The Philippine power generation industry (Part 2)

According to IDEA’s latest copy of Industry Trends, a regular publication of the Institute for Development and Econometric Analysis, Inc. (IDEA), despite the additional capacity and potential investments in the coming years, because of its dependence on hydroelectric power plants, Mindanao is susceptible to power outages as a result of environmental changes, specifically extended periods of drought and high temperatures, which increases demand for electricity. In fact, the DOE had already expected, as presented in the Power Development Plan 2009-2030, that the grid requires additional capacity of about 2,500 MW, of which 2,000 MW is for a base-load plant and 500 MW for a peaking plant, starting in 2010 with peak power demand forecast to grow annually by 4.6 percent.

As of present, available capacity for the grid is only at 1,110 MW, not including the 200-MW power barge of Therma Marine, Inc. Meanwhile, projected peak demand is at 1,300 MW plus the 250-MW required reserve margin as mandated by the Grid Code.

Furthermore according to the same published report, electricity sales mostly came from the residential, industrial, and commercial sectors accounting for more than 90 percent of total power consumption. Although continuously growing, demand for electricity has slowed down from the previous decade, except for Mindanao, as annual average growth rates for the Luzon and Visayas grids declined from 6.0 percent and 7.6 percent, respectively, during the 1990s to 3.7 percent for Luzon and 6.5 percent in Visayas for the 2001 to 2010 period. Average growth rate in Mindanao remained at 4.4 percent for the two periods.

Per IDEA, this measured growth can be partly attributed to the economic shift of the country from industries to the services sector, with annual average growth rate of the industrial sector lower, 2.8 percent, than the commercial sector (5.4 percent), as well as to greater energy efficiency and conservation awareness of consumers.

In 2010, the commercial sector drove electricity sales up, rising by 10.2 percent from 2009 as commercial establishments and the services sector, which includes the business process outsourcing (BPO), expanded. Meanwhile the residential and industrial sectors were slightly slower, growing at 7.6 percent and 8.7 percent, respectively, during the same period. Based on grid, Visayas recorded the fastest growth owing to higher demand compared to the previous year’s contained demand.

Overall, according to the National Grid Corporation of the Philippines (NGCP), actual power capacity in Mindanao was only 1,180 megawatts (MW) while peak capacity was at 1,300 MW. The Mindanao grid has suffered from a 178-MW shortfall as of March 2012, a 40-MW rise from the 138 MW deficit recorded during the previous month due mainly to a decline in available capacity and electric cooperatives’ refusal to buy electricity from fuel-driven power plans, which are priced higher. As such, Mindanao has suffered from rotating blackouts since the start of the year and this is expected to last through 2013 or at least until the ongoing projects become operational, which is projected to commence by 2014 to 2016, according to IDEA.

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