Electricity, Part 3: Epira is a lame duck with a non-performing WESM
By Chemrock
The continuing high cost of electricity fuels clamor for repealing EPIRA (Electric Power Industry Reform Act 2001) and revert the power sector to a public run service. Has Epira delivered on its mandate to bring about affordable electricity in a more efficient and competitive market?
This is a 3-part series on electricity. The first 2 parts formed as backgrounder to a better understanding of the status quo of the Philippines electricity system.
1st part was Philippines electricity tariff decoded
2nd part was Electrification and decarbonization
This final part looks at the restructuring of the Philippines power industry. Deregulation, liberalization or modernization is often used synonymously, but restructuring seems more appropriate, not least because they actually create more laws and regulations. Epira sets the framework to restructure the power industry from an inefficient government controlled monopoly to an efficient market-based one. It seeks to unbundle the industry into 4 separate sectors of power generation, transmission, distribution, and retailing with the aim of ensuring fair and reasonable electricity costs and supply reliability. This blog looks at where we are in the restructuring, whether electricity is now cheaper, its reliability, and how the system addresses decarbonization.
Philippine economic planning has always taken a revolving-door approach as there is seldom continuity of efforts with each succeeding Administration. The consequence is that long-term strategies beyond 6 years are almost impossible. National wastage, in terms of the opportunity cost of preparatory work done by the previous Admin whose projects are jettisoned, are high. (Right on cue after I drafted this portion came the Dec 21 headline “Lacson: Wasteful projects worth Php583b“). As an exception, electricity restructuring has been on course, held together by Epira. So it has to take legislation for long-term strategies to prosper. The great downside is that the long winding process of legislation always hampers economic activities in a fast paced dynamic market in the real world. A good example is the development of initiatives to address climate change, more specifically, in the mechanism of carbon credits, the kind of stuff that was unheard of whilst Epira was being penned by Legislators.
Electricity industry restructuring is a very complicated task unlikely to be completed by a bunch of lobbyist lawyers and politicians.
Like the Philippines, many other countries also restructured their power industry in the last few decades, some more successfully than others. In the 1990s, the State of California was a great example of what can go wrong. There were several missteps, but it will be remembered for 4 things — a poorly thought out mechanism which allowed Enron Energy to game the system and make off with billions of $, a system that collapsed causing rolling blackouts, the taxpayers being loaded with billions of $ of state debts, all of which resulted in the booting out of the incumbent governor to pave the way for the ‘Terminator”, Arnold Swarzeneggar, into office.
The Players and their roles:
- DOE (Dept of Energy) – policy maker and implementing agency for all things Energy.
- NEA (National Electrification Administration) – implements electrification policy, regulates the electric cooperatives.
- ERC (Energy Regulatory Commission)- jurisdiction over all cases contesting rates, fees, fines and penalties it imposes, and over all cases involving disputes between and among participants or players in the energy sector; – promotes competition, encourage market development, ensures consumer choice and penalises abuse of market power in the electricity industry.
- Napocor (National Power Corp) – Govt agency electrificatication of the countryside.
- Transco (National Transmission Company) – govt agency that owns the grid assets.
- NGC (National Grid Corp) private entity that operates and maintains the grid (a Chinese firm owns 40%)
- IPP (Independent Power Producers) – (Gencos – generation companies) licensed by ERC
- DU (Distributor Utilities) – Private entities franchised (territory basis) by Congress
- RES (Retail Electricity Suppliers) – ERC licenses entities that buy wholesale and sell to contestable customers.
- WESM — Wholesale Electricity Spot Market
- PEMC – Philippines Electricity Market Corp a non-stock, non-profit company that manages and operates WESM.
- CRB — Central Registration Body (under PMEC) — looks after RCOA operations (market development, management of systems & processes, registration of contestable consumers, consumers switching retailers.
Basically, all necessary laws are in place.
- EPIRA (Electric Power Industry Reform Act 2001) – the framework for modernization, prioritizes RE
- Renewable Energy Act 2008 — incentives for RE
- Biofuels Act 2006 — specific targets
- Clean Air Act 1999 — regulates GHG emissions
- Solid Waste Management Act 2000 – mandates waste management
Status:
Power generation: Goals — open market (checked)
This sector has been privatized. Napacor has divested generation assets except for hydro-plants. Gencos (power generation corporations) are not considered utilities so it is not Congress-controlled, just green light from ERC is required. Anti-competition safeguards – 100% foreign ownership is still denied; no genco is allowed to have capacity in access of 25% of the country’s aggregate; gencos cannot have shareholdings in utilities.
Transmission: Goals — Govt retains assets, operations privatized (checked)
The Philippine National Grid comprises of 3 interconnections — Luzon, Visayas and Mindanao. The Luzon-Visayas network are now linked. Mindanao grid will be linked up soon. Transmission assets are state-owned, but operation is by a concessionaire with a franchise for 25 + 25 years.
Distribution: Goals – privatized (checked)
DU requires Congressional approval for a territory franchise. Basically, these are local monopolies
Retail: Goals – open market for retail suppliers, contestable market (in a legal tangle)
RCOA (retail competition open access) is a pathway to fully open up the market for consumers. A new class of participants are introduced — retail suppliers. There are no restrictions to applying for a licence from ERC. ‘Open access’ refers to distributor utilities having to deliver the electricity to all retail suppliers’ customers. All consumers will be able to select the supplier of their choice. This is rolled out in stages. Those with loads above 1,000 kWh are contestable. Deliberations at the Supreme Court are holding up those between 750 kWh to 1,000 kWh.
WESM (Wholesale electricity market): Goals — competitive market (partial checked)
The wholesale spot market is up and running for Luzon and Visayas interconnection. Mindanao rollout has been postponed countless times. WESM seeks to ensure a competitive price by having gencos ‘auction’ their production in a transparent manner.
Summary:
Developments are very much in line with the Epira framework. Credit must go to the DOE for doggedly sticking to Epira and ensuring continuity of efforts over several Admins. That in itself is a great achievement not to mention that electricity industry restructuring is in effect a megaproject. After all the hard work over 2 decades, let’s turn to address 3 key questions.
(1) Has restructuring made electricity cheaper?
This is an industry where data in all its varieties is key. The technology today from mission-critical systems to smart meters, where every tiny little sensor anywhere in the system can be read and recorded, ensures the minutest of data to be generated. Unfortunately, any attempt to analyse the impact of industry restructuring on rates is full of challenges due to insufficient data. For eg, information across the utilities is not consistent, simple averages instead of weighted averages, insufficient data for time series analysis, etc.
In 2016 the Philippines Institute of Devt Studies did a study on this. Based on data from NEA and with many assumptions, PIDS offered this useful chart.
Note for those who don’t understand statistics:
Nominal price is the rate in actual pesos terms.
The real price is the nominal price adjusted for inflation. It is the value in terms of the bundle of goods and services in the CPI (consumer price index) basket. An increase means the electricity tariff increases more quickly than the general price level.
Overall, real rates have been quite stable. It should be noted that Epira seek to achieve rates that are fair and reasonable, not cheaper. That is of course subjective, but to maintain rates in real terms is nevertheless a credible achievement.
What then was the impact of the restructuring? The introduction of WESM was supposed to make generation rates more competitive. Did it? Albeit slightly, nevertheless, the real rates 1994 – 2002 decreased, and then, after the introduction of WESM, started increasing 2002-2006.
Nothing is conclusive. There are no ready data at national level to break rates into its various components. Data of this nature would have helped to understand the impact of each cost component on the average tariff. Meralco (for NCR Region) has some good data as can be seen in this table.
Nor is there data to isolate the impacts of the various causes that spike rates — fuel prices, currency exchange rates, weather, govt policy or regulatory changes, planned and unplanned plant outages, etc.
Fuel prices have been decreasing since 2008 so has generation cost decreased accordingly? The Meralco chart suggests NO. Could the cost reduction be negated by a weakening peso? Well, the peso started depreciating during the current Admin so it couldn’t be a cause for an increase in generation cost before 2017.
As for regulatory changes, the Meralco chart show significant increase in taxes and universal charge.
Transmission & distribution cost:
Both operations are monopolies with captured consumers. The rates of the transmission concessionaire are regulated by ERC. The DUs are monitored by ERC but not regulated.
The rates for transmission and distribution seek to allow operators to recoup capital cost, operating expenditure, and a reasonable return on investments. They are often the most non-transparent, most difficult to understand, and vulnerable to systems gaming. It hinges on asset valuation and relies on some accounting methodologies devised by smart academicians. There are a few methodologies, each relevant to a given situation, not least is to be in sync with tax and govt economic policies.
This is briefly how rates are computed. First the operator computes the ARR (annual revenue requirements) for 4 years (rates computed 4 yearly) which are then worked to net present values. This total is then divided by the load to obtain rate @ kWh for each year.
Note the 2 lines return ON and OF capital. These 2 items make up 79% and 54% of Transmission and Meralco’s distribution rate components respectively. These are computed on the basis of RAB (regulated asset base). In the past when life was simpler, cost recovery used to be based on acquisition or historical cost. Many countries are still using this basis. The Philippines was also using historical cost, but sometime prior to Epira, the ODRC (optimized depreciation replacement cost) was adopted. I won’t bore readers with the details (takes 10 pages for full explanation), but in simple terms, this involves a subjective revaluation of the RAB. In effect, it assures a continuous increase in the value of the asset base.
Transmission and distribution (excluding transmission loss), account for about 35% of the electricity bill. The net implication of the ODRC methodology is a transfer of great wealth to utility shareholders from the consumer public. It is a major reason why tariffs are high.
The rationale for ODRC is to have a transmission and distribution rate that supports a contestable market with no barriers to new entrants. In simple English, it means if the rates are based on recovery of sunk or historical asset cost of existing operators, then it will not be profitable for any new entrant who is faced with higher capex (given inflation, historical cost is always lower). So the RAB needs to be revalued. However, this reasoning is irrelevant given that transmission and distribution sectors are monopolies.
It makes no sense for transmission and distribution to be privatized and run as monopolies. Because these are monopolies, it’s in consumers’ interest for these to be a public service. I posit it’s even better for transmission and distribution to be a merged operation under a single govt agency. Economies of scale and conformity of processes and assets are the benefits. Perhaps only then will the cities of Philippines finally rid themselves of the ghastly overhanging wires along all the streets.
The Wholesaler Electricity Spot Market:
The centerpiece of the restructuring is the WESM. Very briefly, WESM is supposed to work like this :
- Demand side (Distribution utilities, retailers, aggregators, direct participants) report load requirements hourly to the SO (Systems Operator)
- SO requests generators to bid
- Generators bid hourly and quote offer rates (per plant basis – if a generator has 3 plants, 3 quotes are offered)
- Quotes are stacked from lowest to highest.
- The marginal price is where the offer meets the demandSO send out dispatch to the successful plants.
- The marginal price is the determined spot rate for the particular hour that buyers pay to sellers.
The function of WESM is to make generation rates transparent, efficient and competitive. Is it working the way it’s supposed to be and is it making generation rates competitive? The answer is a clear NO.
(Note – Mindanao is not yet in the WESM).
In the month of January 2015 only 6% of the load were transacted in WESM. This is a dismal failure of the system to show transparent and competitive generation rates.
The lack of volume has serious consequences for the system.
(a) Most of the gencos’ loads are already pre-committed bilaterally. Only the residue capacity is offered in the WESM. This makes market power play possible leading to manipulation of the spot rates. (Market power is an entity’s ability to manipulate the price of an item in the marketplace by manipulating the level of supply, demand or both.)
(b) The sole purpose of a market is to enable price discovery, which basically is the price where supply meets demand, where buyers and sellers agree on a price. Price discovery ensures fair, efficient and transparent prices. With 96% of loads done through secret bilateral contracts, there is no price discovery in the system. The WESM spot price is not representative of generation cost in the country.
(c) Reliance on the spot rates from the WESM leads to erroneous economic decisions.
(d) Bilateral contracts create a non-level playing field. The retail suppliers who are subsidiaries of gencos, and other retail suppliers with links to gencos have market power over independent retail suppliers. Eg DU Meralco has related companies – Energy Solutions and Management Inc., Solvre Inc. and MeridianX Inc. Meralco PowerGen Corporation, Spectrum (RE). The end result is consumers get the short stick.
(e) With 96% of loads traded outside of WESM, it basically means the system is not within the regulatory controls of the ERC in the spirit of Epira.
As long as the WESM is reduced to an appendage to the whole restructured system, the market will not develop.
100% of gencos’ loads should be transacted in WESM. Retail suppliers and DUs should buy 100% in WESM and then hedge their spot contracts however they want. With no financial derivatives market, buyers will generally be driven to hedge with a bilateral contract with gencos. The tendency is the market will move towards a form of pricing and risk transfers where buyers will simply hedge with their own genco holding companies. Independent retailers will be disadvantaged. The market will not develop in sophistication, innovation, and strength that leads to better deals for consumers. In the longer term, gencos/DU must divest their retailing arms, Meralco divest their RE generation companies, and financial derivatives developed, such as an electricity futures market.
