Déjà vu: A Solution to the Philippines’ Looming Power Supply Crisis

The Philippines has achieved impressive economic growth numbers in recent years and has further reinforced its status as one of the major economies of Asia. Now, the country finds itself amidst a power crisis that may portend a pronounced economic slowdown.

In spite of the slow global economic growth, the Philippines remained a strong economic performer in Southeast Asia. A recent World Bank communiqué substantiates this when it reported that the Philippines’ near-term economic growth was likely to remain strong, and was projected to accelerate to 6.4 percent in 2016, before slightly tempering to 6.2 percent in 2017.

Despite the positive economic outlook, there is a persistent power shortage being experienced in key industrial and commercial areas in the Philippines threatening to fade the lights on this promising growth story. The power supply shortage is most pronounced during peak summer months when hydropower is reduced from the seasonal dry spell, and when a random shutdown of a power plant on the grid can initiate a disastrous widespread power outage. Yes, the Philippines is still grappling with rolling power outages similar to what bedeviled the country in the 1990s.

The Philippines has an enormous energy potential to free itself from the shackles of the power supply conundrum, given its notable geothermal energy capacity, if not for a slew of transmission and distribution limitations, inadequacy in domestic energy production and a challenging geography. Other aggravating factors include the country’s observed dependence on imported fuel, non-subsidy of fuel on the part of the government, high electricity tariffs, and aging existing power infrastructure.

While the Philippines has managed to continually achieve impressive economic growth rates in the face of its power supply challenges, the need for a resolution is growing ever more urgent. The country’s economic expansion, among other factors, has prompted a spike in its requirement for electricity, and now the Philippines’ electric power systems are struggling to keep up. The onus is now on its leadership and on key power industry stakeholders to prevent a power crisis that can negate the economic successes that the country has achieved in recent years.

A turning point

Industry and economic experts opine that the power supply shortage in the Philippines is part of a decades-old chronic insufficiency in the country’s power sector. They point to the country’s mothballing of its sole nuclear plant in 1986 as a vital reason why the Philippines is still struggling to satiate its national electricity demand. Because no new capacity was introduced to the country’s power network, what ensued were sustained day-long power outages that fended off foreign investment, suppressed the growth of various heavy industries and stalled the country’s economy. The incoming government of President Ramos (1992-1998) resolved the power challenge through emergency powers granted by the 1991 Energy Crisis Act to conclude contracts for new power generation. The country was, then, afforded some breathing room.

Now, 18 years on, the Philippines has come full circle and is again confronting a potentially debilitating power crisis.

What is being done?

One of the country’s foremost, albeit stop-gap, response to the power supply shortage is the “Interruptible Load Program”, which entails large establishments, such as shopping malls, office buildings, and factories, to voluntarily switch their power source from the main grid to their proprietary generators when a shortage is impending. It is a program established by the Department of Energy and the Energy Regulatory Commission to help ease the energy supply deficiency in the country until new capacities are introduced to the grid. As of press time, even as details of compensation are yet to be finalized, a number of large firms have already pledged their participation.

There has also been an interest on the part of the government to review, revise and reinforce the Electric Power Industry Reform Act (EPIRA) of 2001, which mandated the privatization of state-owned power enterprises in the hope of encouraging the availability of affordable electricity and fair market competition. The government intends to amend the EPIRA to allow it to intervene in the power sector as need be. For instance, the government proposes to have its own power generation facilities so that it is able to instantly fill in the power shortfalls. Nevertheless, the project still remains to be cost-prohibitive.

The country’s energy department estimates that, with the current economic trajectory, the Philippines’ power demand will balloon to approximately 29,500 MW in 2030. The country’s power generation capacity in the same year, however, is only predicted to be at 26,500 MW – 3,500 MW short of the requirement. Here’s the caveat: In order to bridge the power supply gap, the Philippines reportedly needs USD 46 billion to set up modern power generation facilities in the country. The government is thus taking a proactive stance to woo power investors to invest in the country and help increase its generation capacity.

Not helping this effort, however, is the country’s observed excessive bureaucracy and adherence to official rules and formalities. The energy department itself estimates that it takes approximately 165 signatures and a minimum of three years only to secure the necessary permits for a permanent power plant project. Further delays may ensue in case of an eventual judicial dispute. Other processes like finalizing financial concerns, signing off project designs, sourcing equipment and materials, securing allied service providers, let alone constructing the permanent power plant also take a considerable amount of time. Thus, many foreign power companies have expressed dismay over the situation, saying that the requirements have been a deterrent to entering a market demanding a sizeable initial outlay and a commitment of at least 20 years.

There is no better time

There is no better time for the Philippines to resolve its power challenges than now. The country cannot afford to invalidate its economic achievements of recent years by risking going through a similar power crisis that reined in its economic and industrial growth. If the country wishes to go on living its Cinderella story, the Philippines should do what it can to erase serious concerns about its economic and social sustainability.

