Shifting gears and changing oil: Adopting electric vehicles to address the Philippines’ Energy Trilemma

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The consecutive rounds of oil price increases that greeted Filipinos as they ushered in the New Year once again underscored the country’s heavy reliance on this imported energy source to fuel the country’s economy.[1] Given the highly volatile nature of oil prices, the country must adopt a comprehensive energy strategy that would find alternative solutions and give the commuting and driving public access to energy sources that are reliable, affordable, and environmentally sustainable.

These three requirements are collectively referred to as the Energy Trilemma, as policy solutions geared at addressing one requirement often comes at the expense of the other requirements. As the country’s total energy demand is dominated by the local transportation sector, accounting for 35.6% of the country’s energy consumption[2], steering the sector away from imported oil and towards electricity for its fuel needs is an effective way to address the country’s overall Energy Trilemma.

Shifting to electric vehicles would likewise be a unique energy policy solution as it would be able to address all three facets of the Energy Trilemma. Using electricity as fuel would give the Filipino public access to an energy source that is not only reliable and affordable, but is likewise environmentally sustainable.

ELECTRICITY AS A MORE SECURE FUEL SOURCE

The Philippines currently imports 99% of its crude oil requirements, 81% of which is sourced from three Middle Eastern countries alone.[3] Relying heavily on one of the most geopolitically volatile regions for the supply of energy poses a threat to the country’s energy security. On the other hand, the country derives 47 percent of its electricity from a wide variety of domestic sources such as geothermal, wind, natural gas, and hydropower.[4] This in turn makes electricity costs less vulnerable to price and political developments in the international arena.

The chart below shows the average quarterly price of oil in the world market, as well as domestic prices for oil and electricity from October 2016 to October 2018. The data shows a correlation between international and local oil prices. In particular, the 65% increase in world oil prices during this period was mirrored in the country with a 40% jump in local pump prices. Thus, oil prices increased by PhP 17, from PhP 43 per liter on October 2016 to PhP 60 per liter by October 2018 – the highest in more than four years.

Figure 1. Illustration of monthly movement of world oil prices, local gasoline prices, and local electricity prices from October 2016 to October 2018.

Electricity prices, on the other hand, rose by only PhP 2 during the same period. Relative to imported gasoline and diesel, electricity thus represents a more secure and stable source of fuel for the local transportation sector.

ELECTRICITY AS A CHEAPER FUEL SOURCE

Not only is electricity a more reliable fuel relative to oil, it is also a more economical energy source. A 2018 study by Frost & Sullivan shows that it costs merely PhP 2.75 per kilometer to operate an electric Public Utility Jeepney, compared to PhP 4.50 per kilometer using a diesel powered jeepney. [5] A cost comparison between an electric vehicle sedan and an internal combustion engine (ICE) vehicle as shown below bears similar results.

 

VEHICLE MODEL DISTANCE TRAVELED FUEL COST AT OCTOBER 2018 PRICES FUEL CAPACITY REQUIRED TOTAL FUEL COST
2016 Nissan Leaf S 172 km P10 per kWh 30 kWh P300
2017 Toyota Vios 172 km P60 per liter 11.5 liters[6] P690

Table 1. Fuel cost comparison between 2016 Nissan Leaf S and 2017 Toyota Vios.

Traveling from Quezon City to Tagaytay City and back, a distance of roughly 152 km, would thus cost more than twice as much using a gasoline vehicle than an electric vehicle. Electricity is thus a more affordable fuel alternative for both the commuting and driving public.

ELECTRICITY AS A CLEANER FUEL SOURCE

The local transportation sector contributes 65% of air pollutants in the country’s atmosphere largely due to its reliance on carbon emitting gasoline and diesel.[7] Shifting to electricity as a fuel source would be an environmentally sustainable energy solution as it would decrease the sector’s overall Green House Gas production by an estimated 23.5 million metric tons of carbon dioxide emissions.[8]