Some aspects of the Epira game plan have been hijacked by powerful players. WESM has lost its way, and with bilateral contracts almost the only play in town, ERC implemented a Competitive Selection Process for long-term power supply contracts. This makes it mandatory for buyers to have a bidding process and an independent Third Party to monitor it. It is a laughable solution. It is wool over the eyes to pretend a level of comfort that regulators are on top of things. This can be regulation #101 for a govt entity’s procurement process, but it is not the place for the authority to interject themselves into a commercial entity’s internal management. In any case, the goals for securing best prices is universal and commercial entities know just what to do. Not least of all it is fair dinkum the Filipinos’ flair to engineer a failed bidding that will eventually end up in a negotiated bid.
Retail supplier & aggregators :
RCOA opens up the market by bringing in a new set of participants, the retail suppliers, and allowing contestable consumers the right to choose any supplier they wish. Consumers have the choice of any retail supplier, agregators, or DU. This is supposed to make the retail market more competitive and bring rates down.
The retail market is an open one so there is no restriction to obtaining a retailing licence from ERC. Is it a wonder that almost all gencos and DU like Meralco have their own retailing subsidiary? Would you wonder whether the gencos’ own subsidiaries or unrelated retail suppliers or DUs will have favored deals when it comes to bilateral contracts? Where incestuous relationships exist, consumers suffer. This is the same situation in the fuel pump industry were the oil giants all operate their own petrol stations. It’s a cartel. No good.
Here is something I fail to grasp. DUs make their money from distribution charges. All third party charges are simply pass-throughs — generation cost, transmission wheeling charge, etc. Retail suppliers, meanwhile, need to pay wheeling charges for transmission and distribution, plus generation cost and other 3rd party charges. So where is their margin coming from? It is fairly obvious that all things being equal, retail supplier tariff will be higher than the DUs. Yet many are the reports in media that there are benefits of lower electricity cost when consumers switch to retail suppliers. How is that possible?
I may stand corrected, but my guess, based on what I see in other countries, is that the generation cost as shown in a DU, eg Meralco’s bill, is actually a formulated figure. It is not the actual cost of their procurement, but is based on a complicated formula for the computation which, amongst other things, imputes a margin for the DU. Just as in the oil industry, the retail pricing basis is a very convoluted process. It is almost impossible for those outside the industry to understand. It is this margin that retail suppliers play around with to lower cost for consumers. If this is correct, then DUs have been milking consumers ever since when.
Again I may stand corrected on this one. I checked the websites of a few retail suppliers. They are all talk of being able to offer solutions to fit their customers’ needs. I was not able to see products like fixed rates for 1,2, or 3 years, peak rates and non-peak rates, or a fuel index-linked rate, etc. Retail suppliers should be offering products for risk averse customers. A 3 year fixed rate locks in the price so customers have certainty which is what businessmen prefer. Or if consumers view fuel prices rising they can lock in a retail rate. Retail suppliers play no economic role if their pricing mechanism continues to subject consumers to the vagaries of the day-to-day volatility of the spot market.
FIT or feed-in tariff:
This is a subsidy for Grid-sourced RE energy and it’s a significant reason for the high cost of electricity. (See explanation below under (3).)
(2) Has restructuring improved the reliability of electricity supply?
Reliability refers to the efficiency in capacity planning and systems balancing. With restructuring, power generation is not considered a public utility. It is open market and there is no constraint to new entrants, subject to the 40% foreign equity limitation and anti-competition restraint of no generator having more than 25% capacity of national load. Only ERC approval is required. If there is proper price discovery, investors will enter the market if they deem it profitable.
Installed capacity is currently about 22,000MW with a projected additional requirement of about 43,000MW by 2040, a 200% increase in 20 years.
Systems balancing refers to the job of making sure supply equals to demand. Electricity is a commodity that cannot be stored and must be readily available when required. The supply side must ensure that baseload, peakload and reserves are met. The WESM was designed for this, but with only 6% of loads transacted, it is basically meaningless as a management tool. Bilateral contracts take significant control out of the ERC.
The Philippines is running out of gas, literary
Natural gas combined cycle plants use gas piped from Malampaya plants. With 1/5 of the country’s energy coming from gas plants, not having any gas storage facility all these years subject the country to ransom by Malampaya plant outages. This has happened so many times which spiked the spot rates and hurt consumers. The natural gas reserve is expected to run out by 2024. There is no choice but to rely on imported natural gas. A national disaster looms with no NG gas storage facilities in sight. The Duterte admin is working on a US$2b NG storage facility with interest coming from Japanese and Chinese investors. This has a capacity of holding 5 million metric tons of NG annually. If the Duterte admin fails to deliver, it will gift the next admin the Mother of All Headaches. Construction is estimated to take 30 months. If 30 months is not a problem, think about the time it will take to construct the NG pipe lines to all those gas plants. With the Iron Law of Mega Projects weighing against this huge gas storage project, and reserves running out by 2024, these are years of living dangerously.
How open is the power generation market really? There is a befuddlement going on in Pagbilao, Quezon Province. A 420MW new coal fired plant recently opened and easily feeds into the nodal point, the New Pagbilao Station built by National Grid Corp. Congratulations are in order. Then again there is another nearby project in Pagbilao by the Aussie company Energy World Corp. This is a 650MW NG combined cycle plant PLUS an NG storage facility with 3 million metric ton capacity annually. This was intended as a gas storage hub for imported gas that will supply the needs of a couple of existing NG plants in the vicinity. This EWC project is ready to come onstream but has hit a dead wall with the authorities for months. As usual, all depts declare their part of the job is done, all lights are green. But EWC has no access to the Luzon Grid and even the last tranche funding from Devt Bank of Philippines has been denied. Strangely, EWC was asked not to enter into any bilateral sales contracts. They are only allowed to transact in the wholesale spot market.
Stepped on a few toes, the EWC did. And a few more. Consider this. The EWC project of the 650MW gas plant PLUS a 3 million metric ton capacity NG storage facility, cost US$750 million. This covers the whole works — all auxiliary facilities necessary for the gas hub, such as pumping stations and berthing for LNG tankers. Line this up against the govt-planned US$2B NG storage facility of 5 million metric ton capacity. In addition, EWC has the facility to convert the imported natural gas to CNG which can be priced much lower than the LNG that households use. First broached in the Arroyo admin, construction commencing in the Pnoy admin., EWC project is in limbo in the Duterte admin. Filipinos’ interest now take a back-seat as political and oligarch lobbies square if off, never mind that 2024 is on the horizon. Incredible.
(3) Does restructuring address decarbonization:
Governments steer the decarbonization process by taking a compliance or voluntary route. The cap-and-tax is a compliance regime. The other route is by way of a carbon tax. Carbon tax is regressive and there is a lot of pushback as seen in the demonstrations in France. Canadians and Americans are in somewhat similar mood.
REM (Renewable Energy Market) has been established. This is to function as a Registry for RECs (renewable energy certificates).
The Philippines does not have a ‘tax the polluters’ policy in addressing climate change. The restructuring seeks to incentivize RE (renewable energy) developments by 3 mechanisms :
(a) Net-metering – installations of less than 100kW that export their excess energy into the DU earn peso credits for loads thus exported. The consumer must be a DU customer and the DU is connected to the national Grid. The credits are netted in their electricity bills.
(b) FITs (Feed-in tariffs) – RE gencos sell their green loads to the market, and in addition they get paid a special tariff for what they feed into the Grid. Transco collects the FITs and pays the RE gencos. FIT quantum depends on the type of RE. Eg solar pv FIT is about Php8.68 per kWh (which is roughly the current country average for electricity tariffs!).
RE gencos turn to FIT as a source of revenue compensation to recoup capex or sell their green energy low. Is that why Leandro Leviste (Sen Legarda’s son) says his company, Solar Philippines, is selling their electricity below cost?
Who gets to pay the FITs? The consumers, of course, are the ones subsidizing the RE gencos . With RE contributing about 25% of the country’s energy mix, the annual FIT collection goes into trillions of pesos. It contributes to a great upward pressure on consumers’ electricity bills. This is a sacrifice Filipinos pay for clean energy.
Philippines is behind the market in policy making. FIT was popularized by countries like Germany and Spain which saw the mechanism spurring RE developments. In recent times, FIT is falling out of favor. Germany, Spain Japan, Sokor, etc, are all removing FIT to shift from a subsidy mechanism to a more market-driven one. FIT is bad because, as a subsidy, it distorts market pricing. It’s the reason why there is no FIT in Singapore. Countries are moving toward a form of auction mechanism that is market driven. Here, the Philippines will find itself, as it so often does, caught in legal entanglements because RE projects approved for FIT are given a 20 year life line support.
(c) RPS (Renewable Portfolio Standards) – The scheme is being rolled out. 2018/2019 will be transition years with full implementation in 2020. It sets the pace for utilities to comply with a renewable energy mix in their procurement.
In the US, and most other countries, the RPS applies on Scope 1 emitters, ie the gencos. They have to comply with regulations for certain percentage of their generation from RE. Fossil-fuel plants of course cannot do that. So they are forced to either invest and build their own RE plants, or buy RECs (renewable energy certificates). Either way, RPS incenticizes the development of RE.
RPS in Philippines applies to Utilities, which is not a Scope 1 emitter. Utilities buy the required amount of RE and sell what they term ‘blended’ price. Consumers pay the ‘blended’ price which means they are forced to buy RE. The big difference is the focus is not on fossil-based gencos to participate in finding solutions to address climate change but passing the pain to consumers.
Wind and solar pv rising issues:
Wind and solar pv installations currently make up a small fraction of the electricity mix. Both are expected to grow significantly, especially for solar pv which has seen exponential decrease in cost. Two contentious problems lie in wait. Solar pv requires huge footprints due to it’s inefficiencies (about 10-14%) so the issue of optimum land use will be challenging. Wind and solar pv require intermittency management as they are weather constrained. As their percentage in the electricity mix increases, the cost of reserves increases. At the moment, because they are still insignificant, the question of how to compute, and who pays for the increased reserves, has never been broached.
Philippines carbon road map:
The camp from the Climate Change group promotes a decarbonization path to achieve Philippines NDC 2030 which seeks a 75% CO2E reduction. The DOE under Secretary Cuisi does not wish to depart from coal technology and eyes the rehabilitation of the Bataan Nuclear Power Plant. It’s a divergent view, and with the revolving door policies of economic planning, who knows what direction Philippines will take.
By 2019 end, the Philippines may expect about 5,700 MW of new capacity at least 63% of which will be provided by coal-fired power plants.
DOE’s direction is the refusal to accept economic sacrifices to combat climate change. The older coal fired plants use coal pulverization technology which requires higher grade imported coal. The Philippines coal reserve is the lower quality grade which cannot be used in the old plants. The introduction of recent so called new clean coal technology allows for the lower quality grade of coal. The DOE inclination is to go for new coal technology to maximize local resources to bolster the economy.
Is there market hype in new clean coal technology that says lower quality coal can be better than imported higher quality coal in terms of environmental pollution? Or is it industry power jostling for market share? The question to ask is the power generation cost inclusive of cost of CO2, SO2 & NOx controls as this impacts the consumers. Data is hard to come by. Table below is a dated one from the US which provides some cost perspectives.
This table takes away the allure of coal fired plants with or without controls for CO2, SO2 and NOx capture. In the past decade, Solar PV has made the greatest leaps in Mwh cost, but it is still the most expensive technology today. As to the argument that boosting coal mining activities generates jobs and improves the economy, employment reports all over the world indicate that it is the solar pv sector that has seen the most growth in labor figures.
Bataan Nuclear Power Plant:
The elephant in any discussion of the high cost of Philippines electricity is Cory Aquino. Construction safety concerns, high corruption, construction on seismic fault lines, Chernoby disaster – all these weighed heavily on her shoulders. She mothballed the project in 1986. What if she was wrong and mothballing the BNPP denied Filipinos a source of cheap electricity and caused the 1990s power crisis. What if she was right and averted a tragedy of unspeakable proportions. These are contra-factuals not worth dwelling on. The burden was hers to bear and she made a decision one way or the other.
It’s time to put the ghost of BNPP to rest once and for all, based on facts.
a). Cancelling BNPP did not cause the power crisis of 1990s. The rightful blame for the power crisis was (1) the delays in Napocor’s new projects, and (2) the debilitating effect of El Nino which crippled the hydroplants.
b). Cancelling BNPP did not cause the high cost of electricity today because (1) Nuclear power is not quite as cheap as propagated (See table above), and (2) BNPP capacity of 626 MW is only about 2.7% of total country capacity of 22,728MW (2017), hardly able to influence electricity cost.
c). Here’s the mathematics. BNPP capacity was 626 MW and sunk cost ballooned to $2.3B which isn’t even the final figure yet. Nuclear plant has average efficiency of 90% and 30 year life span. So assuming 24/7 operation, the return of capital alone would be :
– Production : 626MW x 24hr x 365days x 90% = 4,935,384 mWh per annum
– Depreciation (historical cost basis) : $2,300,000,000/30 years = $76,667 per annum
– Return of capital = 76,667/4,935,384 = $0.01553 per mWh = $15.53 per kWh
– Using the exchange rate of $1=Php21 in 1986, the cost of ‘return of capital’ alone would have been Php 326 per kWh. Could Filipinos have shot Marcos in 1986?