While permanent power solutions require a substantial capital outlay, temporary power technologies do not involve capital expenditure. In fact, the government, power utility providers, and other interested industry holders can pay for the rented electricity from their operating incomes. Temporary power solutions may represent a short-term restorative measure, but when employed in crucial times like this, they can be the difference between a calamitous economic collapse and a momentous economic feat.

While the government is revisiting the EPIRA, and while concerned agencies are working to streamline their regulatory processes, the Philippines can readily benefit from the temporary power solutions, which can be swiftly delivered to the Philippines and installed and powered on in as little as days. Contrary to permanent power plants that require long lead times to be completed, rental power plants can immediately supply electricity as soon as the equipment arrives at site owing to its inherent ease of installation and grid connection.

Though recent governments have made great strides in the resolution of the power crisis, there are more to be done to ensure that the Philippines’ power-generation facilities are adequate to cope with the country’s increasing demand for electricity. Until the government and the relevant industry stakeholders encounter an appropriate solution to the persistent power supply challenges, the Filipino will continue to struggle with what has notoriously become a staple of life in the Philippines.

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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.

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Altaaqa Global

Tel: +971 56 1749505

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Maximum Power: Mega Trends in the GCC Regional Temporary Power Industry

From smart solutions to energy efficiency, the value addition curve for rental power plants is always on the rise. Altaaqa Global shares its insights about mega trends that the regional temporary power industry must align itself with. 

• What is you overview of the current Genset market in the GCC?

The temporary power industry is largely dependent on the prevailing market situation and activities. In the context of the GCC, the rental power market is conditioned by several factors, including:

• Utility shortages, particularly in KSA and Kuwait, especially during peak summer months 
• The gradual recovery of the construction industry in UAE and Saudi Arabia
• Absent or unreliable electricity connection in various areas in the region
• Regional growth in population and improvement in the standards of living
• The availability of diesel, and the nascent increase in the supply of natural gas
• Large industrial customers/companies turning to rental power to maintain the effectiveness/productivity of their operations in times of power interruptions or peak shaving
• Opportunities for infrastructure rebuilding and development 

KSA, Qatar and the UAE have consistently been the biggest market for gensets in the region, be it for rental or for sales, as they have been demonstrating high economic growth rates buoyed by industrial and commercial development. At present, however, we see a slight decline in the interest on temporary power services owing to the suppressed prices of oil and other commodities.

• What are the new trends shaping demand for Gensets (across all types)? What is your projection of the region’s Gensets market in the next five years?

We are noticing the gradual expansion of the natural gas and dual-fuel genset markets, particularly where inexpensive natural gas is available. The growth of such markets are supported by the increase in unconventional gas resources and by stringent emission regulations in effect in many countries around the world.

Fuel availability and the costs of installing safe and reliable fuel delivery infrastructure have traditionally posed limitations on the growth of the natural gas generator market. Today, gas is becoming increasingly available and gas generation technology progressively finds application in bigger and longer-duration projects. The availability of dual-fuel generators (which significantly simplifies the transition from diesel-run to gas-run generators), is helping overcome these installation and operational obstacles.

• How is your company geared up to meet the new demand trends?

The temporary power services that we offer vary from industry to industry and site to site.
In recognition of the changes in the market’s demands, we will continue to offer the most fuel efficient, reliable and technologically advanced generators and power systems to our clients to reduce their overall operating costs. We will combine it with consistent technical support and expert advice on equipment selection.  

The diesel generator market will continue to grow in the next several years, so we will continue to have diesel generators readily available in our fleet. As natural gas becomes increasingly available, and gas power generation technologies progressively find application in bigger and longer-duration projects, we will ensure to offer natural gas generators where it is appropriate.

• What is the region’s uptake on smart technologies? What solutions does your company offer to that end? What are some of the latest innovations in Gensets to enhance user experience?

There is an intense interest in the GCC in technologies that aid in the provision of reliable and efficient electrical power, resource conservation and environmental stewardship. The relevance of such technologies cannot be overstated in the GCC’s modern environment, which sees high levels of power consumption that takes a toll on the generation, transmission and distribution facilities.

