Interview: Francisco C Sebastian
How can the power requirements needed to complement growth in the Visayas region be obtained, and how can you attract more investor interest?
FRANCISCO C SEBASTIAN: Within the context of the Electric Power Industry Reform Act, power generators have to compete, which ultimately drives prices down for consumers. Whereas in the past everything depended upon bilateral contracts with the government, independent power producers now need to look for buyers. Reliability is crucial in power generation, especially in the islands throughout the Visayas region. Although transmission lines exist, one would need power plants on the islands themselves in order to ensure technical reliability and energy security. Cities deprived of power cannot be reliable places of business.
Government officials at every level have provided support to facilitate private-public collaboration in power generation. The main challenge in the past has revolved around changing the mindset of local communities and governments from their historical opposition to coal-fired power plants, for instance in Iloilo. However, there have been significant efforts put into information campaigns where the public has been educated about coal and global warming. In coal-fired plants, 30% of the project cost is spent on clearing up carbon emissions and raising environmental standards ahead of existing regulations, particularly in terms of soil and water testing. The carbon footprint of the Philippines is one of the smallest in the world. Additionally, as technology improves, mechanisms to minimise pollution are reinforced.
What type of energy mix would best serve the power generation requirements across the Visayas and for off-grid areas like Mindoro?
SEBASTIAN: Since many power sources are currently under construction or expansion in the Visayas, demand is not expected to outpace supply despite the region’s robust economic growth. Although there has been progress in renewable energy projects, the region needs to supplement these developments with base load capacity; otherwise, if the wind or solar power supply is down, reliability will be compromised. For a developing country like the Philippines, the cost of renewable energy and indigenous power sources is high, and additional base load is required to ensure power security and to deliver a stable supply.
Whereas coal technology is fully developed, for renewables like solar, once a plant is built, costs can vary greatly as technology evolves. In this case, the sustainability of a solar project is challenged by its ability to maintain price stability in a changing environment. With biomass energy, the certainty of the fuel supply is a real challenge, particularly as it is dependent upon the availability of input raw materials, land fragmentation and the ever-changing pricing demands of farmers. Coal is a logistics game; it has a visible international pricing benchmark and shippers and handlers are available for the world market. Thus it is an attractive source of reliable power generation.
What type of pricing and distribution opportunities does the Whole Electricity Spot Market (WESM) offer to power generators?
SEBASTIAN: It is important that a market exists for generators to sell their excess capacity. The ability to have someone ready to provide power in the event of a shortage gives confidence to both investors going into the energy markets and consumers operating within an environment of rapid economic growth. As more fuel sources come into the market, higher prices are a better alternative to being without power. When Typhoon Yolanda occurred in 2013, electricity prices spiked but brownouts were averted, which is the ultimate goal of the WESM as a selling mechanism platform. As investor interest grows, the ability to get contracts and to meet demand will enable businesses to expand confidently.
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