– No doubt pro-BNPP crowd will cry the $2.3b is all sunk cost, fully written off, and pouring in another few hundred million $ to rehabilitate an expired plant makes a lot of sense.
(d) Nuclear power does not appear to have the level of cost advantage to justify the risks, as seen in the table above.
CONCLUSION:
With only 6% of loads handled by WESM, the market pricing is open to wheeling and dealing by the major players. Case in point is the giant DU Meralco. There is action taken by some consumer groups for an inquiry into Meralco’s questionable dealings with sister companies that disadvantage consumers. 4 ERC commissioners have been suspended by Duterte for corruption. This relates to the ERC allowing Meralco to be excused from the open bidding process for their power purchase agreements. Meanwhile, the Supreme court has TRO’d the suspension order.
The open market spirit of Epira is weakened where a regulatory body is required to actively participate in minutiae processes. Every power purchase agreements of bilateral contracts or RE application for FITs require ERC intervention. It interferes with the fast moving world of commerce and leads to the 4 C’s — collusion, corruption, collision, and courts. The suspension of the 4 ERC commissioners is a reminder.
It is a very dangerous way to run the affairs of state to have the Legislative spend years crafting a law, the Executive finally acting on what was planned, and then a Supreme Court intervening and bringing in discord. Businesses and peoples’ lives get bruised along the way. Meanwhile projects are left high and dry. A good example in the US is the Obamacare that’s now been ruled unconstitutional. In Philippines electricity it’s the TRO by the Supreme Court on the RCOA scheme.
Epira lives and dies by WESM. Without a proper functioning of WESM, and that means 100% load transaction, all else are just plain sashaying around the system. Without 100% load transaction in WESM there is no competitive, transparent, efficient price discovery. There is no fair spot rate. The market cannot develop further. And consumers, at the end of the day, are at the mercy of power plays of service providers. ERC is merely grand standing their role as protector of consumer interests.
Electricity systems are generally very complicated. Is the one in Philippines any more so than others? As one frustrated consumer related “We have only 22,000 MW installed, why can’t we get things right?”
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The Society of Honor by Joe America 
A contrarian view.
https://www.bworldonline.com/the-epira-is-working/
Yet many sectors still glamorize that dark era of state monopoly and endless fiscal deficits. They complain of “continuously rising” electricity prices and then blame EPIRA.
Electricity prices are rising, true.
And while they occasionally spike, the general trend is a price decline.
When prices look “unaffordable” for some, people should realize that the monthly electricity bill contains about a dozen items. These include generation, distribution, and transmission charges — the three costliest items — as well as supply, universal, system loss, and metering charges. The bill also covers VAT and feed in tariffs and so on.
After EPIRA was passed, focus was placed on the privatization of NPC power plants, not in the construction of new ones.
As a result, the country’s installed capacity has hardly improved, from 14.7 GW in 2002 to 15.1 GW in 2003, 15.6 GW in 2009.”
“After EPIRA was passed, focus was placed on the privatization of NPC power plants, not in the construction of new ones.”
That pretty much sums up the whole privatization scam. After the gov’t laid out the infrastructure and assumed the costs, privatization vultures will swoop in and devour the system like a parasite.
There is nothing free market in the electric power industry privatization scam. The so-called independent players or operators want as much gov’t subsidies in their business and then fleece the consumers for profits.
The narrative doesn’t change across the board in this neo-liberal screw up : socialize the costs and privatize the profits.
Socialism for capital monopolists, free market discipline for the peasants.
Thanks for your views.
The cornerstone of my article is WESM is not working, and thus the objective of Epira is not working. The various Epira forms may be established, but the spirit and purpose of Eipra is not working. How can there be competitive electricity wholesale prices if only 6% of loads are transacted in the open WESM?
Many thanks.
*******
1. A very complicated piece to start off the new year.
2. As if power generation, transmission, and distribution were not complicated enough, Filipinos must add the complexities of political power struggle to the mess.
3. The “ghastly overhanging wires along all the streets” is symptomatic and symbolic of the national malaise. What is fascinating is that the whole spaghetti mess works.
4. Just like our democracy. There is great transmission loss in the delivery of government services but roads and bridges get built; people are able to communicate through the information highways; people are readily, if slowly, transported from point A to point B; and people do get to experience joy despite the hardships. Perhaps because of the hardships.
5. Filipinos are happy fools.
6. Happy new year!
*****
Hapy new year Edgar.
Your point 4 sounds a bit of fatalism there. Incidentally I’m writing a piece on ‘isms’ which I hope Joe will publish. It kind of intruded into your territory a bit, but only a bit. I have’nt snatched the stone from your hand yet – still a grasshopper.
Yes, I second all that, and a Happy New Year to you, and all our loyal Society members. It promises not to be a dull year. 🙂
Let me guess. This is a white paper commissioned by BDO Capital because Nestor Tan and Henry Sy want a piece of the action in the lucrative business of electric power industry.
Haha .. but pray do elaborate.
Come on chemp, do I really need to? Henry Sy couldn’t possibly resist the captured market of a monopoly currently enjoyed by the Lopezes of Meralco.
Henry Sy already have NGCP. Much better returns without the headache.
On March 7, 2018, Henry Sy, Jr. resigned as president and CEO of National Grid Corporation of the Philippines. Anthony Almeda was named the company’s new president.
Haha you are observant. And he’s pretty happy with the ODRC method of asset valuation that gives NGCP a fat rate for transmission wheeling charges.
Obviously not, because he just resigned as President and CEO.
Does it matter if he has not divested and still collects dividends?
Did he declare his disinvestment?
Precisely. He has’nt
Quite obviously you didn’t spend all that effort collecting voluminous data and research only for JoeAm’s blog consumption; although I for one am grateful that you’re sharing it here.
Hmmmmm. Chemrock is one of the most frequent and technical of all our contributors, covering a variety of topics from trains to banking to electricity. The blog has no revenue and issues no payment for contributions. Articles are jointly owned by both the blog and the author, for their subsequent use and publication. I don’t detect an ulterior motive for his writings other than exasperation that Philippine public discourse is so empty and absurd, and a hope that at least some people are still around who strive for something called deeper knowledge. People speak highly of his work, and his articles have a long shelf-life. His MRT article, done several years ago, still pops up now and then on Twitter as a reference source. I forwarded the current article to a legislative candidate I know in the event he/she can identify a valuable campaign issue in this article. Perhaps people write here because they understand it is not the quantity of readership that counts, but the quality.
Chemrock need not justify his writings. They stand well on their merits.
Banco de Oro has extensive acquisitions and subsidiaries. Henry Sy is a constant Forbes lister of richest Filipinos. Chempo works as a BDO consultant. Is it any wonder that he has resources and information related to the business interests of his employer?
That he is sharing the information here is something we can appreciate but to say that he has no economic or business agenda is a stretch.
Hi Micha
Your comments is not a problem per se for me, however critical, if it’s meaningful and adds to knowledge here. Unfortunately this comment has libelous connotations and maligns some parties specifically so I ought to say something on it.
I have no idea where you got the info I work as a consultant for BDO. Never was, never am. BDO is in domestic commercial banking. I was in wholesale international banking. Lots of difference between the two.
As to motivation to write – I think you are giving TSOH too much credit that I write here for economics or business agenda. This is just a fun place where writers are motivated purely by a challenge in themselves. Some stuff I write about, I really thought I know a little bit more than most, so I like to share. Some stuff I write as nothing but personal opinions, which means be prepared to be challenged by others – which you have often done so, nothing wrong with that.
You have intimated before during our previous exchanges that you work for BDO (couldn’t remember the blog topic, hope karl might be able to dig up).
Regardless, so you’re in international banking? Citibank? Deutsche? Goldman?
The topic of the article is electricity, not Chemrock. Your comments cross the line into personal information and that is against the policy of the blog. Kindly stick to the issue, don’t argue the point or get caustic. Deal with the topic or at least stick to issues rather than personal motives. Thanks.
I WAS in international banking. The bank I worked for has never ever appeared in any banking scandals in the press…. so far at least. I guess that’s your question.
As to BDO, I have expressed the TRUTH. Incidentally, TRUTH is the subject matter of my next blog.
“As to BDO, I have expressed the TRUTH.”
What TRUTH?
Hindi ako nagtrabaho sa BDO
I hope that’s clear enough. I have nothing to do with them and do not wish to drag their name into disrepute.
@chempo
I only based that info on your previous declaration buried somewhere in the comment section of this site which I cannot now readily retrieve because it would be literally like finding needle in a haystack that you work as BDO consultant.
Micha, that sounds very Calida-ish. Walang records?
chemp the key word is readily. If I expend enough time and effort, I’m sure I can find it.
Anyway, your employment or non-employment with BDO cannot be confirmed or verified because you’re only using a pseudonym here.
But since you’re denying it now, I will just have to assume from here on out that your viewpoint is coming in from the perspective of a retired employee of an unnamed international bank.
Fair enough?
Your contribution is well informed, balanced and does not seem to promote any solution (with or without commercial interest). In short: A valuable unbiased summary of the current situation. For which I am grateful.
You highlight that the “constant” over the past years is a high energy price. Electricity was and remains expensive with no end in sight. Add the unreliability of the supply and it is clear why investors look for opportunities elsewhere. I have only anecdotal information from manufacturers in Vietnam and Thailand why they did not invest in Philippines and the electrical power issues were a significant factor (albeit not the only one). The conclusion was that for Philippines to become more attractive, a low electrical cost would be essential as in an island nation most other operational costs are relatively high.
You also avoided the (more philosophical) question if the current system with its many players can be made to work in Philippines or if the complexity automatically means that there will always be gaps so the consumers can be fleeced. Are simpler solutions possible? Group the generation and distribution and come to a single price which then can be compared with surrounding countries and fixed? Something along these lines, because the current system is clearly not working.
Another issue which is a bit hidden in this write-up is the 2030 commitment and how this fits in the current and future systems. Clearly, there is no chance that the commitment will be met. You mention the requirement for big acreage for solar. I tend to disagree. Philippine cities have become concrete jungles without many open spaces, which means that there is a lot of acreage available on rooftops. Any Google-earth & drone picture shows that roofs are under-utilized. A ruling that all (new?) roofing structures shall be made of solar panels would have a huge impact. A bit like the Tesla factory. No more roof sheeting….Solar Panels…… You mentioned that RE now has a premium price. That is when you generate it centrally and have to distribute it. When it is on our rooftops, it does not have to be distributed anymore, it is there to use and the investment costs for the usual roofing is avoided. For sure, a challenge for the architects, but hey, we all will have to adapt our skills if we want to survive.
Also, you have not touched on the question of the responsibility of the consumers and their electrical consumption pattern. Obviously, if there is (will be) an abundance of cheaper solar power when the sun shines or the wind blows. There is a requirement to ensure consumption is directed to these periods of abundance. This is a field which is highly unexplored, but will become essential as you stated that power is difficult to store and batteries are extremely expensive.
This leads to a (revolutionary?) opinion that Philippines is probably uniquely positioned to develop a philosophy where limited area’s (Municipalities, Barangays….) are generating and managing their own electrical power. Certainly, this requires a re-focusing and education of engineers and consumers. But we should ask ourselves if the 2030 target is not more important than all this bitching, infigthing and profiteering as in our island nation, climate change will probably become the single most important factor in our lives. And electricity generation plays an important part in there and costs will be driving the process. Q.E.D.
Besides, de-centralizing power generation will unleash a wealth of ideas & solutions. Some will be counterproductive (for sure), but as a whole, a spectrum of solutions will be generated which big cooperations will never be able to realize and among these, some jewels will certainly be found which will make a huge difference in the way we work and generate power. Also, de-centralized power generation is less sensitive to disruptions and outages will not immediately leave a significant part of the country in the dark…
There are opportunities in our current (problematic) system which more developed countries do not have.
Should we now not proceed to talk about how we can get to the 2030 commitment without putting the country in the dark? Or… to start first: How can we motivate the population to accept that there is a shared responsibility to fight climate change and not wait till the high tide floods the Malacañang 2nd floor? In this picture, power generation is indeed a small but significant part and the current manipulations chickenshit compared to the waves coming towards us?
This does not make your contribution less valuable, but if we focus on the big picture, the smaller parts disappear automatically. Simplified: If I use (almost) no electrical power from the net, it is not important anymore to minimize the price..
@ Micha
I think it’s a silly exchange that sidetracks from what I feel is an important subject matter of the objective of Joe’s blog. Commenters in TSOH have touched on electricity issues and asked lots of questions. I think my article answered many questions and also I offered many points never brought up in media before and I expected some readers to latch onto my points and expand the discussion. As I eg Pablo’s comment here is excellent.