In this light, here are some of the smart technologies available in our power generations systems:

• Our generators are equipped with state-of-the-art control and protection systems that allow them to change operational modes (island, grid or standby) in just a push of a button. Because of this, our generators can provide the precise electrical power at the exact time it is needed, in whatever mode required. 
• Our generators are also equipped with local control systems that provide power metering, protective relaying, and engine and generator control and monitoring. They are integrated with digital voltage regulators, which works to enhance system monitoring. They offer the ability to view and reset diagnostics of all networked controls, eliminating the need for separate service tools for troubleshooting. They also have real-time clocks which allow for date and time-stamping of diagnostic and events.
• To enhance user experience, our generators are equipped with engine operator interface featuring graphical display with positive image, transflective LCD and adjustable white backlight/contrast. Additional features include engine cool-down times, engine cycle crank, three engine control keys and status indicator (run/auto/stop), lamp test and alarm acknowledgement keys. It has warnings/shutdowns with indicating text for low oil pressure, high oil temperature, emergency stop, over speed and over crank, on top of an emergency stop push button and shortcut keys for engine and generator parameters. 

• What are the latest innovations on Bi-fuel portable generators? 

Our dual-fuel power generators are specifically developed to reduce fuel costs and decrease emissions. They are equipped with a dynamic gas-blending technology that optimizes output, while being environmentally considerate. Our bi-fuel generators automatically adjust to changes in fuel quality and pressure to allow engines to run on a wide variety of fuels, including associated gas and vaporized LNG, with no loss of performance integrity. Owing to this, no customer input or gas analysis is required during operation, and no re-calibration is needed when the equipment is moved or the gas supply changes.

• How will the shift towards renewable energy impact the Gensets market in the GCC?

Owing to the rapid depletion of the world’s fossil fuel resources, in addition to greater requirements in carbon reporting, many countries around the world are looking to diversify their energy mix to encourage long-term energy security. A crucial component of this initiative are renewable energy sources.

While renewable energy technologies are being optimized, continued dependence on traditional sources of electrical power is needed to bridge the power gap and maintain a continuous and reliable supply of electricity. Temporary power solutions, for instance, can work in tandem with renewable energy sources to help mitigate the issues of unpredictability and intermittency.

Aside from supporting renewable energy facilities in producing electricity, temporary power plants can also provide power to renewable plants throughout their life cycle. Temporary power plants can provide supplemental power to renewable facilities during planning, manufacturing, installation, commissioning, operations and maintenance. Temporary power plants can help ensure that renewable energy plants are constructed and delivered on time and as planned, and that they remain efficient, reliable and in optimum condition at all times.

• Comment about the market for Genset spare parts?

In addition to our own in-house capabilities, as an authorized Caterpillar dealer, Altaaqa Global has access to the wide range of technical, engineering, logistical and service/maintenance resources of other Caterpillar dealers around the world.

In mobilizing for a project, for instance, we may tap the power generation resources, technical & engineering expertise and logistical facilities of the local Caterpillar dealers where we operate, or of any Caterpillar dealer around the world. We also have access to locally available parts and can call for local maintenance service or technical support. Thanks to this synergy, we are able to provide for a quick and efficient installation of power plants and ongoing support for projects anywhere in the world.

• What are the major challenges in the GCC Gensets industry? How is the slump in oil prices impacting the market?

While the fact that the prevailing oil price makes generators cheaper to run is an advantage in theory, we have to remember that the requirement for generators is proportional to the rate of economic activity. At present, the prices of oil and commodities are suppressed, and this is having a negative impact on the interest on power generation services. We, however, expect the industry to rebound quickly as and when economic conditions improve.

• How is the 5% VAT proposed by GCC countries likely affect the Gensets market?

The introduction of VAT in the region was largely prompted by the drop in revenues in the face of plummeting oil prices. With VAT, businesses and industrial companies must grapple with increased production and higher capital costs. Economists, however, predict that the benefits of VAT to the region will outweigh the financial burdens that come with it.

One positive scenario we see is that with the introduction of VAT, governments in the GCC can have additional revenues that they can use to build additional infrastructure, refurbish existing facilities, and overall improve services to their citizens. These represent excellent business opportunities for temporary power providers. As we have mentioned above, the temporary power industry is conditioned by the prevailing market situation and activities, and if GCC countries intensify their economic and social activities, the industry will continue to thrive in the region.

• With competition in the market growing, what will industry players need to do to retain their clients and also win over new ones? What steps are you taking towards driving efficiency? How is this likely to give you a competitive edge? What is your company doing to have a competitive edge?

As an authorized Caterpillar dealer, we work closely with the Caterpillar product development team to share perspectives of customer requirements in the power rental business. We continually work on improving the efficiency and reliability of our equipment, and we constantly revisit our procedures and processes with the aim of improving the way we do things in every project.

The role of temporary power has evolved from being a local, short-term, transactional activity to a major global project-based industry. To keep abreast of the opportunities in the coming years, we will continue to hone a highly skilled, motivated & experienced, world-class, power projects team. At Altaaqa Global, we strive to lead the evolution of the industry, and to be recognized as the premier source of innovative technical solutions and the highest level of customer service and support.

