How the private sector is taking back the night

When Former President Gloria Macapagal-Arroyo came to remote Toledo City in Cebu to inaugurate a new 246-megawatt coal-fired power plant, she was met with as much pomp and circumstance as the city could muster.

Inside the Cebu Energy Development Corp multi-purpose hall, where the switching-on ceremony would be held, a children's choir sang  “One Little Candle” without a hint of irony.

Outside, local officials and CEDC employees lined the private road where she and her chosen cabinet secretaries would drive up. School children dressed in traditional costumes had been performing a tribal dance non-stop in the baking morning heat for hours before she was scheduled to arrive. Better to risk heatstroke than be caught flatfooted if the former mining town's most distinguished guest came early. It was like unto a visitation of the gods.

And why not? She was symbolically giving the blackout-ridden Visayas region the gift of light, something that was previously the exclusive province of the divine. And with light came the gift of life. As early as 1992, the United Nations on Environment and Development in Rio de Janeiro produced a document called Agenda 21 that recognized how “energy is essential to economic and social development, and improved quality of life.”

That has not changed more than a decade later, as the Asian Development Bank notes in a 2008 briefing paper: energy is a basic requirement for providing social services like education and health, as well as powering the machines that generate income. Basically, “The Millennium Development Goals cannot be met without higher quality and larger quantities of energy services than currently available.”

It comes as no surprise, then, that regions like Mindanao—facing a power deficiency of some 750MW as of press time—and parts of the Visayas where rotating power interruptions are the norm have been lagging behind more industrialized and electrified Luzon.

This reporter has been to the island of  Sibale in Romblon province—eighteen hours by ferry and pump boat from Manila—where there is no electricity for most of the day, and the power it imports from Panay Island comes on at dusk only to cut out at around ten in the evening. Perfect for tourists looking to rough it, but for residents, not so much.

Investments that could have shored up the lack of social services have been coming in, but only in a trickle because as CEDC chairman Francisco Sebastian asks, why would anyone put up a factory where power surges and interruptions could affect productivity and destroy equipment?

To The Highest Bidder

The Philippine government got out of the power industry with the passage of the Electric Power Industry Reform Act (Epira) in 2001. Saddled with gargantuan debts from the last power crisis, the government had no choice but to privatize the state-run National Power Corporation.  Since then, reports the Power Sector Assets and Liabilities Management Corp, government has received some US$3 billion from selling off power plants and generators.

“Henceforth, it had to be the private sector” that would be responsible for providing electricity to consumers, President Macapagal-Arroyo said at the Toledo City plant inauguration. The best that she—or any Philippine leader for that matter—could do was “campaign hard for the private sector to invest in power.”

The private sector seems to have heeded her call, with the CEDC—a consortium composed of Global Business Power Corp., Aboitiz Power Corp., Vivant Energy Corp. and Formosa Heavy Industries Corp.—sinking some US$450 million into the Toledo City site.

Cebu, which provincial governor Gwendolyn Garcia calls the President's “most favored and favorite city,” could use the boost in power. Called the Queen City of the South, Cebu is one of the most developed and progressive cities outside Manila. With an international sea and airport, export processing zones, factories, and a shipbuilding industry to support, Cebu accounts for 56% of the 978MW consumed by the Cebu-Negros-Panay (CNP) grid, and has to import some 37% of its peak power needs from Leyte Geothermal.

When the CEDC Toledo Plant comes fully online in December (only the first of three 82-MW units were switched on last month), Cebu will be able to meet its energy needs, but only just. “We will meet the actual demand but we won’t have the required reserve capacity,” explains CEDC president Jesus Alcordo, adding that there will still be a shortfall of 17MW unfilled power reserves. This means that if any of the mostly aging coal and diesel-fired plants in the CNP grid fail, it's lights out again.

In the meantime, Sebastian says, the power supplied by the Toledo plant will help fuel shipbuilding in nearby Talamban that employs 9,000 workers and launches a new vessel every month. The old Atlas copper mines that used to be the top source of income for Toledo are expected to reopen soon, and is estimated to make some US$400 million a year. To which Toledo City mayor Arlene Zambo replies with apt cleverness,“More power to us!”

Elsewhere along the coast of Cebu, another power plant is under construction. A US$270-million joint venture between the Korean Electrical Power Corp. and Salcon Power Corp., the Naga City power plant is expected to start generating 200MW by early 2011. The plant promises not just electricity for Cebu and the rest of the Visayas, but is also expected to generate some 1,500 jobs, and up to 30 million pesos in real property taxes for Naga City.

Power investments are not limited to Mindanao, either. Colossal San Miguel Corp. recently announced plans breaking ground this year for a power plant that could generate up to 2,000MW for the underdeveloped region. San Miguel president Ramon Ang, who attended the CEDC inauguration incognito in a simple sports shirt and baseball cap, said that the company has already acquired a coal mine in General Santos, South Cotabato to fuel the proposed power plant. According to industry veterans, a plant that large could cost upwards of US$2 billion. The gains for Mindanao, which can only meet half of its energy demand, will, on the other hand, be priceless.

