From the Website of the President
President Aquino inaugurates the 300-MW Davao baseload power plant
January 9, 2016
Some of you might remember the dire state of the Philippine energy
sector in the past. In the year 2000, the National Power Corporation’s
debt had ballooned to P1.2 trillion—let me repeat that: P1.2
trillion—representing almost a quarter of all our nation’s debts. I
believe, at that point, everyone knew the situation was untenable. After
all, how could we, as a nation, continue servicing these debts—much
more pay them off completely—while also allocating enough resources for
infrastructure, health care, education, and other necessary services?
The proposed solution came in the form of the Electric Power Industry Reform Act of 2001 or EPIRA. The plan: for NAPOCOR to sell its plants to private entities, with the proceeds being used to pay off debt, thus freeing up the necessary fiscal space for more projects and programs that directly benefit our people. The private sector could then professionalize the power sector: decisions would be made solely based on sound economic policies, while at the same time continuing to service our nation’s growing need for energy.
Legislators from Mindanao, however, asked for a ten-year exemption from EPIRA. Perhaps it made sense in the short-term. They pointed out that there was an oversupply of power in their region, and that their energy was far cheaper compared to Luzon and Visayas. To be frank, maybe this exemption would have been fine if the situation had not changed. But the situation did change.
Perhaps I can explain: In Mindanao, more than half of the energy supply is sourced from hydroelectric plants. The brunt of the cost for these plants goes into building the infrastructure. Afterwards, the only major expense is maintenance, as these plants do not really need fuel to run. Back in 2001, the government had already gotten its return on the original investment for the plants, which is why they were able to provide electricity at significantly low price points—lower, even, than the production cost of energy from other fuel sources. This became a problem because the population and the economy continued to grow, which naturally increased the demand for electricity—but EPIRA forbids government from putting up its own plants, and the private sector simply could not compete with the artificially low prices. The result: As the demand for electricity grew, the supply didn’t. In fact, the hydroelectric plants that were once abundant sources of energy suffered from a number of factors, including the lack of regular maintenance, the vanishing watersheds, and the worsening effects of climate change.
This was the situation that our administration inherited, and the results were clear: In recent years, Mindanao has had very little energy surplus. In 2010, this resulted in rotating brownouts that understandably frustrated our countrymen, and that stifled local economies. This was a problem we had anticipated even before we took office, which is why, from day one, we made a stern commitment to foster an environment that would encourage the private sector to make massive investments in energy in Mindanao.
We knew, however, that even if we succeeded, these plants would not begin operations overnight. Even the most basic power plants, after all, take around three to four years before completion. In the meantime, we had to come up with temporary measures to minimize the impact of the power situation. Amongst the schemes we came up with was the Mindanao Modular GenSets program, wherein government would help finance generator sets for cooperatives who wished to produce their own power. Government would then buy back these GenSets once the baseload power plants were online. Sadly, this program did not have the impact that we hoped. There were very few who took us up on those offer, and even then, those who did took the longest time to go through the necessary processes. Nevertheless, those who did avail of the Modular GenSets experience less brownouts. In fact, in most cooperatives, they experience no brownouts.
We also approached partners in the private sector; for instance, through the Interruptible Load Program, we spoke to big companies who had their own generator sets, and asked if they could run their own generators instead of sourcing from the grid.
All this work took a full-time commitment, and I must thank all those who have served as Secretary of Energy, namely Secretaries Rene Almendras, Icot Petilla, and now Zenaida Monsada. They did all this even in the face of harsh critics who would speak loudly against us during the dry period—when the hydropower production is low—and completely forget about the issue during the rainy season. These critics also made the most unreasonable demands: cheap, renewable, and sufficient energy, delivered yesterday.
Before I continue, allow me to point out: it’s not as if we have forgotten our goals in terms of developing renewable energy, and doing our part to mitigate climate risk. In fact, we have increased our usage of renewables, and they now make up 33 percent of our energy mix; we have reduced the number of illegal logging hotspots by 88 percent; and in 2011, we started a National Greening Program, the goal of which is to plant 1.5 billion trees on 1.5 million hectares by this year. We did all this even if our nation’s carbon emissions are minimal especially compared to more industrialized countries.
At the same time, the Mindanao situation has made it obvious that we also need more baseload power. After all, while I am a believer in developing renewables, at this point we are still hounded by the questions: What if there’s no wind? What if the clouds are overcast and the solar efficiency is down? What if we do not have enough biomass? Unfortunately, right now, we cannot wean ourselves completely from relying on coal.
