Businesses do not follow the roads. They follow the electric grid. Modernity always translates into increased power usage.
The reason is simple. If there is unreliable power supply, any business becomes unsustainable.
That fact becomes more emphatic if we seek to build a manufacturing base for our economy. Factories require vast amounts of electric power – reliable and uninterrupted. Even relatively small tourism-oriented enterprises require continuous power supplies.
Take the case of Samal Island in Davao. It is a tourist paradise that has everything – except reliable power supply. The electric cooperative supplying the island does not have the capacity to ensure abundant and continuous power supply. As a result, long blackouts caused the tourist establishments there to fail.
In most parts of the archipelago, power is distributed by small electric cooperatives. They often use outdated technology and do not have access to capital needed to upgrade their services. Unable to deliver sufficient power, they interrupt services during a large part of the day.
Where power is distributed by small electric cooperatives, the community cannot expect to receive investments for manufacturing plants or even tourism-oriented enterprises. If these cooperatives cannot fully supply their residential client base, it will be impossible for them to support manufacturers. The areas they serve will simply stagnate.
Areas that cannot quickly upgrade their power distribution services cannot keep up with the growth of the larger economy. They will be left behind.
Take the case of Iloilo City. For decades, the city’s progress was held back by unreliable electricity distribution by a firm that was content with the earnings it was making underserving the community. That firm did not have the vision nor the capital to rapidly upgrade its power distribution.
Behold Iloilo City today, after a new power distributor took over. The city is blooming.
Regardless of how many trips abroad our leaders make to invite foreign investors into our economy, everything will be for naught if we do not rapidly modernize power distribution throughout the archipelago. Our problems are not confined to inadequate power generation. We have to look at inadequate power distribution.
The irony of it all is that the poorest communities are charged the costliest power. This is because the decrepit distribution setup is terribly behind the times.
It is easy to say that the country needs to diffuse investments as evenly as possible throughout the archipelago. But that cannot be done if power distribution remains spotty as it is. Businesses, out of necessity, will congregate where power is available cheaply and reliably.
Batangas province is an illustrative case.
The Philippine Statistics Authority tells us that Batangas in the fastest growing province in the Calabarzon region. After the pandemic lockdowns and the eruption of Taal Volcano, the province posted growth of 12.5 percent. That is substantially higher than the 7.6 percent growth of this dynamic region.
This remarkable progress is about to hit a wall. That wall are the two electric cooperatives supplying much of the province: Batelec 1 and Batelec 2. The inadequacy of these two electric cooperatives results in outages lasting as long as 12 hours each day. Power interruptions affect about half of all days annually. They are most severe during the dry months.
The outages adversely affect the operations of schools and hospitals, let alone business enterprises. The situation becomes more unbearable as the two electric cooperatives schedule repair and maintenance work during the day, when power demand is higher.
As in all the areas served by electric cooperatives, distribution and sub-transmission lines are radial. They lack the redundancy and flexibility to handle unforeseen issues effectively. Large investments are needed to make the distribution system redundant to protect the consumers from sudden outages.
Our system of electric cooperatives was designed for an earlier age, when power demand was just a trickle compared to the deluge our modern economy now needs. They are inadequate by design and unprepared to support an economy with a growing manufacturing base.
The ERC requires all power distribution utilities to establish effective channels to keep their customers informed about potential interruptions in service. Very few, if any, of the electric cooperatives have this service available.
When we say we plan to grow our tourism industry, that necessarily means building the infrastructure that can absorb tourist inflow. The most significant part of the infrastructure needed is adequate and reliable power distribution.
Unfortunately, most of our electric cooperatives, comfortable in their obsolete franchises, are resisting modernization. This will eventually hold the growth of the whole economy hostage.
It will not be easy to overhaul our system of electric cooperatives designed for an earlier age. But our economic progress demands precisely that overhaul.
The first barrier is capital adequacy. Our electric cooperatives need massive infusions of capital to modernize their distribution networks. They also require new plants, possibly including battery storage facilities.
At the same time, our cooperatives need to distribute power at lower costs to the consumers. Our least developed areas are forced to pay the highest power costs. This situation will only deepen disparities across our regions.
In a word, our cooperatives need to raise large amounts of capital while promising to sell cheaper power. That might seem an impossible mission.
The business needs dramatic rethinking by our economic planners and power regulators. Our ability to grow relies on that capacity to rethink an old problem.