The high cost of electricity has always been a bane for the Philippines. Data as of January 2022 from Global Petrol Prices as reported by the Philippine Center for Investigative Journalism places the Philippines, at P9.86/kilowatt-hour or kWh, next only to Singapore, with P10.15/kWh, across Southeast Asia, where Malaysia has the lowest at P1.42/kWh. This is because we have always been dependent on fuel from the international market. Such dependence makes us vulnerable to price fluctuations and supply chain disruptions due to geopolitical developments, like the Ukraine-Russia war.
Climate change also exposes another vulnerability, especially of a country like the Philippines. This highlights the need for resilience in the event of disasters so that there is minimal to no disruption of electricity supply for rescue, recovery, and rehabilitation efforts.
Within our borders, energy insecurity has also manifested itself through uneven power accessibility across various points in the archipelago. Earlier this year, the province of Occidental Mindoro declared a state of calamity because of a severe power crisis where residents experienced only four hours of electricity during non-peak hours. Other places in Luzon are also experiencing power challenges and have aired their dissatisfaction with their distribution utilities and electric cooperatives. Some local government units and business groups in Laguna, Batangas, and Pampanga have taken their power providers to task for poor services and have demanded better performance from them.
Local and foreign investors are inclined to bring their capital to areas with affordable and reliable energy. This minimizes the risks of disruption of operations and assures enterprises of lower costs. Industries such as manufacturing and technology specifically require a stable energy supply. Paying for more expensive electricity is almost always a determinant of investing in one place and not the other.
From this, it is abundantly clear that our leaders should work double time on achieving energy security, first to provide the needs of the population and to sustain economic recovery, and second, to attract investors, both local and foreign, that will in turn fuel economic growth and development.
It is a good sign that the current administration is aware of the crucial energy gap and the need to take drastic measures to achieve energy security for the Philippines. Foremost, our leaders are actively pursuing the exploration and development of domestic energy sources to create an optimal energy mix. This includes more conventional — yet increasingly unpopular — fossil fuels, as well as renewable energy technologies.
President Ferdinand Marcos, Jr. himself acknowledged that renewable energy is the way forward, and that his administration is aggressively promoting renewables to have a 35% share in the power mix by 2030, and 50% by 2040. To achieve this transition goal, the country has also opened itself to foreign investments in renewable energy. As a start, according to the Department of Trade and Industry, President Marcos’ foreign visits have resulted in P427 billion worth of foreign investments, with Germany as the leading foreign investor. Ninety percent of these investments are going to the renewable energy sector.
In his second State of the Nation Address last July, Marcos said that his administration had awarded 126 renewable energy contracts with a potential capacity of 31,000 megawatts. There are currently more than a thousand active projects: 299 solar, 187 wind, 436 hydroelectric, 58 biomass, 36 geothermal, and nine ocean-powered.
The renewal of the Malampaya project guarantees continued revenue and energy production for another 15 years, even as the country will conduct more gas exploration in other parts of the country. It has also been announced that the government would partner with the Bangsamoro Autonomous Region in Muslim Mindanao for energy exploration and development.
As the government, in tandem with the private sector, pursues these long-term energy exploration and transition objectives, it should open itself to domestic and foreign investments in energy infrastructure. This includes building more power plants, modernizing the electricity distribution system, expanding transmission networks, and enhancing energy storage.
A good example is a recent study by the University of Asia and the Pacific that the appropriate investments and efficient operations of Iloilo City’s distribution utility contributes P5 billion to the local annual economy and creates 2,200 jobs a year. This shows how a well-performing electricity distribution company is strategically critical to the development of local business ecosystems and its population.
At the same time, it is crucial that we be able to reduce electricity costs for the needs of our current population and industries.
Energy cost and stability are a significant determinant of the level of interest of businesses to set up shop in the country. Investments mean jobs, income, spending power, technology transfer, and, ultimately, economic activity and growth. Investments in the manufacturing sector, specifically, would yield a high multiplier effect and would lessen our country’s dependence on global supply chains and goods. Investment-driven growth is more sustainable and longer-term than a consumption-driven one, to which the current structure of our economy is skewed.
Investment-driven growth will minimize our vulnerability to external developments and enable us to better assure Filipinos of a better quality of life. But this type of growth can only take place with energy security already in place. Thus, it is important that we address costs, stability, accessibility, and reliability of power anywhere in the Philippines at the soonest possible time.
Victor Andres “Dindo” C. Manhit is the president of the Stratbase ADR Institute.