When this plant becomes fully operational, we can count on it to consistently produce 300 megawatts of baseload power, which means that this capacity can be tapped into anytime, rain or shine, with very minor fluctuations. To emphasize just how significant this is, this plant’s dependable capacity is roughly equivalent to one-fifth of the Mindanao grid’s highest peak demand in 2015—and it is already delivering power to areas at the end of the grid, such as Sarangani, General Santos, and the Zamboanga peninsula. Apart from all the projects that have come to fruition during our administration, our private sector partners have committed to undertake at least another 11 power projects in Mindanao that will come online between 2016 and 2020, envisioned to produce at least another 675.30 megawatts of capacity, which will be more than enough to cover the projected increase in demand for those years.
Each time I speak about Mindanao, I mention how the goal for our administration is to transform it, from the Land of Promise, to the Land of Promises Fulfilled, and over the past few years, we have seen the beginnings of this transformation. You have heard me say before that the mode of governance is so dependent in ARMM on having the right leader, and I believe we have seen one prominent example in Mujiv Hataman. Whereas before, the ARMM governor was perhaps overly concerned with his family or his clan, Gov. Hataman chose to carry out policies as dictated by all stakeholders, and the effect has been palpable. Just look at the amount of BOI-ARMM approved investments: From P87.9 million in 2010, it increased to P3.9 billion in 2014, and might I note that this happened with all of the tensions in the region. But you must remember, Gov. Hataman’s time in office is limited, and we need to make sure that his region has a framework that can truly make good, inclusive governance the norm rather than the exception. This is why we need to pass the Bangsamoro Basic Law in the soonest possible time. For my part, I believe it would certainly push Mindanao, and the Philippines, further into the global spotlight.
We thank Aboitiz Power Corporation and Therma South Inc. for being an early believer in the potential of Mindanao. Rest assured, we will fulfill our promise to leave Mindanao in a better situation; we will maintain our steadfast commitment to peace; we will continue to focus the national coffers towards infrastructure development so that those who have historically been left behind are given a boost up so they can catch up; and I am certain that, if we continue working together—both public and private sector alike—we can truly give rise to a Mindanao that reaches its full potential, and prove, once more, that nothing is impossible to a united Filipino people.
Thank you and good day.
Office of the President Website
http://president.gov.ph/
Article links:
Speech
of
His Excellency Benigno S. Aquino III
President of the Philippines
At the inauguration of the 300-MW Davao baseload power plant
of
His Excellency Benigno S. Aquino III
President of the Philippines
At the inauguration of the 300-MW Davao baseload power plant
The proposed solution came in the form of the Electric Power Industry Reform Act of 2001 or EPIRA. The plan: for NAPOCOR to sell its plants to private entities, with the proceeds being used to pay off debt, thus freeing up the necessary fiscal space for more projects and programs that directly benefit our people. The private sector could then professionalize the power sector: decisions would be made solely based on sound economic policies, while at the same time continuing to service our nation’s growing need for energy.
Legislators from Mindanao, however, asked for a ten-year exemption from EPIRA. Perhaps it made sense in the short-term. They pointed out that there was an oversupply of power in their region, and that their energy was far cheaper compared to Luzon and Visayas. To be frank, maybe this exemption would have been fine if the situation had not changed. But the situation did change.
Perhaps I can explain: In Mindanao, more than half of the energy supply is sourced from hydroelectric plants. The brunt of the cost for these plants goes into building the infrastructure. Afterwards, the only major expense is maintenance, as these plants do not really need fuel to run. Back in 2001, the government had already gotten its return on the original investment for the plants, which is why they were able to provide electricity at significantly low price points—lower, even, than the production cost of energy from other fuel sources. This became a problem because the population and the economy continued to grow, which naturally increased the demand for electricity—but EPIRA forbids government from putting up its own plants, and the private sector simply could not compete with the artificially low prices. The result: As the demand for electricity grew, the supply didn’t. In fact, the hydroelectric plants that were once abundant sources of energy suffered from a number of factors, including the lack of regular maintenance, the vanishing watersheds, and the worsening effects of climate change.
This was the situation that our administration inherited, and the results were clear: In recent years, Mindanao has had very little energy surplus. In 2010, this resulted in rotating brownouts that understandably frustrated our countrymen, and that stifled local economies. This was a problem we had anticipated even before we took office, which is why, from day one, we made a stern commitment to foster an environment that would encourage the private sector to make massive investments in energy in Mindanao.