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Altaaqa Global

Tel: +971 56 1749505

rbagatsing@altaaqaglobal.com

How much does it cost to operate and maintain a permanent power plant?

Whatever the energy source, be it fossil fuel, nuclear or renewable, expenses for operation and maintenance (O&M) form a vital part of the life cycle cost of power plants. Though O&M cost differs among various forms of power generation, it plays an important part of any power plant’s business case. Guided by the information provided by the International Energy Agency’s World Energy Investment Outlook 2014, we present an overview of the estimated average O&M costs for six of the most common power generation methods.

1. Gas Turbine (USD 20 per kW)

Gas-fired power generation is popular for having a relatively low O&M cost compared to other power generation procedures. For instance, power plants installed with simple-cycle combustion turbines have been shown to have an average annual O&M cost of just around USD 20 per kW, making such technology the most economical O&M option in the power industry. The maintenance of an effective lubrication system for gas turbines plays an integral component of O&M expenditure in gas-fired power plants.

2. Large-scale solar photovoltaic (USD 25 per kW)

Thanks to the ongoing development of solar photovoltaic (PV) technology, large-scale PV installations are among the most economical power generation technologies for O&M, at just about USD 25 per kW. Because solar PV is a relatively simple technology, maintaining it often only involves cleaning and removing debris from PV cells, together with monitoring of inverter units and AC subsystems.
Concentrated solar power (CSP), on the other hand, being a more sophisticated and complex technology, demands a much higher O&M cost, estimated at USD 290 per kW.

3. Subcritical coal power (USD 43 per kW)

O&M costs for coal vary depending on the type of plant. For instance, the cheapest subcritical plant has an O&M cost of approximately USD 43 per kW, even higher for supercritical and ultrasupercritical coal combustion technologies, and about USD 88 per kW in the case of integrated gasification combined cycle plants. A major component of the O&M costs of coal-fired power plants is monitoring and servicing the numerous moving parts involved in the generation process, including turbines and generating sets, coal yard conveyors and handling systems.

4. On-shore wind power (USD 46 per kW)

There is a notable disparity between O&M costs for onshore and offshore wind farms, mainly owing to access-related issues. While O&M costs for onshore wind power sites are almost at part with those of the simplest coal technologies, and are even expected to fall below those of coal by 2020, O&M expenditure for offshore wind technologies are approximately four times as much, sitting at around USD 181 per kW.

5. Large-scale hydropower (USD 53 per kW)

Large-scale hydroelectric power is considerably cheaper to operate and maintain compared to smaller-scale projects. However, the O&M costs for maintaining large installations like dams and barrages are predicted to increase in the future, matching those of small-scale hydro by 2035. At present, the O&M costs for small hydro projects stands at USD 70 per kW. According to IEA, ageing equipment in need of replacement at hydroelectric dams, on top of the complexity of running and maintaining new equipment along with dated components may be factors that contribute to the predicted increase.

6. Nuclear power (USD 198 per kW)

Nuclear power plants do not only command a hefty capital expenditure, they are a long shot from being cheap to operate and maintain. Major contributors to the steep O&M cost include the processing, enrichment and fabrication of uranium into fuel elements; waste disposal; and maintenance of a large number of pumps, valves, cables, circuit breakers and other mechanical and electrical components.

When permanent power plants become less efficient and less reliable...

Naturally, O&M costs, as illustrated in our discussion on large-scale hydropower facilities, are expected to increase as power plants age and become less efficient and less reliable. When old power plants continually shut down or become increasingly expensive to operate and maintain as they age, power utilities may be compelled to do a major refurbishment on existing power plants or build new ones as they rest the old ones.

While permanent power plants are being optimized or new ones are being constructed, power utility providers can turn to reliable and fuel-efficient temporary power solutions for supplemental electricity.

Temporary power plants can be swiftly transported from and to anywhere in the world, and can be installed in a matter of days as soon as the power equipment arrived at the site. Rental power plants do not require a huge capital expenditure and major civil works before they can be installed, and have been proven to deliver exceptional performance and outstanding fuel efficiency. Power utilities can pay for the “hired” electricity from their OPEX,

Rental power plants are scalable in that power utilities can choose to increase or decrease the power plants’ power output depending on the existing requirement. This means that in case the power requirement rises, they do not have to build another permanent power plant to satiate the demand. Once the need for additional electricity passes, power utilities can simply end the contract, and the temporary power plants will be demobilized, leaving no permanent facility idle or requiring continuous maintenance.

Temporary power plants are operated and managed by a team of certified and expert engineers, so clients can rest assured that the power plants will be running smoothly and will be providing sufficient electricity anytime it is needed.

For more information on temporary power solutions, visit www.altaaqaglobal.com

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PRESS INQUIRIES

Altaaqa Global

Tel: +971 56 1749505

rbagatsing@altaaqaglobal.com