I know you are capable of more profound comments.
I have to let you know straight I resent the “denying” which is a slur to reputation. It’s one thing to criticise opinions, but wrong to impugn. I learnt long ago if you want to accuse someone, you better be ready to defend it. Saying you saw something buried is ridiculous. You should offer a reward for anyone who can dig up the info for you if you are too busy or lazy to do it.
@ Pablo
Excellent comment Pablo. You brought up many good points which I like to respond. I copied your comment into a new thread below for ease of others who may want to join in. Please refer below.
@chempo
Where you’re coming from is as important as the comment or advocacy itself.
Let us dispense with that BDO sidemark now. In Philippine power industry what prevents the optimization of wholesale spot market?
Privatizing the power industry is NOT in the best interest of consumers. Although EPIRA became law during the tenure of Estrada if I am not mistaken, the architecture and the framework of the bill was laid out by President Tabako, a neo-liberal puppet whose policies led to the opening up of the country to predations and exploitation of parasitic bankers and capitalists.
That policy approach resulted in the enrichment of the 1% and their coterie of lackeys and sycophants but impoverished the rest of population.
That, in turn, brings us to why the maniac from Davao is in power today – the disaffection of voters to the trickle down bullshit being peddled by private capital owners.
Epira was enacted in Arroyo’s term 2001. It was drafted in Cory/FVR time. Cory made several mistakes — it’s easy for all Cory haters to sit in their air-con room to blame this and that post fact. Command is a lonely post, and all those who has never led a group of people in serious situation where final decisions lie in your hands, will never appreciate the torment of the leader making those decisions. Cory took over a broken country — bankrupt financially, bankrupt in ideas, bankrupt in friends (dictator Marcos had no friends except US), Basically a little housewife put humty dumty together again, never mind the scratch marks.
I will only fault Cory in one critical area as far as the electricity sector is concerned. She relied and trusted too much on Cesar Buenaventura as energy advisor. Buenventura was CEO of Shell Philippines thus some decisions on energy issues were driven by self-interest.
As to you fabled parasitic capitalist outbursts, may I ask you to refer to me one successful socialist collectivism economy – other than China?
So EPIRA was made into law during Arroyo’s time. It didn’t grab much attention then, sneaked it at midnight like her proclamation maybe. But that connects the dot for the whole racket because El Tabako and President Midget are ideological twins. They didn’t try to pass that law during Estrada’s time because he’s more of a nationalist so they dig the dirt on his corruption and eventually removed him.
I can understand Cory’s incompetence on the matter. It was mostly El Tabako who did the dirty work for setting the neo-liberal policies and agenda.
A successful collectivist socialist economy? Well why, the USA is prime example of a successful collectivist socialist economy. That is true during FDR’s time, and it’s still true today, at least for the corporate owners and Wall Street banker parasites who could only thrive under a gov’t supported scheme.
We never have true laissez-faire capitalism that became successful here or anywhere else. Free marketers always rely on gov’t support because, left on their own, they burn, exhaust and crash the whole system. Capitalism is supposedly just a transition system to get rid of feudalism and then eventually evolve into a socialist set up.
I’m surprised you pointed to USA. I thought you would have directed me to some Scandinavian countries.
Laissez-faire capitalism thrived in Hongkong for quite many years, thank you very much. Perhaps we can include Switzerland, Ireland, Estonia.
Free marketers don’t need govt support. They only need govt to set boundaries and monitor the market.
It is difficult to be President, I think. The job is so enormous, the President has to trust people, as both Aquinos did . . . and they both got burned for it. Although Filipinos have infinite capacity to excuse bad behavior from scurrilous leaders, they have no patience for mistakes from decent people. A mistake is like blood in the water and Filipinos possibly share genes with sharks.
Pablo’s comment above, retreaded:
Pablo says:
January 2, 2019 at 9:32 pm
Your contribution is well informed, balanced and does not seem to promote any solution (with or without commercial interest). In short: A valuable unbiased summary of the current situation. For which I am grateful.
You highlight that the “constant” over the past years is a high energy price. Electricity was and remains expensive with no end in sight. Add the unreliability of the supply and it is clear why investors look for opportunities elsewhere. I have only anecdotal information from manufacturers in Vietnam and Thailand why they did not invest in Philippines and the electrical power issues were a significant factor (albeit not the only one). The conclusion was that for Philippines to become more attractive, a low electrical cost would be essential as in an island nation most other operational costs are relatively high.
You also avoided the (more philosophical) question if the current system with its many players can be made to work in Philippines or if the complexity automatically means that there will always be gaps so the consumers can be fleeced. Are simpler solutions possible? Group the generation and distribution and come to a single price which then can be compared with surrounding countries and fixed? Something along these lines, because the current system is clearly not working.
Another issue which is a bit hidden in this write-up is the 2030 commitment and how this fits in the current and future systems. Clearly, there is no chance that the commitment will be met. You mention the requirement for big acreage for solar. I tend to disagree. Philippine cities have become concrete jungles without many open spaces, which means that there is a lot of acreage available on rooftops. Any Google-earth & drone picture shows that roofs are under-utilized. A ruling that all (new?) roofing structures shall be made of solar panels would have a huge impact. A bit like the Tesla factory. No more roof sheeting….Solar Panels…… You mentioned that RE now has a premium price. That is when you generate it centrally and have to distribute it. When it is on our rooftops, it does not have to be distributed anymore, it is there to use and the investment costs for the usual roofing is avoided. For sure, a challenge for the architects, but hey, we all will have to adapt our skills if we want to survive.
Also, you have not touched on the question of the responsibility of the consumers and their electrical consumption pattern. Obviously, if there is (will be) an abundance of cheaper solar power when the sun shines or the wind blows. There is a requirement to ensure consumption is directed to these periods of abundance. This is a field which is highly unexplored, but will become essential as you stated that power is difficult to store and batteries are extremely expensive.
This leads to a (revolutionary?) opinion that Philippines is probably uniquely positioned to develop a philosophy where limited area’s (Municipalities, Barangays….) are generating and managing their own electrical power. Certainly, this requires a re-focusing and education of engineers and consumers. But we should ask ourselves if the 2030 target is not more important than all this bitching, infigthing and profiteering as in our island nation, climate change will probably become the single most important factor in our lives. And electricity generation plays an important part in there and costs will be driving the process. Q.E.D.
Besides, de-centralizing power generation will unleash a wealth of ideas & solutions. Some will be counterproductive (for sure), but as a whole, a spectrum of solutions will be generated which big cooperations will never be able to realize and among these, some jewels will certainly be found which will make a huge difference in the way we work and generate power. Also, de-centralized power generation is less sensitive to disruptions and outages will not immediately leave a significant part of the country in the dark…
There are opportunities in our current (problematic) system which more developed countries do not have.
Should we now not proceed to talk about how we can get to the 2030 commitment without putting the country in the dark? Or… to start first: How can we motivate the population to accept that there is a shared responsibility to fight climate change and not wait till the high tide floods the Malacañang 2nd floor? In this picture, power generation is indeed a small but significant part and the current manipulations chickenshit compared to the waves coming towards us?
This does not make your contribution less valuable, but if we focus on the big picture, the smaller parts disappear automatically. Simplified: If I use (almost) no electrical power from the net, it is not important anymore to minimize the price..
Pablo, thank you once again. Let me break up my respond for ease of comments by others.
(1) On high cost and reliability :
It is pointless for a country comparative because it can’t be an orange-to-orange basis. Every country factors things slightly differently in their tariff. What we can try to do is to see if tariffs are ‘affordable’ – which is what EPIRA wisely crafted. “Affordable’ is subjective. I would think it is aligned with ‘fair’. To prise into this we need to understand where market power exists and analyse to what extent pricing could have been lowered in a real competitive environment. The main areas I highlighted in the article are :
– you need 100% load to be transacted in WESM to obtain a competitive and transparent spot price. For WESM to be functioning optimally, the country needs to be in a slight excess capacity mode.
– ‘Return OF capita’l for Transmission and Distribution need to be reviewed. There is much potential to lower wheeling rates by moving away from ODRC methodology to a historical cost basis. ODRC unfairly disadvantage consumers.
– Merger of Transmission and distribution under a govt agency can offer much savings in synergy. Why allow monopolies to be privatised?
– DUs and gencos should not participate in retail part of the industry.
Other cost items like taxes and universal charge we can’t comment as these are tied to govt fiscal policies.
I think we should move away from the argument that high cost of electricity makes it difficult to attract foreign investors. Other than those industries that are heavyweights in energy consumption, like crypto mining & data servers, other industries can live with the high cost. It is reliability they are concerned with. Foreign investors look at a host of issues, lower cost of operation may be but just one of them. Personally, I think the big turn-off of Philippines to foreign investors is the political climate. No, it’s not the crimes, ejk, nor the corruption. It’s the unpredictability of the regime which leads ill winds such as the prospect of the peso depreciation.
@ Pablo
(2) You asked if there is an easier way.
There is no escaping the complexities. Epira has more or less got the structure right, except for me, I think a bit of fine tuning would be great. Suggested schema :
Pointers:
– Transmission and distribution is merged
– MSP is the market service provider — the link man with consumers for all things technical, except supply contract and payment. Tasks include attend to consumers opening new premises or accounts, meter installation, switch-on, metering, consumers switching suppliers, complaints, Vendor of last resort, etc. This is a govt agency, sells at regulated tariff.
– Retailers — sells at competitive rates. Bills consumers. Retailers obtain metering info via MSP systems.
– WESM — 100% transacted through WESM. All settlement via the WESM. National stock exchange + private ownership.
Not in the picture —
Systems Operator — responsible for systems balancing — load despatch, monitoring online systems. Govt agency under the Regulator.
Regulator – govt agency.
Energy Dept — capacity planning, overall responsibility for energy plan — policy formulation.
(Note that currently, WESM settlement is via NGCP, which makes WESM not really operating as a market should. In a market, all transactions and settlement are through the market, not directly between transacting parties)
“….there will always be gaps so the consumers can be fleeced” —- areas that I already pointed, needs to be addressed — 100% WESM and cut out the bilateral deals, DUs and gencos should not enter retail business,merge transmission + distribution and run as public service.
I don’t know if the laws of thermodynamics apply but simply transmitting electricity loses electricity. So are those heavy users placed closer to the source? I’m asking ,
if urban planning or some sort of grid planning is done, or is it build as you go, same-same with everything there?
Negative electrons flow in the copper-wires. With AC, it flows and counterflows, The speed of the flow is measured in hertz. It flows through conductors which provide resistance. With resistance, there is transmission loss, in the form of heat.
Urban planning, grid planning — I don’t think anybody has a chance to be given a brand new unoccupied country and start on an empty slate. Perhaps some localised area there is a chance to plan from ground zero. Eg like Ayala’s Global City — you don;t find overhead overhanging electricity wires.
(3) 2030 commitment and rooftop solar pv
Pablo, you certainly know some stuff, thunanks for bringing it up.
Yeah I left out a lot on 2030 commitment — because that is not the core of the subject matter. I made only one critical point — that there is a divergent view between Dept of Energy and the Climate Change Group on decarbonisation. There is a problem. DOE is driven more by economic gains on coal fired plants. The so-called new clean coal technology allows Philippines to use local lower grade coal, thus generating economic activity on the mining side. It’s difficult to talk of economic sacrifice to address change — until it’s too late.
Re rooftop solar pv:
You are quite right there is a cost difference between embeded installations for a building owners’ own use, and those from solar-farms. The difference that you rightly pointed out, is embeded systems have no transmission and wheeling charge, whereas the solar farms do. II did’nt get into this as it’s basically way too off the main topic.
As to cost effectiveness of embeded systems, I don’t have any data. Just a few pointers here:
– capex is high, but maintenance is low. Many countries offer special grants to owners going this path, so capex might by reduced slightly.
– embeded systems can export excess capacity into the grid and get paid at certain rates. This improves the ROI.
– Solar panels at the moment are extremely inefficient — 10 to 15% or thereabouts. For an average sized house, you be lucky to harvest 15 to 20% of your MW requirements.
– There is a huge obsolescence risk. Some new techologies breaking out promises big leaps in efficiency up to the next 20-30% levels.
Solar pv gencos can use a collection of rooftops for a bigger installation for the grid. But this will be legally almost impossible with private properties – how to negotiate into a collective? In Singapore, we have thousands of govt-built buildings under the Housing and Devt Board. HDB apartment owners are merely 99 year leaseholders. HDB still owns the right to all sorts of matter. Thus the HDB is free to make such arrangement of collective lease of rooftops to gencos. The commercial equivalent to HB is the EDB (Economic Devt Board) which owns commercial properties. Both HDB and EDB has initiatives that leased out the rooftops to solar pv gencos. Today many HDB blocks have solar panels at the rooftops which power the energy required for common services of the blocks — lifts, corridor lightings, etc. The solar pv gencos sells the electricity to HDB and excess load are fed into the Grid.
