes WWF's call for a multi-stakeholder approach to planning.
"This is the best means to minimize, if not avoid the errors of the past. By doing so, we would all promote wider ownership and accountability for whatever mistakes we may honestly make in the course of planning our future. But by doing so, we would also probably significantly reduce the scope for making such mistakes in the first place."
Energy consultant Dean De la Paz said "the IPPs do not trust the figures of the DoE forecasts and there is a need to go beyond these abstract economic concepts which don't reflect reality. In a sense, the participatory approach brings all stakeholders to the table, and bridges the disconnect that exists between government and the IPPs."
He cites the claims of STEAG State Power's TV ad which warns of an imminent 14 percent increase in energy demand for Mindanao.
"That is more than 200% of the (growth rate for the) country's Gross Domestic Product (GDP). Misamis Oriental must be the economic engine of the country," De la Paz said. The Philippines GDP in 2004 was 6.2 percent.
"We used data STEAG itself submitted to the Japan Bank for International Cooperation (JBIC), one of the foreign banks that is financing the project, yet we cannot see how STEAG came up with 14 percent," said BenCyrus G. Ellorin, spokesman for environment watch dog Task Force Macajalar.
Ellorin said the STEAG figures assume they would be the only new power plant to go on line in the Mindanao Grid for the period 2004-2013. But other data provided to Japanese Diet member Noburo Usami by the coal-fired power project proponents when they applied for financing with the Japan Bank for International Cooperation (JBIC) show other power projects coming on-stream for 2005-2014 (75MW in 2005 and 2006, 285MW from 2007 to 2014. (see tables below).
JBIC provided TFM a copy of their reply to Usami after the Japanese lawmaker sought an investigation into possible irregularities in the approval of the JBIC loan to the project.
The Philippine Energy Plan projects demand for power in Mindanao to increase by 11.8 percent for 2005 ? 2011 and actual increase in energy demand was three percent in 2003 way below the DoE's projected 9.8% increase for the period.
"For a much lesser cost of only $70-million, 270MW could be available in the next 18 months from the geothermal fields of Leyte," De la Paz said. "Compare that to the $300-million, 210 (net) MW Mindanao Coal-fired Plant and do the math," de la Paz said. "Another 70MW is readily available from the geothermal power plants in Mt. Apo, Davao."
"We should stop the talk of an impending power crises in Mindanao, in 2002, they were saying that if no new power plant is coming, by 2005, Mindanao will have 10 hour brown-outs, but do you have brownouts now?" de la Paz said.
Peak power demand in Mindanao this summer topped 1,100 megawatts but the NPC only managed to supply an average of 1,050 megawatts to Transco for distribution to the Mindanao Power Grid. As a result, whenever there's a glitch in the distribution system, power is cut in some areas as the grid seeks to balance the remaining available power throughout the delicately balanced system.
De la Paz believes Mindanao power crisis is not one of generation but transmission, since excess supply is found Northern but energy demand is growing fastest in Southern Mindanao, with no reliable means to transmit excess power where it's most needed.
"We are afraid that this talk of power shortage is a prelude to the entrance of new coal-fired power plants," Ellorin said. "We have learned that a Thai investor has expressed willingness to construct a coal-fired power plant in Iligan."
"Mindanao should not have problems with electricity if NAPOCOR (National Power Corporation) puts its resources where it is needed and government look for investors in renewable energy," said Ellorin said.
In fact, that is exactly how the National Transmission Corporation (TransCo) aims to address the projected growth of power needs in Mindanao, although Transco officials said the original cost of the interconnection project was $450 million, and not $70 as De la Paz believes.
The Leyte-Mindanao Interconnection Project is the final phase in the unification of the Luzon, Visayas and Mindanao grids. The 250 kV HVDC bipolar link will make available to Mindanao about 500 MW of power from Luzon and Leyte. It emanates from the existing Ormoc Converter Station in Leyte and terminates at Kirahon Converter Station in Northcentral Mindanao via Southern Leyte and Northeastern Mindanao .
A feasibility study commissioned two years ago by Transco to Japanese firm Chubu Electric showed it is feasible to trim down the estimated budget for the planned Leyte-Mindanao transmission line inter connection project to $ 275 million from the original $ 450 million by initially making a "one-way" interconnection that only permits the dispatch of load from Leyte to Mindanao.
Though the study showed it was not feasible to pursue the project due to the green light already given to the 210MW Mindanao coal-fired project; Alan T. Ortiz, TransCo president and chief executive officer, is now asking the Department of Energy to "revisit" the Leyte-Mindanao interconnection project because consumption trends indicate power demand and supply in the island would be reaching an "equilibrium position" by 2009 fueled by growth in Mindanao.
Ortiz said it should be more "cost-effective" to proceed with the interconnection project rather than look for private sector investors for new merchant plants in the island.
Parallel to this, Ortiz has also recommended DoE move up the proposed Cabalian geothermal power project in Leyte (200-300MW) to 2009-2010 (instead of 2014), so it could serve as anchor load for the link-up of the transmission lines.
Despite the DoE's continued indecision whether to push through with it, Ortiz said TransCo is committed to pushing the project as a key component in their ultimate goal to establish a single national grid.
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