Mindanao power supply to stabilize, needs more renewables in mix

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By Carmelito Q. Francisco
DAVAO CITY — When President Benigno S. C. Aquino III took his oath as the President of the Philippines in 2010, Mindanao didn’t have enough power.

Mindanao Power Outlook

By the time Mr. Aquino steps down on June 30 this year, the southern island is projected to have moderate reserves, thanks to investors who had committed to building new plants even before he became president.

In a presentation here late last year, Engineer Noriel R. Christopher Reyes, Department of Energy (DoE) science research specialist, said Mindanao will have about 1,920 megawatts (MW) in additional power by 2019 on top of the current 1,340-MW supply.

The opening of new power plants, mainly coal-fired, started in September 2015 when the first unit of a 300-MW facility of Aboitiz Power Corp. subsidiary Therma South Inc. (TSI), began commercial operations.

Before the end of the first quarter this year, the second unit of the TSI plant and the first 100-MW unit of the Alsons group’s Sarangani Energy Corp. are also scheduled to be online.

Based on the DoE’s initial projection, 720 MW of power will be added to the grid not later than the first half of 2016.

“We need additional power to help us catch up with the rest of the country’s economy,” Ferdinand Y. Marañon, president of the Philippine Exporters Confederation, Inc. (Philexport)-Davao Region, told BusinessWorld.

Mr. Marañon — whose company Sagrex Corp. processes indigenous banana varieties for export to the Middle East, Europe and the US markets — said these power investments enhance business confidence in Mindanao.

With power supply stabilizing, Undersecretary Janet M. Lopoz, executive director of the Mindanao Development Authority (MinDA), said: “Mindanao will be able to sustain its growth and make this growth inclusive.

In 2014, the combined gross regional domestic product of Mindanao’s six regions accounted for 14% of the country’s economy.

Ms. Lopoz said several ratings agencies have started to recognize Mindanao’s role in the national economy.

“Before, ratings agencies were not interested in how we performed. Now, they have slowly taken notice of the impact of Mindanao’s economic performance to the rest of the country,” she told BusinessWorld.

But even with the expected improvement in the power supply, the entire Mindanao won’t have ready access to it, said Romeo M. Montenegro, head of MinDA’s public affairs division and the Mindanao Power Monitoring Committee’s (MPMC) technical working group.

Mr. Montenegro said some areas will not immediately benefit from the new power sources unless the electricity distributors, majority of which are cooperatives, can address mismanagement and mounting debt.

Three other major issues will linger long after Mr. Aquino leaves Malacañang: the fate of the two government-run hydropower complexes, Agus and Pulangi; the interconnection of Mindanao to the national grid; and balancing fossil fuel and renewable sources.

The Electric Power Industry Reform Act of 2001 mandates the government to leave the power industry to the private sector, but the Agus and Pulangi facilities, which supply more than half of Mindanao’s power requirement, remain in government hands.

Several Mindanao business and public sector leaders, including MinDA’s chair, Secretary Luwalhati R. Antonino, and the Association of Mindanao Rural Electric Cooperatives insist that the government retain the Agus-Pulangi facilities by creating the Mindanao Power Corp. (MPC), thus keeping electricity rates lower than in Luzon and the Visayas.

The proposal creating the MPC is pending before Congress.

“We do not expect the proposal to be approved (within the term of Mr. Aquino),” said Mr. Marañon.

On the interconnection issue, which would give Mindanao access to excess power from Luzon and the Visayas, a feasible and affordable option has yet to be explored.

Given its isolation from the national grid, Mindanao aims to achieve a balanced power mix, tilting in favor of fossil fuel in the immediate term, particularly coal-fired power plants.

To ramp up renewables, MinDA has set up a Web-based portal to facilitate approvals of such alternative power projects.

Citing MinDA’s projections, Mr. Montenegro said a 50-50 power mix is possible by 2030 if renewable energy applications are approved with dispatch.

As of July, the portal has logged 290 green energy applications worth a combined 2,400 MW.

“We hope that with that bulk of renewable power, we will be able to balance the mix,” Mr. Montenegro said.

However, not all projects are likely to get off the ground as some companies are awaiting more incentives from government.

A power company executive who asked not to be identified said for these projects to take off, the government should come up with better feed-in tariff rates, thereby cutting investment risk.

“Companies need better details because renewable power projects are not only capital-intensive but are also smaller, which in turn provide smaller revenue,” the official toldBusinessWorld.

Vicente T. Lao, chairman of the Mindanao Business Council and co-chair of the MPMC, said the committee should take the lead role in “finding solutions to the key issues that need to be addressed.”

“We must not rely on the national government; we must be able to at least come up with programs that will help us make our lives better,” he said.