Power plants, tax cuts, no red tape key to energy security, economic growth – industry expert

economic growth

The economic growth envisioned by the administration is only possible with a sustainable power supply at a cheaper cost, an industry expert said.

In his column in the Manila Standard, Orlando Oxales called on regulators to act on pending investments for power plants in preparation for the growing energy demand.

Power is an important part of this equation, and the government needs to act accordingly lest an already expensive and unstable power situation debilitate any sort of momentum that the economy gains,” he said.

The Philippine economy’s growth slowed down to 6 percent in the second quarter of the year, slower than the 6.6 percent in the first quarter and 6.7 percent in the second quarter of last year.

While not yet alarming, Oxales said that this could be a threat to the ambitious infrastructure program of the Duterte government especially if the country’s looming energy problem is not addressed soon.

“If the Philippine economy, as the administration has confidently predicted, is poised to take off, disruptions brought about by something fundamental as inadequate power supply are as disastrous as they are embarrassing,” he said.

“Stable power capacity and affordable rates are a requirement for any robust economy,” he added.

The years 2012 and 2017 saw energy demand in the Luzon grid outpace the power supply. The demand grew by around 2,900 megawatts while the supply can only provide 2,600 MW.

Meanwhile in the first six months of 2018, power capacity grew by only 3 percent, while the demand grew at 8.2 percent.

As it stands, there are 22,728 MW of installed generation capacity as of end of 2017. The Build Build Build program needs a total of 43,000 MW.

If this trend of slow growth in energy supply continues, Oxales said that the country’s economy will reflect the same.

He added that the government needs to act accordingly to provide solutions to the unstable power situation that can affect any future economy gains.

“Sustaining our economic gains will not be possible without a stable and affordable supply of electricity—and before any real takeoff could happen, we need to cut the bureaucratic red tape and build more power plants now,” he said.

Energy security means lower prices

Additional power capacity will not only deliver smooth implementation of infrastructure projects, but will also bring the power rates down, Oxales said.

A study conducted by International Energy Consultants (IEC) showed that Meralco customers are among the few in the world to have a decrease in their power rates since 2012.

The survey found that Meralco’s average tariff (excluding VAT) has declined 4 percent since January 2016, a better performance compared to the average increase of 12 percent across the 46 countries covered by the study.

This puts Meralco’s average tariff at 24th out of the 46 countries and 4 percent below the average figure, making it one of the cheapest rates in Asia excluding subsidies and nuclear power generation 4 percent below the average figurenon.

Competitively-priced power supply agreements contracts in the generation portfolio contributed to Meralco’s tariff reductions.

“This is an excellent outcome for consumers, considering that the Luzon power market is unsubsidized and the majority of electricity is produced using imported fuel. In peso terms, Meralco’s tariff has increased by only 3 percent despite the twin headwinds of significant fuel price increases and a depreciating local currency,” said IEC Managing Director Dr. John Morris who led the study.

The study also revealed that electricity tariffs especially in the Luzon grid will decrease through new power plants that can meet the rapid demand of the market.

“This can in turn promote competition at the retail level, and any reduction in wholesale electricity cost can be fully felt by customers,” Oxales said.

“This is the kind of strategic objective that President Duterte’s political capital should be spent,” he added.


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