(4) “….you have not touched on the question of the responsibility of the consumers and their electrical consumption pattern”
Great point, Pablo.
Consumers play a significant role in the overall plan to address climate change as far as electricity consumption is concerned. Consumers — residential and commercial/indstrial — needs to be onboard in the effort to be more energy conscious and energy efficient. DOE has some action plan to educate consumers. I’m not following this so I don’t really know what’s happening here.
The commercial/industrial consumers are where meaningful contributions can be achieved. There are lots of ways — use energy saving bulbs, set a higher temperature for air-conditioning, use more energy efficient equipment, etc.. I don’t know if in Philippines there are trade associations or interest-groupings that are driving the change. As I mentioned in my 2nd installment, there are no Filipino companies in the RE100 grouping that seek to go energy neutral.
There is a movement in the electricity industry worldwide to encourage participation on the demand side to better manage electricity sector. It mostly goes by the term Demand Response Schemes. Basically this allows consumers to cut off their demands during peak surges (either shut down or they use alternative means such as generator sets). Consumers get paid for not drawing on the grid. This helps to keep supply balanced during sudden surges. In Philippines there is the Interruptible Load Program which allows consumers with own generation capabilities to export their loads into the grid during peaks.
In Singapore, the electricity bills for residential consumers come with a chart showing consumption of the past 6 months with an indication of the average consumption of consumers having the same profile. Profiling is by the number of rooms of the homes. If you are in a 4-room apartment, you get a sense of what similar households are consuming.
This issue brings me to 5Gs. The purpose of 5Gs is not to bring high speed so Filipinos can have better experience on their social media. If the authorities approach this development with this in mind, they must be nuts. Authorities move for 5Gs for a few seemingly valid reasons :
– to enable the internet of things. TOT is required for smart city development which leads to better control over the electrical/electronic equipment, appliances we use and be more energy efficient.
– TOT will kick off another round of worldwide economic expansion (just like PCs an mobile phones had done) because all appliances and equipment will be remodelled and sensor-eneabled to talk to each other.
– Of course authoritative regimes look forward mass control initiatives.
(5) ….. de-centralizing power generation will unleash a wealth of ideas & solutions
What you are referring to is ‘distributed power generation’. This is gaining traction worldwide. And you are right, there are benefits, new ideas coming forth. Commenter Lcpl talked a lot about this in a prior blog. However, there are also tremendous challenges.
Basically it’s having a neighbourhood genco, those with small footprints. Certainly you can’t have a nuclear or coal plant in the neighbourhood. But solar pvs and wind turbines are possible. It’s what they call electricity flowing backwards from beyond the meters. Fancy huh. It simply means consumers with embeded generation capacity exporting loads back into the grid.
I just have a few points here :
– Certainly this is carefully being looked into by the DOE and industry players. Other than this, I’m not really following developments.
– For off-grid communities, the DOE has what they call ‘missionary electrification’. Distributed power is the answer for these communities. Makes a lot of sense.
– Legarda’s son (Philippines Solar) — I think he recent won a franchise from Congress for some solar pv project. I think this involves a localised grid development in some far flung place. I don’t have the details, but I’m always wary of franchises from Congress. It’s a local monopoly for sure. Good or bad, I have no idea. He put his money in places where no one goes.
– If there are too many distributed power providers, they will pull consumers away from the baseload gencos. Disrtibuted power providers may be cheaper due to locality and they don’t pay transmission wheeling charge. Is cheaper good? Sure, for the few consumers. The baseload gencos, transmission and distribution operators still need to provide service to the rest of the consumers who are not serviced by the distributed providers. So their cost will be loaded onto others. There is a need for balance — a greater good for a greater number of people. Not easy to thread.
@ Pablo
Thanks for your excellent points. To do justice to your comments, I’ll respond with full attention tomorrow. I need to attend to some matters at the moment.
As far as household electricity usage , is the Eco-Cooler popular in the Philippines and does it really work, ie. cool air comes out? I’d imagine AC and refrigeration would be at the top of electricity consumption.
Also I’ve always wondered if this Clay Pot Cooler idea can be translated to architecture , maybe every household in the Philippines can have a Clay Pot Cooler Room, where every Filipino can chill like vills 😉 ,
Claypot coolers work brilliantly when the humidity is low, hence the nickname “desert cooler”. But in Philippines, with a humidity of 80%, a desert cooler would increase humidity and make life uncomfortable. You would need to make sure that the outer skin (“The claypot”) and the interior cannot transfer the humidity. But, why try to re-invent the wheel? Our ancestors knew how to keep rooms relatively cool. We seem to have lost the link to their knowledge, why else do we build those silly boxlike concrete boring structures when so many proven alternatives are available. A total failure of our engineers. For big buildings, on the other hand, alternatives to bulk-standard air conditioning are slowly emerging, but the current electricity price is too low to force potential building owners to force engineers and architects to prioritise functionality above looks. But, the tools are available and if indeed warmer periods become the norm and power will become more expensive, then we will see old knowledge re-appear and new technology be applied https://m.youtube.com/watch?v=SwiaaqKdtjw But for the individual building his home, I can only advice to look how his ancestors kept cool and that is valid for the affluent person building his place in Alabang as well as the farmer building his house in the province.
Thanks, Pablo!
That makes a lot of sense about humidity. We talked about this here too,
I always thought the palm hut/house, with bamboo for flooring made a lot of sense for a hot humid country. I loved sleeping on bamboo cots, nice and cool.
chemp,
Great stuff! There’s a lot to chew , as with the rest of the series on electricity.
I’m reading yours and Micha’s back and forth closely and awaiting your answer to Pablo.
My question isn’t technical or economic, but I see something similar going on here in California but NOT in electricity but with gas, Nevada tends to be a dollar less per gallon, & I believe in the Mid-West it’s like two dollars less.
there’s the supply/demand stuff to account for the fluctuations, but also the tax and fees laid on to the cost per gallon, that drivers have to pay.
It’s up at $4 per gallon now, and the injustice of that seems to escape regular folks (no choice, they like to drive), there should be riots ala Paris right now, i’ve seen it go up to $5 , but that seems to be the magic number, it’s never gotten pass that.
We’ve done 1 day boycotts here via social media, but more symbolic than anything. Though more and more people when the gas prices go up , do opt for the bus or rail or bike.
My question is couldn’t the Philippines do some huge boycott and not use electricity for a week or more, bringing suppliers to their knees thus be more amenable to changes?
I remember when electricity goes out over there, Filipinos don’t skip a beat (they’re so used to it) , they get candles, and go outside to tsismis 😉 and the children play games. Fun times.
My point, Filipinos are perfect specimens to boycott electricity; we over here can’t even boycott gas, much less electricity, so dependent we are. But Filipinos totally can. Why not you and Micha organize it? 😉
I’m a free market guy with a good sense of social responsibility, that means profiteering is out for me. If prices go up in abeyance to demand and supply pressures, what can one do? C’est la vie or go off-grid.
What we can do?
Many people take action already and install solar on their roof. It started slowly, but the quantity of installations is increasing. Also LED lighting starts making a difference. Get one of these powermeters you plug between the power socket and the appliance and see how much your fridge or fan is actually using and you will get shocked and might opt for a smaller fridge or low powered fan. You can easily save 50% of your energy if you look at it seriously. But the power prices are probably still too low for people to be serious about saving energy. Proof of the pudding: in the US, petrol is still cheap, hence big cars are common. In Europe, the petrol price is double that of the US, hence people there drive smaller cars. It is not popular to say, but fuel prices in Philippines are still so low that inefficient, smoke belching trucks and jeepneys can be operated instead of being replaced with more efficient vehicles… But there is a trend emerging in the bus companies where more efficient vehicles and better driver (training and monitoring) are more efficient and force the inefficient companies slowly out of business. Same for the electrical appliences where people start to take note of the energy labels. It is all a matter of economics, isn’t it? Low energy costs results in waste, high prices result in an unhappy population. But, if we decide that higher prices are needed to prevent wastage, that does not mean that the energy conglomerates should be the beneficiary of these increases. Better use it to educate the kids and improve the quality of life of our population, right? But that is politics. And the current systems are made (by design) so opaque that the majority of the people cannot understand where the money is disappearing, hence this series of articles about electricity is very, very enlightening.
I envy the French most days I look at gas prices here in California, Pablo.
But here people actually go to and fro , I imagine Parisians just French kissing all day long at the park, eating baguettes, cheese and wine, reciting nihilist poetry while watching a mime play with a red balloon.
I wish we protested like the French. But if we did we wouldn’t be America doing important things. So we suck it up. No choice. We work, we get things done, no time for French kissing at park.
But I think Filipinos can totally bring the power industry to their knees, either by doing what you’re doing just divest, or do what Filipinos do in times of blackouts and/or typhoons, just simply do without electricity.
“….higher prices are needed to prevent wastage, that does not mean that the energy conglomerates should be the beneficiary of these increases”
Pablo, spot on.
You voice the concern of Micha too.
How we address this type of problem in Singapore —
Water is a big problem for us. In the past, we had only 3 catchment areas with 3 reservoirs. We relied primarily on a water arrangement with Malaysia. Raw water is piped into Singapore. We process it, partly for our consumption, and partly we re-sell portable water back to Malaysia. This water comes from the state of Johore. Whilst we have very good relations with the rulers of the state, the water contract is a federal one. This long term contract presents a security threat to Singapore, in fact it is an existential threat. Unfriendly executives in Malaysia have always used this contract for political gaming. Current PM Mahathir is the most vociferous. He has recently raised this issue yet again. This is a long term international contract and it’s so contentious that Lee Kuan Yew once mentioned if they cut off the supply, it means war. The gist of their complaint is they supplied water to us dirt cheap, and we resell to them at a hefty profit. The truth of the matter is there is a huge difference between raw water and portable water.
So in Singapore, water has been priced extremely high to prevent wastage. People understand that and the geopolitics behind it. There are no riots. The marginalised are taken care off by a progressive pricing system. Water utility is govt run so all profits are retained by the public.
Meanwhile we planned for new water sources to minimise water reliance on Malaysia – artificial reservoirs, monsoon rain run-off collection pits, desalination — this has improved our source-mix considerably. In the plans is a huge water sequestration project, an huge underground storage facility.
The way we ensure conglomerates do not end up the sole beneficiary of monopolistic sectors, like water, or public transport, is to nationalise, incorporatise, and then go public IPO. The operating entity is run as a public company with govt holding substantial shares and directorships.
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It’s crazy, chemp. Most SE Asian countries , South Asia too , when monsoon hits, and it rains hard, there’s usually street flooding. In Singapore, it rains it pours, but all the rain disappears quickly to a secret magical place. No flooding.
Climate change is catching up, floods are occurring now, although it subsides pretty fast.
Street floodings of the past were resolved by constructing what we call monsoon drains. These major arteries are like canals, but at the base is an ordinary drain. Ordinarily, water flows along the small drains. When the monsoon pours, the canals chanel the water away fast and dumps into retention facilities.
I haven’t read here of the taking over of the IEMOP from WESM.
Here is an article.
https://businessmirror.com.ph/iemop-takes-over-electricity-spot-market/
“IEMOP takes over electricity spot market
THE Independent Electricity Market Operator of the Philippines Inc. (IEMOP) on Wednesday formally took over the Wholesale Electricity Spot Market (WESM) from the Philippine Electricity Market Corp. (PEMC).
The takeover was in compliance with the mandate of Republic Act 9136, otherwise known as the Electric Power Industry Reform Act (Epira), for the WESM to be run by an independent operator.
“The IEMOP fulfills the promise of Epira to foster competition in the WESM through an independent market operator. Our existence and our service usher in the electricity market’s inevitable transformation to a more competitive state for the ultimate benefit of the electricity consumers,” IEMOP President Francis Saturnino C. Juan said in his message to IEMOP employees on opening day.
IEMOP facilitates the registration and participation of generating companies, distribution utilities, directly connected customers or bulk users, suppliers and contestable customers in the WESM. It also determines the hourly schedules of generating units that will supply electricity to the grid, as well as the corresponding spot-market prices of electricity via its Market Management System. Moreover, it manages the metering, billing, settlement and collection of spot trading amounts for the benefit of the market participants.
Under the policy and regulatory oversight of the Department of Energy (DOE) and the Energy Regulatory Commission (ERC), PEMC will remain as governing body for WESM to monitor compliance by the market participants with the market rules.
IEMOP is a nonstock, nonprofit corporation governed by a professional board of directors composed of individuals not affiliated with any of the electric companies that trade in the WESM. The IEMOP carries out the mandate to pursue the WESM objective to have a transparent, fair, competitive, and reliable market for the trading of electricity throughout the Philippines. As market operator, IEMOP is bound to strictly comply with the Epira, its implementing rules and regulations, the WESM rules and other related issuances of the DOE.
The WESM is a landmark achievement established pursuant to Republic Act 9136. From its commercial operation in 2006, the electricity market has been functioning as a central venue for buyers and sellers to trade electricity as a commodity where prices are based on supply and demand interaction.”
