Tuesday, August 23, 2016

How Not to Waste Your Economic Success: A Solution to Power Supply Deficiency in Developing Countries

Many developing countries around the world are grappling with power supply insufficiency. While the increase in the power requirement is aggressive, investments in the power industry seem to be sluggish. Is it only a matter of time before these emerging countries lose steam?

Perhaps one of the biggest challenges an industrializing economy, like the Philippines, can face is satisfying a continually growing domestic energy demand. Naturally, when a country’s economy expands, it prompts a consequent improvement in the standards of living of citizens and a significant increase in business and industrial activities. These, in turn, result in a surge in the power requirement in the country, which has to be borne by its power infrastructure. The problem is that a developing country’s power systems, owing to their age, quantity or quality, are often unable to cope with the increased power demand.

Metro Manila skyline
When the available electricity is not enough to satisfy the power demand, the government or the power utility providers may implement rolling blackouts, otherwise known as load shedding, to protect the power systems and avoid a total power failure. Though not as disastrous as a prolonged total blackout, load shedding in itself can be a real bane to any business or industry, can bring myriad inconvenience to citizens and can rein in the further economic growth of any developing country.

Why not enough power?

There are several reasons why a developing country’s power infrastructure is unable to produce electricity according to the demand. For instance, there could be a shortage in the necessary fuel to run the power systems. This has happened in South Africa in 2007 when challenges in the supply of coal to its coal-fired power plants resulted in an electricity supply deficiency. From 2014 until recently, South Africa again faced a power supply crisis due to the collapse of a coal storage silo at the Majuba plant which provides approximately 10% of the country’s electricity. A similar situation has also been observed in other countries in Southeast Asia, Africa, and South America, when droughts and prolonged low-rain seasons caused large dams to dry up, resulting in insufficient hydropower generation.

Another reason for the insufficient electricity production of power systems are the delays in the construction and activation of new power plants that will have introduced new generating capacity to the country’s grid. Let us consider this situation: When a country’s energy department predicts an increase in the domestic power demand, it will work towards the construction of new power sources to satiate the eventual electricity requirement. However, the construction of the new power plants can be wracked with delays and budget overruns, which can cause a postponement or the suspension of the power projects. Without the new generating capacity expected from the new power sources, the existing power infrastructure has to bear the increased demand. This puts the power system in severe strain and compromises the integrity of the existing power infrastructure. This scenario often leads to load shedding or, worse, a total failure of the existing power systems.

"Perfect" Combination: Residents of the Philippines suffer from the effects of scattered rains
and continual blackouts, or "brownouts" as more popularly called in the country
A lack of proper maintenance of the existing power systems is also a salient reason of a power supply insufficiency. In many developing countries, it can oftentimes be observed that power plants are operated beyond their maintenance window to save on maintenance cost and to keep them producing electricity in response to the demand. While this may seem to be a sound economic decision in the short-term, this can result in the breaking down of critical plant components and, worse, of the power plant itself. Shutting down power plants for a protracted unplanned maintenance can lead not only to a more expensive maintenance process but also to a deficit in the country’s electricity supply, which in turn brings power interruptions to homes and operational disruptions to businesses, industries, and government services. Moreover, poorly maintained power plants have been proven to be less fuel-efficient and less reliable and, thus, more expensive to operate.

The real cost of the insufficiency in power supply 

Load shedding, rolling blackouts and frequent power outages can severely hamper myriad industry and business functions and can bring health and security risks to citizens. Some of the businesses that could be heavily hit by power interruptions include manufacturing, financial corporations, IT services and consulting, data centers, pharmaceutical plants, petrochemical plants, refineries, food processing facilities, control centers, entertainment venues and medical facilities. Judging from the number and the activities of the affected industries, one can safely reckon that even a momentary power outage can easily cost billions of Pesos in losses and damages.

Not Spared: Dark buildings at the central business district endure
the effects of the power shortage  
More alarming, frequent blackouts hold the real potential to compromise the economic growth and international competitiveness of a developing economy. A disappointing economic performance from key industries can lead to a strong monetary depreciation and downward revisions in growth forecasts. It can also drive global rating agencies to downgrade a developing country’s credit ratings, which can put it in a bad light as an investment destination. A prolonged bout with load shedding can negate previous economic achievements of an emerging country and, worse, can plunge the country’s economy into recession.

There are solutions to power challenges  

To effectively combat a power supply inefficiency, a developing country, like the Philippines, should promote further investment in its power sector and regular servicing and maintenance of its existing power systems. While it is understandable that such initiatives may take some time to come to fruition, an emerging country can in the interim turn to temporary power solutions for the immediate resolution of its power supply challenges.

Temporary power solutions can be delivered to the Philippines or to any emerging country anywhere in the world at a moment’s notice, and can be installed and activated in a matter of days. They are able to effectively supply the precise power requirement at any given time, and can be ramped up or scaled down depending on the demand. Governments, power utility providers or power industry stakeholders need not pour in a huge investment in capital expenditure, and can pay for the produced electricity from their operating revenues. Temporary power plants are greatly beneficial in providing reliable electricity when permanent power facilities are undergoing maintenance, or when there are significant delays in the activation of new sources of electricity. They can also be a viable alternative to running inefficient and costly outdated or poorly maintained permanent power plants.

Temporary power solutions can provide immediate power to developing countries
The economic resurgence of the Philippines in recent years has been one of Asia’s biggest success stories. The country’s continued economic growth has been nothing short of impressive. Modern and industrializing economies, such as the Philippines, need an efficient and reliable supply of electricity to sustain their economic activities, better support their citizens and take off. While the government and other power stakeholders are working towards a long-term solution to power challenges, temporary power solutions can provide the Philippines with the much-needed boost in the power supply, paving the way to a more sustainable and viable economy.


Altaaqa Global
Tel: +971 56 1749505

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