Supply Issues

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In the lead up to the Philippines' presidential election on May 10, power is increasingly cited as an issue. Though it is not so much a matter of who will control the political destiny of the country as of electricity and the disruption to its supply that is making headlines.

Many regions across the country are experiencing power shortages, with a number of factors playing a part in reducing supplies. One of these is the long-running drought that has affected the Philippines and much of the wider region, which has seen water levels in dams and rivers drop as seasonal rains failed.

Almost one-quarter of the Philippines' generation capacity is represented by hydroelectric power plants, with some 3300 MW of the country's total 15,572 MW installed production being water-driven.

On Mindanao the drought could have an even greater impact, with more than half the island's power generated by hydroelectricity plants. The lack of water to turn turbines means that hydroelectric power plants at Agus and Pulangi, with a combined capacity of 900 MW, could be facing severe disruption, according to state-owned utility National Power Corp (Napocor).

Falling water levels, along with rising demand as the national economy starts to recover from the global recession and a string of shutdowns of generating plants for urgently needed maintenance, have all combined to dim the lights across the country, with some regions experiencing brownouts – a reduced but continuous supply of power – or full blackouts for extended periods.

The ongoing power cuts have impacted the economy, with businesses and industries on the island of Mindanao in particular being affected and investments put at risk due to the inability of distributors to guarantee supplies in the future.

According to Jerome Soldevilla, the president of the Cagayan de Oro Chamber of Industries, firms are holding off on new investments until there is an improvement in the power situation, which is harming the long-term prospects of the local economy.

"Investor confidence has been dampened. Unless permanent and long-lasting solutions are put in place to address this power issue, Mindanao's competitiveness as an investment destination will continue to erode," Soldevilla told local media on April 13.

The state has been working to overcome the power shortage, proposing a mix of solutions to the problem. Part of this is a commitment to backing renewable energy sources, with the Renewable Energy Act signed into law at the end of 2008 setting out the objective of doubling the country's renewable energy capacity from its present level of 5300 MW by 2030. This is a part of what Mario Marasigan, the assistant secretary at the Department of Energy (DoE), says is a policy to aggressively develop renewable energy potential such as biomass, solar, wind and ocean resources.

While renewables could help strengthen the Philippines' energy security and cut its fuel imports bill, a shift towards alternative energy sources will come at a cost, Marasigan told a conference held in Manila in late March.

"In financing renewable energy, perceived investment risks are still an issue. But the government is aggressively developing renewable energy potential," said Marasigan, adding that the policy will be supported by fiscal and other incentives for the private sector.

Since the Renewable Energy Act came into force, just under 200 renewable energy contracts, valued at $1.97bn, have been approved by the government. The first of these projects, with a combined generation capacity of 4400 MW, will be coming on-line soon, though the majority are still at the predevelopment stage.

Running parallel to the push to promote renewable energy is the ministry's plan to reduce coal imports and encourage local production to help meet growing demand. It is estimated that the Philippines uses more than 12m tonnes of coal annually, most of which is utilised for energy generation. This total is expected to rise to 15.3m tonnes by 2014, of which 13m tonnes will be burned to create electricity.

While a mix of clean renewables and coal are part of the solution to the power shortage, the other main ingredient in the mix is nuclear, with the DoE also laying the groundwork for an atomic energy programme.

In its 2009-30 Philippine Energy Plan (PEP), the department said it had the short-term objective of building the required human resource capability and preparing the substantive framework and technical aspects of a nuclear power programme. One of the initial steps in this process has been completed, with Napocor recently releasing a report identifying 14 potential locations where a nuclear power station could be constructed.

In early April, officials announced the government was considering spending up to $4bn on two 1000-MW nuclear reactors from South Korea. Though the adding of nuclear power to the country's energy mix is at the moment only a proposal, it does seem likely that the Philippines will go down this road.

Most of the candidates in the May presidential poll have outlined their solution to the energy crisis, in the main backing the existing energy mix. All promise to step up funding and find a solution to the power shortages, though it will take time to boost generation capacity and ensure the light at the end of the tunnel stays lit.

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