IEMOP from WESM don’t make no difference. They are operators, hence toothless. Can they get gencos to transact 100% in WESM? NO. DOE and ERC let the gencos and DUs run rings around them preventing them from enforcing WESM to do what they are supposed to do. IEMOP will be as toothless as PEMC.
Media and everyone in the industry keep talking of landmark achievement of WESM. This is so very typical of Philippines. Interested only in the form, never the subtance. With only 6% of loads transacted in WESM, it’s a dismal failure. They should stop fooling themselves.
OK, thanks.
There is a lot of money in Oil/energy if magician Dennis puts up another 4 billion.
Dennis Uy buys P4-b shares in PXP Energy
posted October 25, 2018
http://manilastandard.net/business/power-technology/278896/dennis-uy-buys-p4-b-shares-in-pxp-energy.html
Bet you he is a proxy.
Today in Rappler some info about mister Uy
https://www.rappler.com/newsbreak/in-depth/219039-dennis-uy-growing-business-empire-debt-year-opener-2019
Thanks for that. I started to write a blog about Uy but found the research tedious. Rappler does good work.
From Bong ”Chooks to” Go carinderia to ”99 Luftballons” 🙂
@Micha,
I don’t want to dig in.
Don’t be too hard on Chempo.
We are all here to learn from each other.
+1
-1
-20
+20
“Merger of Transmission and distribution under a govt agency can offer much savings in synergy. Why allow monopolies to be privatised?”
Geez chemp, why were you surprised? That’s the whole point of EPIRA. That’s the whole point of this privatization mania.
Look chemp, the biggest flaw in privatizing the power industry is not that EPIRA and WESM is ditching its intended purpose. The biggest flaw is in treating the power industry as a market.
Electricity production and consumption is not a market in the strictest traditional sense of the word. It is a utility, a monopolizing service utility.
It’s not like Burger KIng and McDonalds competing in the open market on how to make and sell the best hamburger in town. Gencos and retailers do not deliver chocolate or vanilla flavored electricity to your homes. Electricity are atoms and electrons flowing through the copper wire that power your refrigerators and light bulbs. It’s not like consumers get to chose whether to buy or not to buy galunggong or hasa-hasa in the fish market.
Because electricity production and distribution is a monopoly and that it is an essential utility for every homes and businesses, it should not have been privatized in the first place.
With that same line of thinking, gasoline too should not be privatized? I can understand not privatizing water and air, but electricity like gasoline is needed by everyone too why not have a Chevron or Shell at every corner?
In the Philippines, gasoline is NOT needed by everyone. There’s still a functioning public transportation unlike in the US of A where everyone needs to have a car to get around. You could say lousy transportation system like tricycles and jeepneys and MRT’s but nonetheless it gets people to move. Gasoline is NOT an essential utility.
I’ve been to homes in the Philippines not served by electricity, is it safe to say that electricity too in the Philippines is NOT an essential utility?
Sure, but you can’t call them modern 21st century households. It’s like stone age people unable to access and use stone tools.
But if ‘essential’ is your qualifier for not privatizing, then ‘NOT essential’ (you agreed) renders it a luxury good/service fit for market competition , no?
Nope, I did NOT agree that electricity is NOT essential for modern 21st century households and businesses.
What’s so essential about it?
1. AC?
2. TV?
3. Lights?
4. Nespresso?
Look into your own life style , how is it essential? Like I said, what I saw in the Philippines was when electricity went out, people went on about their lives just fine.
If you could live a primitive lifestyle free from all the trappings of modernity like light bulbs and computers and refrigerators then sure, be a hermit in far away boondocks for all I care.
But to be engaged in the modern world without electrical energy is impossible. Envision this : take out electricity in the the whole of Metro Manila for a month and see what happens. How about 6 months? Or a year?
Like I said, when black outs happen in the Philippines up to a whole day was what I witnessed, Filipinos go about their business just the same, only w/out electricity.
Now I don’t know what happens say in a warehouse or call center or bank; warehouses and banks have operated before in the past w/out electricity, but I’m sure call centers would suffer.
Now your question is up to a whole month? in Manila? being that one of the places I witnessed a black out (though only for a few hours) was in fact Manila, I can a test , to candles being lit, tsimis automatic, and kids playing on the street. There’s almost a fiesta feel to it— like when it rains and all the kids go out to shower in the rain.
But will such fiesta feel last a whole month or more? That’s a good question.
For neighborhoods I can totally see it. No refrigerator, there’s those ladies that walk around with flat baskets with all kinds of fresh fish on their heads, if no ladies out and about, go to local fish market. Pigs and goats there too.
No AC, women have those big ass palm leaf weaved fans shaped like spade, or those folding fans (Chinese?). No internet, play chess or throw & hit tin can with slippers (looks fun!). Read books.
Most professions there can be done w/out electricity, lawyer (no electricity); accountant (no electricity, back to the books); engineer (back to rulers and squares); doctor (more patient to doctor interaction).
Call centers would suffer for sure and Filipinos will be less exposed to fake news, what’s the problem? 😉
My contention is most Filipinos can do w/out electricity. Whether it’s complete zero, to 80% w/out, to 50% without, Filipinos can do with less electricity. There’s nothing essential about electricity (at least for the common folks) in the Philippines.
Now for chemp and many foreign business folks looking to make some bones over there, yup electricity is a must. Like over here.
We have regular black-out days which cuts me off the internet and on occasion means I have to miss an important basketball game on TV. These are bearable sacrifices, ahahaha. We did without electricity for two months when Yolanda ripped out the power lines. We ran a generator once gas had been brought into town, a couple of hours a day to recharge batteries, keep the refrigerator cool, and pick up the basketball games. Essentials like that. Until you lay out a pragmatic action plan, though, you are just preaching at the light post.
Nonsense, Micha. I don’t use any electricity from the net and I would call my place more modern than most. I run on solar and have done so for 20 years and learned the hard way that you do not need the electrical grid to survive but can live comfortably with less (much less) than one kWh per day. My beer is cold, my washing machine runs and the wife watches her sitcoms while I fool around on the Internet. Not exactly stone age.
The contention is whether one can live in the modern age without electricity, not where or how you source your electricity.
That you were able to have the trappings of modernity by installing solar panels on your rooftop does not negate the fact that you are using electrical power.
Would it be possible to install solar panels on every household and every commercial establishments and manufacturing centers and totally get off the grid? That would make for a separate interesting topic.
You would get a totally different grid. But the grid should not be abandoned, it allows a sharing economy where you use my solar power when the sun shines, I use Juan’s wind power when the sun does not shine and both Juan and me use Nonoy’s rice husk classifier on a windstill night. Loads of options. And they are already tested, but need a rethink on how we want the grid to work and our power to be generated.
Let me ask you this, Micha.
What does the regular common Filipino need electricity for? Mostly for leisure, luxury, pleasure , no? AC? internet? refrigerator? TV? think about it. Can 90% of Filipinos survive if say a disaster (manmade or otherwise) befell the Philippines tomorrow?
You know the answer is YES, a resounding yes. Youre like Cool Hand Luke, your argument is
I just looked up water for California, and some of it is private , most though are cities, counties and other special public districts look after by consumers (then other small providers).
Water comes from the sky, unto the mountains then it gets funneled southward via CA aqueduct and LA aqueduct (for San Diego it’s Colorado aqueduct).
Unlike electricity (aside from it not being naturally occurring) , water gets used for people or plants (or car washing), then goes to the sewage system, then gets cleaned, then either gets recycled or dumped directly to the ocean.
Then water cycle all over again.
Electricity is created naturally by water or thermo, or by coal or nuke, etc. Transmitted like water, distributed like water, but you see electricity unlike water goes right back to the source, that’s why there’s two holes in that electric socket— it goes in, gets heated (thus power), then it goes out back to the grid.
There’s power loss that’s for sure, why electricity has to be generated. But unlike the sewage component of water use, the overhead for electricity is just its production, there’s no waste to clean.
My point is i’m finding it difficult to find a fitting analogy for why electricity should be public and not privatized. I guess it’s like air, in one orifice and out the other, but as a different product coming out, ie. Carbon dioxide.
That is an interesting point, presuming that we all could set aside material aspirations and live off the land and not have to move to the city for jobs, or get skilled in computers to find the jobs that allow our career in the city to prosper. I think “essential” has to be re-defined by the complexities of living, overcrowding, and inherent greed which we interpret as fulfilling if we are good at it. The State’s view of electricity is that it is an essential product preventing people from freezing in Alaska, cooking in Palm Springs, and suffocating from lack of a respirator in the hospitals. That is why it is viewed as a public utility, I’d suppose. Lives depend on it. It could be privatized, too, I think, but would need proper regulation.
Exactly, Joe. My point with Micha. I don’t think she gets the whole essential point I’m making.
She concedes that gasoline is essential yet a myriad of gas sellers exists here, why not also apply that same model to electricity?
chemp’s got it right when electricity was privatized it was a big mess here, I remember all the black outs and sky rocketing prices, though was too young to understand the nitty gritty of it all. But now, now , electricity is fine.
It’s gas that’s going crazy. That should be public utility. 😉 What’s the word… publicized (vs. privatized)?
Gas though is collected one place, processed in another, transported somewhere else, then price fixed and sold to China because she’s willing to pay the high price for it. Electricity is less a movable feast (within the grid).
Although I’m w/ Micha most days (me being a Bernie fan); on this subject, I’m with chemp. And I believe electricity privatized is already a given, they’ve ironed out all the kinks , so why fight it still?
Privatize it already, just go solar!
“The State’s view of electricity is that it is an essential product preventing people from freezing in Alaska, cooking in Palm Springs, and suffocating from lack of a respirator in the hospitals. “
Alaskan eskimos did okay w/out it; Morongo/Cahuilla indians in Palm Springs also did okay ; but for sure those who need respirators will die (that’s Darwin for ya).
The reason these folks chemp lists can get away with stuff like price fixing, bad service, is precisely because it’s viewed as essential , necessary for modern life . In reality, humans have done quite okay without electricity or gas for that matter for more than 200,000 years!
So we return to my previous point about the boycott above. And farther back to Nietzsche’s slave/ herd morality. Divest.
Right. I admire the discipline of your approach, and the non-material bent, but I’m personally not there, except for small steps rather than huge lifestyle changes, and I think you would have a hard time getting the newly prosperous middle income and upper income people from China or the US or anywhere else to adopt a minimalist lifestyle. So you can argue the point, but it seems to me to be one of those things that would have to be adopted by nations who would then pass laws to move to a less consumptive lifestyle . . . which is impossible because big companies don’t want to shrink. So you need to lay out the path to achieve broadscale minimalist lifestyles rather than argue from the skies that it is morally good.
I’m not saying zero, Joe… I’m saying between no electricity to some electricity, the 200,000 years is just to point out that humanity has flourished w/out such luxuries. That after 1 century most in the West cannot live w/out electricity is something I’m aware of.
I agree with the idea as a sliding scale to reduce lavish consumption. It still requires a pragmatic action plan that consumers and businesses will support.
“. . . which is impossible because big companies don’t want to shrink. “
China can scale-up shrinkage , it’s a command economy.
Remember China (along with the Philippines) were my protagonists in this 2016 article,
(Pablo, you might also want to read above blog and comments)
Pablo, this comment in particular, read ensuing thread after below initial comment…
The Philippines and China can begin a new relationship in which the Philippines offers them a vision of cleaner air and environment, while China provides the Philippines with the means to harness clean energy” – Joe! This is a real workable solution! There doesn’t have to be “cradle of war” here in these South West China-Philippines Seas! Just much bigger business and better well-being for all the world! This is pure genius proposition! i will work on this… “
@ Micha
Nothing surprises me. My view is consistence. Privatise for a competitive market. Don’t privatise a monopoly because there is no competitor. So for gencos, Epira say privatise – I agree. Transmission – Epira say privatise, I disagree. Distribution — Epira say privatise by territory franchise (monopoly), I disagree.
Many fear that public service is inefficient, I disagree. Many countries are doing just great with public service in certain sectors — Germany, Singapore, Taiwan, etc. One way to go about this problem. Incorporatise the public service entity and let it run as a commercial entity. Float it in the stock exchange, Govt to hold major share and directorships.
“Electricity production and consumption is not a market in the strictest traditional sense of the word. It is a utility, a monopolizing service utility.” —
I checked PIPPA (Philippines Independent Power Producers Association) and they have 29 members. With 29 gencos, I don’t see how anyone can call it a monopoly sector.
“Gencos and retailers do not deliver chocolate or vanilla flavored electricity to your homes”
There are green power and there are brown power.
There are fixed rates – 1 year, 2 year, 3 years.
There are other plan options.
You want a plan indexed to oil? or you want to take the risk with spot rates?
Etc etc … these are the service differentiation which I think sooner or later will be introduced as competition heats up under RAOC.
“Because electricity production and distribution is a monopoly and that it is an essential utility for every homes and businesses, it should not have been privatized in the first place.”
