Cebu as next Silicon Valley?: Looming power shortage  weakens Cebu’s potential

CEBU, Philippines — Cebu has to speed up its efforts in securing additional power supply contracts, otherwise, it may lose its potential to become the next Silicon Valley.

“The lack of cheap, reliable, and abundant electricity poses a major challenge and risk to the dream of Cebu becoming the next Silicon Valley. A global center for high technology and innovation is always largely dependent on the electrical grid, especially with the emergence of energy-intensive - AI technologies and data centers,” said Mandaue Chamber of Commerce and Industry (MCCI) president Marc Ynoc.

According to Ynoc, Cebu’s looming power shortage is a serious concern as this also impacts other sectors of society with several multiplier effects due to the potential weakening of its entrepreneurial ecosystem.

“Venture Capital Investors or Foreign direct investors have matrices to determine which country has the best potential for investments. Electricity rate always remains as the top key attraction in the list,” Ynoc explained.

As a basis, electricity costs account for nearly 40 percent of the whole operations cost in the manufacturing industry.

According to Ynoc, the Philippines’ power rate is one of the highest in Southeast Asia. “This is the primary reason why large Western companies that are moving out of China have preferred to have our neighboring countries such as Indonesia, Malaysia, Vietnam and Thailand as their next expansion destination.”

Business leader Steven Liu likewise warned that the power situation of Cebu will be part of the consideration of any new direct investment into Cebu.

“For now, while our power supply backup seems to be thinning, we are supported by the upcoming expansions of baseload and new renewable energy plants (primarily solar plants), coming onboard in the immediate next few years. We should also tap more private sector partners to enroll in the load sharing scheme like Meralco’s expansive partners. Consumers are encouraged to conserve energy and use green appliances and lightings (inverters and LEDs),” suggested Liu.

Moreover, in consideration of overall demographic situation, “we should continue to be allowed to invest and build new baseload power plants to cover our medium-term energy requirements,” stressed Liu.

According to Liu, Cebu’s economy relies more on BPOs (Business Process Outsourcing) manufacturing, tourism and industries. These industries continue to provide its constituents. “Hence, a stable and sufficient power supply is a must for its survival.”

For his part, acting Cebu City Mayor Alvin Garcia said he believes the city will not experience an electricity shortage shortly. Nonetheless, the city is taking steps to ensure that the city will have sufficient power supply.

“We have to invite investments from the private sectors, especially the power generation companies already here. We only have to let them expand their capacity to supply power to Cebu Island,” Garcia said.

The Department of Energy (DOE) projects that energy demand for Cebu Province will  reach around 1,400 MW in the next two years and will outpace supply by 2027 unless new baseload power plants are constructed.

Visayas has a generating capacity of 2,454MW and a system peak demand of 2,153MW or a margin of only 239MW as power reserves.

Cebu province accounted for half of the region’s total demand and within Cebu, Metro Cebu, falling under the Visayas Electric franchise area, contributed to over 500 megawatts, representing more than half of the province-wide demand.

The record showed that Central Visayas is the fastest-growing regional economy in the Philippines, with a growth rate of 7.3 percent in 2023, or an estimated P1.38 trillion, up from P1.29 trillion in 2022.

Cebu's capacity to expand its high-value outsourcing jobs, particularly in Knowledge Process Outsourcing (KPO), has attracted more multinational companies to establish research and development (R&D) sites in the region. These companies are leveraging the rich pool of engineers, data analysts, and high-value talents available in Cebu.

Cebu dreams of becoming the next Silicon Valley, and experts believe this is possible. However, achieving this goal requires more than just talent and venture capital; it also demands robust infrastructure support, including a stable power supply.