Smoke and Mirrors?

Huge fossil-fuel dependent power plants have not been welcomed by everyone, however. Environmentalist and Church groups have opposed the use of coal, and not even Secretary Reyes is fully convinced  of the sustainability of 'clean' coal. At a meeting of the Joint Congressional Power Committee last year, Reyes said that the DOE preferred clean coal, but added almost sotto voce, “if there is such a thing.”

Environmentalist group Greenpeace has opposed the construction and operation of coal-fired power plants in Cebu, Panay, Quezon, and in the rest of the Philippines saying their emissions contribute to climate change. From picketing power plants to using their Rainbow Warrior schooner on interdiction raids against coal shipments, their message is unequivocal: quit coal now.

They say that Carbon Capture and Sequestration (CCS), the process that turns coal into 'clean' coal by keeping emissions from leaking into the atmosphere and dumping them underground, is simply not viable at its present state.

CCS has not been tested on a large scale, and according to Greenpeace's False Hope report,CCS cannot be deployed in a commercial capacity until 2030, too late by 15 years if we want to mitigate the effects of climate change.

CCS is also costly, the report claims, with up to 40% of generated power being consumed to keep the plant 'clean.' This means that consumption of coal will rise by at least a third, the groups says. The costs of running the plant will also allegedly double, which could lead to rate hikes of up to 91%.

And even then, stored carbon dioxide (CO2) could still leak into the atmosphere.  “Carbon capture and storage is a scam. It is the ultimate coal industry pipe dream,” claims Emily Rochon, author of the report and climate and energy campaigner for Greenpeace International.

According to Greenpeace, “The real solution to stopping dangerous climate change lie in renewable energy and energy efficiency that can start protecting the climate today.” Wind, wave and solar power are already technically viable, the group says, and can potentially provide “six times more energy than the world currently consumes—forever.”

CEDC's Alcordo agrees wholeheartedly with Greenpeace's sentiments. In the press kit for the CEDC's Toledo City plant, Alcordo says that “renewable energy is the future.” He says, however, that the cost of renewable energy (RE), some US$2.5-5 million per megawatt, is far too expensive for developing countries like the Philippines. “The Philippines still needs a transitional technology, being a transitional economy,” he argues.

He says that RE is still unreliable, and comes with its own set of problems and challenges. The NorthWind wind farm in Bangui Bay in Northern Ilocos, for example, only operates at 33% capacity for an average generation capacity of 10MW. When winds are intermittent, fossil-fuel fired generators have to pick up the slack. The noise of wind farms also affects wildlife in the area, he adds.

Meanwhile, the Cagayan Electric and Light Power Company in Cagayan de Oro requires 6,500 solar cells on 2 hectares of land to generate one megawatt at the cost of US$5.6 million. Hydro-power, on the other hand, will mean the displacement and possible destruction of aquatic life when dams and reservoirs are constructed.

Besides, Alcordo says, citing a report by the Department of the Environment and Natural Resources office in Cebu, 70% of carbon dioxide emissions in the Philippines comes from vehicles, and not industrial plants. He adds that shutting down half of the coal-fired plants in the country, as has been proposed by some environmentalist groups,  will not significantly lower the amount of CO2 in the Earth's atmosphere, but will have “a tremendous impact” on the economy, with power rates rising by some 20%.

Simply put, the country needs electricity, and Alcordo says this is is the most affordable and environmentally sound option that we have. “You really have a crisis there. Whatever it takes to handle the crisis, we should do that,” he tells reporters before the ceremony starts. The alternative urged by some legislators, using power barges to augment power supply, is no more eco-friendly, and is probably less so. Reyes says that they are “costly and inefficient,” and burn diesel fuel like there is no tomorrow.

If it's any consolation, the Philippines has a higher ratio of RE plants and generators than China and the US, with 43% of our power coming from renewable resources. China aims to reach 20% by 2020, while the US is set to reach 25% by 2025.

The Toledo plant uses a Circulating Fluidized Bed (CFB) boiler system, which  supposedly reduces CO2 emissions, removes 95% of sulfur dioxide, and includes an electrostatic precipitator that captures 99.9% of particulate matter. CEDC chairman Sebastian even boasts that the plant is painted white so people can see that the black soot associated with coal is a thing of the past.

Adding her imprimatur to the plant, and on other similar projects, the guest of honor, and the country's climate change czar, hails the Toledo site as proof that we “can grow the economy without sacrificing the environment.” The President adds that CEDC's plans to plant some 180,000 trees and distribute 70,000 seedlings annually, and arrangements with cement plants to use their waste ash make the plant “even more carbon neutral.”

As the President  leaves with her convoy, a veteran journalist on the power industry beat gives me the bottom line: “As long as there's electricity so children can study at night, they're happy with that.”

In the background, the choir sings, “I am but a small voice, I am but a small dream. The fragrance of a flower in the unpolluted air...”