Lance has provided some input. To take Lance’s idea to it’s logical conclusion — sugar is a monopoly, salt is a monopoly. Heck education is a monopoly also, why have private schools.
“I checked PIPPA (Philippines Independent Power Producers Association) and they have 29 members. With 29 gencos, I don’t see how anyone can call it a monopoly sector.”
29 gencos do not produce 29 flavors of electricity. Electrons that run through the copper wires have the same electrifying properties. What you have there is a monopoly cartel.
“There are green power and there are brown power.”
Multiple sourcing of power generation does not produce multiple varieties of electricity.
“There are fixed rates – 1 year, 2 year, 3 years.There are other plan options.
You want a plan indexed to oil? or you want to take the risk with spot rates?”
Rate variation is not product variation.
“sugar is a monopoly, salt is a monopoly. Heck education is a monopoly also, why have private schools.”
Monopoly and essential utility go hand in hand. Sugar and salt are not essential utilities.
Education had been targeted for privatization for the same reason that the power industry was : there’s handsome money to be made by those who corner the industry. Public service is secondary to profit making.
“What you have there is a monopoly cartel.”
From your perspective, everything is a cartel. You can have a cartel of sari sari stores.
“Rate variation is not product variation.”
It is a service variation.
“…handsome money to be made by those who corner the industry”
Almost everything can be cornered. Sugar, salt, rice… everything any anything…even porn industry, can be cornered.
“You can have a cartel of sari sari stores.”
For profit sari-sari stores are NOT essential public utilities.
“Almost everything can be cornered.”
Yes, but do they all fall under the heading of essential public utilities and monopolies?
“Education had been targeted for privatization for the same reason that the power industry was : there’s handsome money to be made by those who corner the industry. “
The issue isn’t just profit, Micha, there’s an actual need , nay demand, for quality education absent in most public schools. Private schools go for quality while public schools go for quantity (why roll call is so important).
I believe that’s what Pablo is hinting re (5) ….. de-centralizing power generation will unleash a wealth of ideas & solutions
Private schools have no tenure, no unions, in many instances can pick their students, while keeping teacher to student ration low. Seems a great argument for privatization to me, Micha, sure have public education handy for the needy,
but for those who can afford, open the market, same with 1st class and cabin class over there. Why subject people to public mediocrity, that’s not fair! If you notice here in the US people are clamoring for private or at least charter schools.
Open it to market forces, Micha.
“…..heading of essential public utilities and monopolies”…
Ahh here’s the rub. Essential is subjective. Salt and sugar is not essential to you but yes to others. Milk powder is not essential to others or those who lactate well, but yes to others. Vicky Bello moisturiser cream is essential to me.
As an addendum about different hamburgers vs electrons :
Low tension – high tension, 110/120v – 220-240v, 50/60 hz —- are these the same?
Don’t tell me the electrons are the same. Mcdonalds and Jollybees’ hambergers came from the same cows.
That is a good topic for an article. Public education in the Philippines features crowded classrooms and mediocre teachers. People who can afford it move their kids to a private school for smaller classrooms and better teaching. The most expensive schools are generally the best. Public schools are free, lower tier private schools are about P30,000 a year for tuition and top rung schools are above P! million (international schools). There is a classist ring to it all. But public schools really are shitty in a lot of places.
Hopefully no more postponements for WESM in Mindanao.
https://www.doe.gov.ph/energist/wesm-mindanao-operations-reset-first-half-2019
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THE VIEW AND THE EXPERIENCE FROM AUSTRALIA
1. Historically, government utilities ran the entire electricity supply chain in all states and territories.
1.1. The historical view was that electricity networks are considered to be natural monopolies. Unlike other industries, where it makes sense for lots of businesses to compete and drive costs lower, the cost and importance of supplying electricity means it make sense for one business to control the market.
1.2. This single business should not be a privatized firm or even a corporatized government enterprise. Instead, it should be a statutory authority with a primary mission of delivering energy security at low cost.
2. Until the 1990s, state governments owned and controlled Australia’s electricity grids from power stations to poles and wires.
2.1. In the 1990s, neoliberal governments began to separate the 4 components of generation, transmission, distribution and retail segments into stand alone businesses.
2.2. Generation and retail were opened up to competition, but this approach was not appropriate for the transmission and distribution networks due to Australia’s vastness and its dispersed thin population. These two segments became regulated monopolies.
2.3. The basic argument in favor of the privatization of electricity generation and distribution is simple — public ownership allows too much bargaining power to electricity workers and their unions; it also fosters over-investment in generation capacity by engineers concerned to guarantee service reliability (“gold-plating”). By selling off their assets, the states realized short-term gains in their budgets.
2.4. Note: Not all states and territories have privatized.
o Western Australia, Tasmania, and the Northern Territory remain public.
o South Australia, Victoria, and the Australian Capital Territory are completely private.
o New South Wales has private generation and retail; and public transmission and distribution.
o Queensland has public generation, transmission, and distribution; and private retail.
3. The only federal component now is at the regulatory level, where two separate national regulators overlap with the continuing regulatory operations of state governments.
4. Contrary to the hopes of the market designers, breaking up these integrated systems has delivered no benefits, while incurring huge costs. Power prices have continued to rise. The reasons for the rise are:
o Private capital has to earn a higher rate of return than public investment.
o Private debt is more costly than public debt.
o Private competition has increased the work force in marketing, which is nonproductive in terms of power generation.
4.1. Fact check: While South Australia, with privatized electricity, has the highest bills, there is a study that has found no consistent correlation between higher power bills and privatization. The movement of electricity prices also doesn’t demonstrate a link between price rises and privatization. (This lack of correlation may be attributed to the regulatory agencies?)
5. There is an energy crisis going on now in Australia. The country has closed down several coal-firing energy generators but has not replaced them with renewable energy alternatives.
5.1. There is talk of renationalizing the electricity supply chain. Can the scrambled eggs be unscrambled?
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Thanks edgar.
Australia has not been spared from neo-liberal madness. If it’s prices that we must be concerned about, there’s no other way to solve it but through gov’t subsidy. Private operators exist for one thing and one thing only : profits. They are not ever going to bring down the rates if it meant reduced or negative returns.
Does the gov’t have the ability to operate the whole power industry? YES.
Does it have access to resources to ensure efficient and reliable power supply? YES
Can it afford to maintain the whole system in the long run? YES
Is it capable to innovate for new eco-friendly technologies? YES
Can it afford to subsidize consumer prices? YES
The madness of privatization had been concocted to enrich and empower the oligarchs. It does not necessarily led to efficiency or lower the costs.
Thanks for the info.
It’s interesting, because DOE and other govt authorities have often mentioned Philippines is adopting Aussie model. So what is the Aussie model?
One point you missed out — with privatisation of gencos, private funds are used, thus leaving the govt with more liquidity for their budgets. What is the trigger down economic benefits as a result of that spending?
There seems a whole host of problems, obviously there must be a whole host of causes which may have no bearing on whether the operation is privatised or public run.
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“What is the trigger down economic benefits as a result of that spending?”
Impossible to assess.
Politicians will spend — nay, they will squander.
The facts remain:
o The excess liquidity was short-lived and was not mindfully channeled into renewables.
o The government — and therefore the public — has been stripped of assets.
o People are paying for the marketing expenses of the energy retailers.
o As Micha contends, utility funds are being channeled into private pockets.
On that last point, I am in agreement with Micha.
As a general principle, governments should provide essential public utility services to taxpayers. This would include electricity, natural gas, water, sewage, telephone, certain transportation services, and, in the age of the Internet, broadband.
Paying road tolls to private companies — for eternity — is a bugbear.
The old quote about death and taxes should be updated to include tolls. And possibly trolls.
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Edgar — this bogs down the the argument of more government or less government.
Privatisation has it’s good sides — proof is the fact the world has been on an upward trajectory in so many metrics since Industrialisation took hold. Sure there have been problems as Julia Roberts (Erin Brockovich) can testify. The problems are all human deficits, not the system.
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Capitalism? And not necessarily privatization?
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In the context of discussion here, capitalism is the general sphere, privatisation is the restrictive sphere of less govt.
See which are the areas that govts all over have divested — electricity, gas, and water utilities, postal services, public transport, port management, health services, etc. If it’s bad, why are they all heading for the cliff?
When the govt privatise and corporatise (holding on to major share of the entity), that entity with technical expertise over time, can venture overseas and part-take in business opportunities. It’s a heck of a way to accumulate and build a sovereign wealth fund.
Have you seen this, chemp? https://en.wikipedia.org/wiki/The_Commanding_Heights
No I have not read this.
Thks for the link. Will catch up on this.
” The commanding heights of the economy refers to existing private industry essential to the economy like public utilities, natural resources, heavy industry and transport as well as control over foreign and domestic trade. This phrase emerged from a branch of modern political philosophy concerned with organizing society and can be traced back to Karl Marx’s idea on socialism, which stresses the commanding heights and advocates for government control of it. “
*******
I am not sure that the selloff of public assets here in some Australian states provisioned for a sovereign wealth fund.
I am not sure that the divestiture of state functions into private hands is totally a good thing.
The reason for doing so is usually “efficiency.”
Apart from the sectors you mention, prison management and national security have also been privatized to some extent.
I believe the results have been varied.
I believe the jury is still out.
From Wikipedia: “Many of the military interrogators at Abu Ghraib prison were provided by a private contractor and lacked formal military training; this was subsequently identified as a contributing factor to detainee abuse at the prison by the Fay report.[21]”
As to electricity here in Australia, let me quote from a recent HuffPost AU article entitled “We Are Paying The Price For The Privatisation Of Energy:”
1. Why is the government not ensuring extra supply?
“Because governments no longer own power generation assets in New South Wales, Victoria and South Australia — the three states facing a power supply crisis.”
2. Why is the private sector not investing in new baseload energy?
“The private sector is not investing in new baseload energy because of a lack of policy certainty. As a result, supply is becoming constrained and business and household consumers are starting to pay the price.”
“In their submission to the Finkel review, The Australian Energy Council, stated: ‘The lack of national policy certainty is now the single biggest driver of higher electricity prices. The electricity cost of sustained national policy inaction is effectively equivalent to a carbon price in excess of $50 a tonne.’”
The analogy of a cliff is appropriate.
*****
“5. There is an energy crisis going on now in Australia. The country has closed down several coal-firing energy generators but has not replaced them with renewable energy alternatives.”
This was key in California.
.
Meralco has its Solar option, but it discourages getting or installing solar panels that is not from them.
https://residential.meralco.com.ph/products-services-and-programs/solar-net-metering
A 2015 article about the view of the experts. They do not want Epira to be amended.
http://www.bworldonline.com/content.php?section=Economy&title=epira-works-fine-but-energy-institutions-need-bolstering-experts-say&id=112191
“EPIRA works fine, but energy institutions need bolstering, experts say
Speakers during a power governance forum yesterday said stakeholders should focus on strengthening institutions like the Department of Energy (DoE) and Energy Regulatory Commission (ERC) instead of pushing for the amendment of the Electric Power Industry Reform Act of 2001 (EPIRA).
“Institutions matter particularly in building an enabling environment for private initiative,” Raphael Perpetuo M. Lotilla, former Energy secretary, said during the forum in Makati City jointly organized by Ayala Corp. and the University of the Philippines School of Economics.
Mr. Lotilla, who is currently the chairman of the Center for the Advancement of Trade Integration and Facilitation, said energy agencies are facing budgetary constraints that hinder them in investing compared with power firms, which are more flexible.
“Strengthening institutions and working together is important as we deepen the existing reforms,” he said.
He said coordination among the agencies is necessary to avoid situations that may affect the power industry.
“The planning function can serve as a way of integrating and coordinating, not only the ERC and DoE, but all energy related agencies. Oftentimes, the planning exercise is taken for granted,” Mr. Lotilla said.
“Integration is not simply collation of all sub-sector plans by putting together a coherent plan for the energy industry,” he added.
He noted that measures are available without the need to amend the EPIRA, which instead should be utilized and effectively executed.
These sentiments were backed by AC Energy Holdings, Inc. President John Eric T. Francia, saying that “there is a need to strengthen institutions under the EPIRA framework.”
“It is my hope that stakeholders focus on this thesis instead of repealing and amending the EPIRA,” Mr. Francia said.
The official cited various power generation projects in the pipeline that could soon address the growing need for power as he noted that the recent supply problems are only short-term.
“This goes to show that the system is ready when the need arises. The bottom line is that we do have the momentum. EPIRA is working. It’s not perfect and we need to strengthen the institutions,” Mr. Francia said.
The official also recognized the need for a sound energy mix policy, which the DoE wants to achieve to ensure energy security.
“We will be hounded, five to 10 years from now, if we don’t have the right mix,” Mr. Francia said.
To which Alternergy Wind One Corp. President Vicente S. Perez Jr. added: “If a significant portion of the energy market is dependent on imported coal from Indonesia and China, which also use coal for their own needs, I think that would be putting energy security at the hands of other countries.”