We knew, however, that even if we succeeded, these plants would not begin operations overnight. Even the most basic power plants, after all, take around three to four years before completion. In the meantime, we had to come up with temporary measures to minimize the impact of the power situation. Amongst the schemes we came up with was the Mindanao Modular GenSets program, wherein government would help finance generator sets for cooperatives who wished to produce their own power. Government would then buy back these GenSets once the baseload power plants were online. Sadly, this program did not have the impact that we hoped. There were very few who took us up on those offer, and even then, those who did took the longest time to go through the necessary processes. Nevertheless, those who did avail of the Modular GenSets experience less brownouts. In fact, in most cooperatives, they experience no brownouts.
We also approached partners in the private sector; for instance, through the Interruptible Load Program, we spoke to big companies who had their own generator sets, and asked if they could run their own generators instead of sourcing from the grid.
All this work took a full-time commitment, and I must thank all those who have served as Secretary of Energy, namely Secretaries Rene Almendras, Icot Petilla, and now Zenaida Monsada. They did all this even in the face of harsh critics who would speak loudly against us during the dry period—when the hydropower production is low—and completely forget about the issue during the rainy season. These critics also made the most unreasonable demands: cheap, renewable, and sufficient energy, delivered yesterday.
Before I continue, allow me to point out: it’s not as if we have forgotten our goals in terms of developing renewable energy, and doing our part to mitigate climate risk. In fact, we have increased our usage of renewables, and they now make up 33 percent of our energy mix; we have reduced the number of illegal logging hotspots by 88 percent; and in 2011, we started a National Greening Program, the goal of which is to plant 1.5 billion trees on 1.5 million hectares by this year. We did all this even if our nation’s carbon emissions are minimal especially compared to more industrialized countries.
At the same time, the Mindanao situation has made it obvious that we also need more baseload power. After all, while I am a believer in developing renewables, at this point we are still hounded by the questions: What if there’s no wind? What if the clouds are overcast and the solar efficiency is down? What if we do not have enough biomass? Unfortunately, right now, we cannot wean ourselves completely from relying on coal.
When this plant becomes fully operational, we can count on it to consistently produce 300 megawatts of baseload power, which means that this capacity can be tapped into anytime, rain or shine, with very minor fluctuations. To emphasize just how significant this is, this plant’s dependable capacity is roughly equivalent to one-fifth of the Mindanao grid’s highest peak demand in 2015—and it is already delivering power to areas at the end of the grid, such as Sarangani, General Santos, and the Zamboanga peninsula. Apart from all the projects that have come to fruition during our administration, our private sector partners have committed to undertake at least another 11 power projects in Mindanao that will come online between 2016 and 2020, envisioned to produce at least another 675.30 megawatts of capacity, which will be more than enough to cover the projected increase in demand for those years.
Each time I speak about Mindanao, I mention how the goal for our administration is to transform it, from the Land of Promise, to the Land of Promises Fulfilled, and over the past few years, we have seen the beginnings of this transformation. You have heard me say before that the mode of governance is so dependent in ARMM on having the right leader, and I believe we have seen one prominent example in Mujiv Hataman. Whereas before, the ARMM governor was perhaps overly concerned with his family or his clan, Gov. Hataman chose to carry out policies as dictated by all stakeholders, and the effect has been palpable. Just look at the amount of BOI-ARMM approved investments: From P87.9 million in 2010, it increased to P3.9 billion in 2014, and might I note that this happened with all of the tensions in the region. But you must remember, Gov. Hataman’s time in office is limited, and we need to make sure that his region has a framework that can truly make good, inclusive governance the norm rather than the exception. This is why we need to pass the Bangsamoro Basic Law in the soonest possible time. For my part, I believe it would certainly push Mindanao, and the Philippines, further into the global spotlight.
We thank Aboitiz Power Corporation and Therma South Inc. for being an early believer in the potential of Mindanao. Rest assured, we will fulfill our promise to leave Mindanao in a better situation; we will maintain our steadfast commitment to peace; we will continue to focus the national coffers towards infrastructure development so that those who have historically been left behind are given a boost up so they can catch up; and I am certain that, if we continue working together—both public and private sector alike—we can truly give rise to a Mindanao that reaches its full potential, and prove, once more, that nothing is impossible to a united Filipino people.
Thank you and good day.
Office of the President Website
http://president.gov.ph/
Article links:
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