Powering up the economy

I was in New York recently for the 79th UN General Assembly where world leaders, policy makers and experts gathered to discuss the most pressing challenges that the world is facing today, among them climate change. Asia-Pacific leaders expressed serious concern about the “clear and present danger” that is climate change which, according to the United Nations Development Program, poses a “profound existential threat for Asia and the Pacific with the potential to disrupt decades of progress and burden future generations with the costs of unsustainable economic development.”

The 2024 World Risk Report attributed the increasing “frequency and intensity of extreme natural events” to climate change, with the Philippines topping the list of countries that are most at-risk to extreme natural events and negative climate change – which is not surprising because we are hit by an average of 20 typhoons every year.

Since July, we have seen the devastating impact of Super Typhoons Carina (Gaemi), Enteng (Yagi) and Julian (Krathon) that displaced thousands of families and inflicted damage to agriculture and infrastructure amounting to billions – driving economic losses and impacting the income of households.

In a study titled “The impacts of multiple tropical cyclone events and associated precipitation on household income and expenditures” by international research organization Climate Analytics published this April, it noted that “even at the time that the Paris Agreement was signed, climate change was already reducing the average income of Filipino households,” underscoring that “development and climate issues can’t be separated, they have to be addressed hand in hand.”

An earlier study conducted by the think-tank Philippine Institute for Development Studies (PIDS) also showed the interconnection between natural disasters (such as major storms and earthquakes) and electricity supply interruptions that negatively impact households, businesses and the economy as disruptions on critical infrastructure such as banking, transportation, telecommunications and production could lead to huge economic losses.

Using data from the the monthly interruption reports of electric cooperatives submitted to the National Electrification Administration, the study titled “Electricity Supply Interruptions in the Philippines: Characteristics, Trends, Causes” authored by PIDS research fellow Kris Francisco noted that while access to electricity has improved with electric cooperatives serving as “core provider of electricity services for households” outside Metro Manila, power supply remains insufficient.

“Policies give little attention to improving the reliability of electricity supply. The fast-growing electricity demand is causing stress during peak-power demand months, resulting in widespread blackouts and electricity supply interruptions,” Francisco noted.

President Marcos has made energy security a top priority in his socio-economic agenda, knowing very well that a stable, reliable and affordable supply of electricity is crucial in attracting investors to sustain growth and further transform the economy.

While Metro Manila remains to be the country’s economic hub, the government is pushing for development outside of NCR – but this will be challenging in areas that experience frequent power outages because electric cooperatives (ECs) have outdated infrastructure and suffer from poor management, among several others. As a result, the frequent power interruptions turn off investors and prevent these areas from maximizing their economic potential.

According to Manila Electric Company (Meralco) SVP Arnel Casanova, they are ready to partner with electric cooperatives and help enhance the latter’s capabilities to provide reliable and stable electricity in the countryside. Given its experience that spans over 120 years, plus the fact that it is the most technologically advanced distribution utility in the country, Meralco can lend size and economies of scale to help these ECs deliver reliable and more affordable electricity. More significantly, the distribution utility can make its critical infrastructure readily available for use by ECs – whether they are in the Visayas, Mindanao or elsewhere in the country – to make services more efficient and cost effective.

During the Power Summit 2024 held in Makati last June, the Philippine Chamber of Commerce and Industry underscored that reliable energy supply and affordable power costs will make the Philippines more appealing to investors.

A case in point is Batangas City that has been dubbed as an economic powerhouse. More than 100 multinational companies are located in Batangas City, which is one of the areas outside Metro Manila that is serviced by Meralco. Recognizing the crucial importance of reliable electricity supply to power up their local economy, residents and local officials from municipalities like Nasugbu want their electric cooperative to partner with Meralco and maximize their economic potential.

Many also see the House of Representatives’ approval of a bill on second reading to grant Meralco’s franchise renewal as a welcome development because the distribution utility can help areas outside Metro Manila become growth centers as well.

The New Clark City in Tarlac – which happens to be serviced by ShinClark, a Meralco subsidiary – is also becoming very attractive to foreign investors. Just recently, President Marcos inaugurated the StBattalion (StB) Giga Factory, a huge manufacturing plant that is the first in the country for lithium-iron-phosphate batteries – projected to create 2,500 new jobs and generate P5 billion in government revenues when it hits full capacity in 2030.

A few days ago, the Coalition for Emerging Market Infrastructure Investment announced that it has chosen the Philippines as the initial market for its $25-billion energy investments across the Indo-Pacific, describing the country as the “fastest-growing economy in Southeast Asia” and “an ideal market to initiate this effort, given its rapid growth in energy demand and ambitious renewables target.”

All these developments certainly show that efforts to promote the Philippines as a prime investment destination are bearing fruit. Like I have been saying, energy security can fuel growth and economic prosperity that would provide a strong foundation for national security.

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