“The more diversified, the better the energy security,” Mr. Perez, who was also a former energy secretary, said.
He also concurred with the idea that EPIRA — which he regarded as “ambitious” — should not be amended.
Peter Lee U, dean of University of Asia & the Pacific’s School of Economics, for his part said that the country’s electricity market is working.
“If you have price spikes and volatilities, it reflects insufficient capacity in the market,” Mr. Lee U said.
Such situations send the appropriate signals, since the market is governed by supply and demand.
Mr. Lee U further said that the energy industry needs to establish a reserves market.
“Today, we tend to see a lot of narrow reserve margins, which can cause more volatility in the market,” he said.
“If it’s volatile, it shows that you don’t have enough supply from the power plants — or in the case of reserves, you don’t have dedicated market that will produce ancillary service,” Mr. Lee U explained.
A reserves market has been on the radar of the energy agencies for some time, though implementation has yet to be realized.”
“EPIRA works fine, but energy institutions need bolstering, experts say”
6% load transaction in WESM say Epira is not working. But the Epira framework is practically in place. There is no need to repeal Epira, just get 100% load in WESM.
Some tweaking required:-
Consider review of Transmission and Distribution wheeling rates. The ODRC methology should be reconsidered.
Get rid of Distribution franchise.
Merge transmission and distribution — nationalise under a govt entity, incorporatise it.
“If you have price spikes and volatilities, it reflects insufficient capacity in the market,”
Spikes and volatilities are day-to-day occurrences due to failure in load balancing arising from an array of causes, Capacity insufficiency causes rolling blackouts.
Me + chemp = privatization is good , CA & Singapore
Micha + edgar = privatization is bad , Socialism(?) & Australia
Privatization is happening, so no sense in defining it as “bad”, it’s arrived hence “good” (the powers that be have decided, master morality of Nietzsche)— unless the Philippines can do a U-turn.
With privatization,
Me + Micha + chemp + edgar + et al = all agree that prices will go up. It went up here, chemp’s right a big reason why the Terminator became the Governator was because of price gouging , CA wised up (now though it’s over extended too many players, another coming problem).
Either because of bureaucratic fumblings or more sinister cartel type dealings to fleece the people and businesses, doesn’t really matter, same-same.
Knowing how dirrrty the Philippines is, this is a guarantee. Prices will go up. Filipinos will get screwed (yeah, what’s new?).
Back in the early 2000s, California had no choices; Australia now seems in the same boat , California 20 years ago. Now, though especially in CA and other parts of the US we’ve seen viable examples of people doing okay with less electricity, we have other options for electricity as well, there’s a lot more off grid examples now, than 20 years ago.
I don’t know about Australia, but within the last decade the theme in Hollywood and TV shows have been about survival, about living with less, going off-grid, assuming the inevitability of societal collapse. We got Mad Max from Australia in the 80s, I’m surprised they got caught up in this mess, they seemed ahead of us on this societal collapse stuff.
My point is, I think everyone’s ready.
20% of folks here are now well versed in living off-grid and homesteading. But my point here is 80%-90% over there never had to prepare themselves for the possibility of life w/out electricity , it’s kinda been a given. Filipinos are used to less already.
So Filipinos don’t have to be indoctrinated with homesteading shows, off-grid, tiny house living, etc. etc. By definition Filipinos are survivors.
My plan of action, Joe, is boycott electricity when they start their reindeer games, it’s gonna come.
Filipinos are like Parisians, they’re not as busy as Americans, probably have more time on their hands than Parisians. Don’t protest. But like your Yolanda scenario , just pretend a huge typhoon hit the Philippines and just go without electricity, if you were able to go 2 months, extend to 4 then to 6.
Show the fat cats moving in just how “essential” electricity is. This notion of progress has to be re-thought, the last century saw leaps and bounds, but I think this century is going to be more of less. Either by natural disasters, man-made ones, or from outer space.
But for sure they are gonna hike rates up (same game they play everywhere), we’re not buying your drug is the solution. I agree with Micha like Mexican drug cartels they will gouge the public, but unlike Micha I also don’t think the Philippine gov’t is a better steward. Rock meet hard place, Filipinos in between.
NH can check my take here, via game theory, but not playing is definitely an option here. My plan of action, not playing (or playing very little of said game).
p.s. — as an added bonus to this scenario I hope call centers dissolve. they are nothing but slave farms. but that’s an old discussion. 😉
I don’t think that is the pragmatic approach that would have to be introduced, and so remains, to my ear, preaching. Step 1 would be laws, but the only progressive thinkers in the Philippine legislature are with the minority (Roxas – maybe, Aquino), and they have no platform from which to drive anything. They probably are not even electable. Your proposal is to just cut off electricity for several months so people learn to do without it? Investors would flee in droves. So the problem is not with your ideals, but how to put them into the action plan that is framed by the current social and political and economic dynamic.
The price gouging is assumed no?
Action-reaction.
Reaction being boycott. Mine.
The question is, is boycott realistic (we already agree on this, we can disagree whether boycott will work or not, etc.) over here absent of some actual calamity, no won’t work too dependent; over there, totally doable less dependent on electricity.
The plan is not over-arching , Joe, it’s merely a reaction to the coming price gouging, if me, Micha, edgar, chemp are wrong, and prices go down and service improves, then foot to mouth time.
Over here people take the bus to work or train or bike, but I notice price has to go around $5 per galloon for people to adjust their routine, I don’t know what price people will walk out on over there, just that if a certain price range is reached,
some reaction is assumed no? You’re saying just waiting for what Nonoy and Roxas will do? That the people won’t take action ala Paris over there? You may be right, high electricity prices, and no reaction.
I’m just saying Filipinos are the perfect folks to apply said boycott.
The PCGG takes ng over the assets and leaving it to rot and decay beyond economical repair make us favor privatization.
But the lousy service of Maynilad and Manila water during its early stages make us rethink of the benefits of privatization.
In addition to that the privatization of Napocor did nothing but give temporary relief and beyond that temporary relief, thing became even worse.
So it’s not about privatization and renationalisation, it is all about leadership and management.
We are known not to have preventive maintainance in all of our assets, maybe we should begin with having a preventive maintainance program.
Good programs can lead to a good system.
Loads of Filipino engineers work abroad and are experts with maintenance systems, be it preventive, corrective, condition based or maintenance projects.
The fact that it does not happen here is very simple: Money going down suspicious channels.
Just claim you did the maintenance and make sure it looks as if it’s done while actually no work was done and the costs can be sluiced away. Nobody notices the difference for at least a year, maximum 5 years.
My company went from preventive maintenance to condition based maintenance on turbines and generators and we managed to run our equipment for an additional 1 to 3 years without problems (and without planned maintenance). It saved us a load of money, but this only works under very strict conditions. Every airline company will tell you how it works because this is the standard now.
Proving that in Philippines, you could bag the preventive maintenance cost for a long time without anybody noticing it. The auditors are a joke anyway and management does not seem to have a clue. A very profitable ” business” in Philippines… Or am I justified to say that actually there is no chance that any public power utility could work here? Let’s be real, it won’t work, the culture is not here to allow any successful public utility to work. It has been proven over and over again, so let’s not flog a dead horse.
So, let’s face the facts and try to find a way to make the utility companies charge a fair price.
And as has been proven in this blog that the prices remained stable, it follows that the current systems are not working, hence the people are not doing their job, hence they should face the music. But most likely, this is hopeless as this is Philippines. Hence, I came to the conclusion is that the only way to solve the problem is by producing your own electricity and staying away from the net. But I have written this in several other comments in this blog, in this reply, you see my reasoning WHY I have done it, And individual Barangays can do exactly the same. There are enough Filipino ships engineers capable of managing this. That would tell the utility companies what The Who already sang in 1969: ” We’re Not Gonna Take It”.
I do not see any other solution in Philippines, there will be lots of talk, lots of very interesting blogs written, but the system will stay totally opaque so the cash can be diverted and the power prices in Philippines with be like always: Amongst the highest in Asia. Q.E.D.
Organised corruption and chaotic maintenance —
That is the reason why I’m scared shit taking Cebu or PAL flights.
It is also why I’m totally against nuclear plants for Philippines.
Cebu Pacific and PAL both are accredited by the international aviation industry. It seems the maintenance of the planes and their procedures (working times etc) are in order, so I would not worry too much, they are much better than the airlines we used in Africa and Russia. In Aviation, there are so many flights every day, you tend to notice when planes drop out of the sky. But as for the nuclear powerplant, I completely agree with you. There, we talk about a single unit. And not like the PH airlines which lost their international accreditation and had to work hard to get it back. A single mistake in a nuclear powerplant is likely to be lethal. And PH does not have a nuclear history, I do not know of an accredited university in PH which trains operators and engineers and scientists and civil authorities for the nuclear business. Scary.
Besides, nuclear power proved to be VERY expensive. Oh sure, it is competitive if you do not count the waste, but if you look at the Windscale cleanup, you talk about billions and billions of US-Dollars EVERY YEAR to just ” manage” the waste and they have not even started the cleaning process. A de-commissioning of a nuclear power plant therefore is always postponed and the cost to be paid for by our grandchildren (who by then only get the burdens and never the benefits). I would call that totally irresponsible. There is a nuclear pressure group right here in Philippines who promote nuclear power without giving relevant information. They make it look rosy and cheap. I call it misleading. Anyway, if Philippines ever decides to go for nuclear, I am happy I am far away. The accidents in 3-mile island, Fukushima, Chernobyl, Kyshtym, Windscale, Tokaimura, happened to countries with well trained people and a history in nuclear physics like USA, Russia, France, UK, Switzerland… Philippines has no nuclear awareness and is likely to become a Mini-Murmansk if they go nuclear.
Yes you are right about Cebu and PAL . They have improved, but it was so not very long ago.
My concerns about how systemic corruption is so dangerous in the area of maintenance in sectors where safety is critical stems from some personal experience a very long time ago. I was with a microwave tecommunication installation where I saw the re-cycling of maintenance parts (by Malaysian personnel). Certain parts have a retirement age even though they are still in working order. They were sold off as electronic junks to some dealers, eventually re-procured as replacement items. Imagine this being done in airlines, or horrors, in a nuclear plant. Or very reaiistically, procurement of fake items.
The nuclear pressure group is convinced Philippines has the nuclear engineering capability, or fully capable of building up that capability. I’m sure they can, at least at the daily operational levels. It’s when things go wrong, is there depth of experience to handle the situation. But mainly, my worry is in the maintenance part.
I share chempo’s concern regarding the danger of corruption in the area of maintenance and safety. From working within the electronic industry (printed circuits in avionics, on-board computers) one is exposed to the rigorous standards of acceptance for both newly bought equipment and those under maintenance. The equipment and components I worked with are routinely subjected to both US Military Standard Specifications and Federal Specifications covering acceptability and reliability. The rigor is particularly applied to equipment and parts used in the transport of personnel, e.g. aircraft avionics, and instruments of war such as guidance systems. The technical expertise of personnel involved both users and manufacturers are in my opinion impeccable from what I have seen. These personnel are under the aegis furthermore by the various professional associations such as the National Bureau of Standards and the American Society of Testing Materials to certify a modicum of reliability and safety. The following article is a foretaste of awareness as to what needs to be in place.
https://www.flyingmag.com/when-airplanes-feel-fatigued
And from my experience: Fully justified concerns, a recipe for disaster.
Why do we have many cookbooks for disasters? Too many cooks?
Or too many crooks?
Too many crooks, but no hooks to hang them.
Bingo.
Second the motion on Bingo.
Another eye opener. Thanks again.
In addition we cannibalize spare parts in order for equipment to operate.
Is it because of problems in procurement, planned obsolescence, etc.
Corruption is bottom up, it is not only about pocketing money, even the processes are corrupted.
Karlgarcia,
In shops, the cashier checks your purchases, the packer checks it again and the guard at the exit checks it again. But nobody (apart from the cashier) tries to do his job thoroughly, so theft still is possible. This is a sign of the overall system, nobody trusts anybody. Same level of trust in the procurement systems where no trust nor accountability is build-in, so the systems become complicated and opaque and still a significant part of the money disappears. And everything becomes hopelessly inefficient without any accountability build-in. Add the “powerlosses” (powertheft which is rampant and there is no system to stop this effectively). By no means can you run a halfway efficient public utility this way. Processes, people & customers; all corrupted and inefficient to the max. No, both options: public or private are needlessly expensive and inefficient. Now, what is the solution? Selecting the least bad option? That implicates us in the choice as well, knowing that both are seriously corrupt and harm the country. Then what?
Again, many thanks. No immediate answers yet.
What we allow things to proceed despite the red flags.
Some big projects got scratch just after a series of senate investigations, name the ZTE NBN Broadband, Northrail- Southrail, etc.
If they just correct the measures that at to be corrected and add a little trust, some projects would have been finished or up and running by now.
I already posted this on the climate change blog, but it is about Power and Energy.
https://www.sciencemag.org/news/2019/03/new-fuel-cell-could-help-fix-renewable-energy-storage-problem