GOVERNMENT SUPPORT NEEDED

Admittedly, however, the upfront costs of owning an electric vehicle remain considerably high.[9] Legislation is needed to provide a framework to encourage the public to adopt electric vehicles. This would allow the institution of non-fiscal incentives that may be desirable to vehicle owners such as dedicated parking, privileged access, and ready availability of charging stations.[10] These incentives are crucial as they have been proven to be twice as more effective in encouraging electric vehicle adoption than direct financial subsidies.[11]

NECESSITY OF CLEAN GRID

The benefits the Philippines is projected to derive from a shift to electric vehicles are, however, inherently tied to the quality of power that runs through the country’s electric grid.[12] As recently pointed out by the International Energy Agency, in order to be effective, electrification of the transport sector must form part of a comprehensive package of policies geared towards use of sustainable energy sources.[13]

Rejecting ICE vehicles in favor of electric vehicles while at the same time relying on generation plants powered by imported energy sources to fuel the same electric vehicles, would not address the country’s Energy Trilemma. Shifting to electric vehicles must thus be coupled with a continued utilization of domestic and renewable energy sources in power generation as mandated by landmark energy laws.[14]

SOLUTION TO THE PHILLIPPINES’ ENERGY TRILEMMA

Adopting electric vehicles as part of the Philippines’ overall energy strategy would place the country in a unique position to address all three facets of its Energy Trilemma. Given that a significant portion of the country’s electricity requirements is derived from domestic and renewable sources, shifting to electric vehicles would thus give the commuting and riding public access to an energy source that is reliable, affordable, and environmentally sustainable.

 

Sources:

[1] Pump price hike 4th in a row, available at: http://www.manilastandard.net/news/top-stories/286456/pump-price-hike-4th-in-a-row.html.

[2] Page 12, Philippine Energy Plan 2016-2030. The industry sector’s share in the country’s total energy demand is 26.6%; residential sector accounts for 24.8%; commercial sector accounts for 11.9%; and agriculture, fishery, and forestry sector accounts for 1.1%.

[3] Oil Supply/ Demand Report, available at: https://www.doe.gov.ph/downstream-oil.

[4] 2017 Power Statistics, available at: https://www.doe.gov.ph/sites/default/files/pdf/energy_statistics/01_2017_power_statistics_as_of_30_april_2018_summary_05092018.pdf. Natural gas and renewable energy account for 16% and 31%, respectively, of the country’s dependable capacity.

[5] Frost and Sullivan Report on Electric Vehicles in the Philippines. March 2018.

[6] 15 km per liter assumption.

[7] Page 17, 2016 DENR National Air Quality Status Report 2008-2015.

[8] Page 13. Pathways to Low-Carbon Development for the Philippines. Asian Development Bank. 2017.

[9] Page 49. EV Policy Compared: An International Comparison of Governments’ Policy Strategy Towards E-Mobility. E-Mobility in Europe, Green Energy and Technology. 2015.

[10] Page 4. National Framework of Local Incentives for Electric Vehicles. Urban Foresight. 2016.

[11] Page 8,068. Policy Incentives for the Adoption of Electric Vehicles across Countries. Xingping Zhang, Jian Xie, Rao Rao, and Yanni Liang. Open Access Sustainability, 2014.

[12] Page 2. State of Charge: Electric Vehicles’ Global Warming Emissions and Fuel-Cost Savings across the United States. Union of Concerned Scientists. June 2012.

[13] Electrifying the world is no panacea for global warming, IEA says, available at: https://www.bloomberg.com/news/articles/2018-11-13/electrifying-the-world-no-panacea-for-global-warming-iea-says.

[14] RA 7156, otherwise known as the “Mini-hydroelectric Power Incentive Act.”; RA 9513, otherwise known as the “Renewable Energy Act of 2008”; and RA 9136, otherwise known as the “Electric Power Industry Reform Act of 2001”.

Atty. Ivan Galura

Atty. Galura currently serves as Deputy Director for the Senate of the Philippines’ Committee on Energy. He assists the Committee Chairman in crafting legislation governing the Philippine energy industry and reviewing the implementation of existing energy laws. Prior to his current work, Atty. Galura served as a Hearing Officer for the Energy Regulatory Commission, where he gained extensive exposure to the country’s electric power industry. He can be reached through ivanmarkcgalura@yahoo.com.

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