Yearender: DoE managed the unmanageable in 2011

The Philippine energy sector in 2011, as in years past, was plagued with problems such as unwarranted price spikes, shortages and, consequently, protests from concerned groups.

But in 2011, unlike the years before it, the local energy sector seemed to have emerged from the challenges almost unscathed, with the Philippine Department of Energy looking as if it merely breezed through all the local and global troubles, allegations and controversies—a considerable feat since oil and electricity are deemed highly sensitive political commodities in this side of the world.

Of course, it’s not as easy as it looks. All the achievements of the DoE last year were rooted in hard work and the political will to put in place all the critical groundwork needed to ensure that energy would be accessible and affordable down to the grassroots level, said Energy Secretary Jose Rene D. Almendras.

And the DoE’s effort is quite evident. Last year, reports of long hours of rotating brownouts stemming from acute power supply shortfalls were few and far between. Unwarranted surges in electricity prices were tempered while fuel supply shortages had been successfully worked out.

Also, the government managed to cushion the effects of the socio-political tension in the Middle East and North Africa, as well as the earthquake and its aftermath in Japan, which directly threatened the country’s supply of oil and other petroleum products.

Almendras admitted it was a “truly challenging year,” and reckoned that it wasn’t over yet, particularly where fuel prices were concerned.

Cleaner alternatives

Yet he believes that the government, through the DoE, has tried its best to mitigate the increases in global oil prices.

One of the short-term measures implemented was the P450-million Pantawid Pasada program, under which jeepney drivers were given cards loaded with P1,050, which they could use to buy fuel.

Medium- and long-term measures included promoting the use of natural gas (compressed or liquefied) and electricity as cheaper and cleaner transport fuel alternatives. The DoE has tapped both local and foreign investors, as well as multilateral agencies, to roll out the Alternative Fuels Roadmap that will serve as the policy framework on diversifying fuels for transport use in the Philippines.

Almendras proudly pointed out that in 2011, Filipinos did not experience major brownouts as in the past.

“We’ve been able to keep supply levels good, without building a new power plant. We were able to augment power supply in all three grids and we’ve made the market more efficient. Noting the cost considerations, prices at the wholesale electricity spot market have even gone down,” Almendras explained.

To further secure the country’s energy supply in the future, the DoE launched the Philippine Energy Contracting Rounds for petroleum and coal, offering to investors highly prospective resource blocks (30 for coal and 15 for oil and gas) for exploration and development.

Harnessing local resources will help the country meet its daily demand and reduce the importation of costly and price-volatile petroleum products.

Other notable achievements by the DoE included the 10-year extension of the Lifeline Rate Subsidy Program, which provides discounts for low-income electricity consumers. This program benefits 4.53 million lifeline customers with total electricity consumption of 158 million kilowatt-hours. Total subsidies provided to them amounted to P355.28 million as of end-December 2010, which were funded by around 28.14 million non-lifeline customers.

Donors’ forum

The DoE likewise conducted a donors’ forum to promote potential investments in the Philippine energy sector, which would need over P1 trillion in fresh capital over the next 20 years to tap indigenous resources.

Almendras also launched the National Renewable Energy Program (NREP), or the “green energy” roadmap of the Philippines, as part of efforts to ensure national energy security, as well as highlight the need for energy efficiency and conservation measures.

Some stakeholders, meanwhile, lauded certain key officials from the DoE and other attached and related energy agencies, who were described as “accommodating,” “accessible” and “transparent” enough—true to the mantra of the Aquino administration.

Proactive

“Quite objectively, the government has been quite proactive and positive. I’d (give them a rating of) 8.5 to 9 out of 10,” said Oscar Reyes, chief operating officer of power distributor Manila Electric Co. (Meralco).

Similar to sentiments aired by a number of stakeholders across various energy sectors, Reyes pointed out that this batch of energy officials knew what they were doing, what the issues and challenges were, and what actions would need to be implemented to solve problems.

This administration, he further said, had the guts to do what should rightfully be done.

But critics of this administration pointed out that the DoE was not able to deliver the goods last year, failing to implement the law to the letter, much to the detriment of certain sectors.

Dissenting quarters noted that, for one, the renewable energy sector seemed to take a backseat, with the energy chief being branded as a “coal boy” among hushed discussions—but still much to the knowledge of the Energy secretary.

‘He-said, she-said’

Discussions on feed-in-tariff (FIT) rates for renewable energy sources have been taken to media as various opinions have been thrown about, without, in reality, having achieved much to actually resolve the issue.

As one observer puts it, the FIT debate has been reduced to “a he-said, she-said” discussion of sorts.

It was also only in the last month of 2011 did the government issue the much-awaited circular that contained the guidelines on the priority utilization of locally produced ethanol as well as on its importation—a move awaited for more than a year by stakeholders because this would help boost the ailing ethanol industry.

Already, a number of investors had backed out of their proposed ethanol projects for lack of clear direction from the government.

On power-supply issues, Mindanao continued to suffer rotating brownouts throughout the year—although still not as dreadful as experienced in 2010—as its heavy reliance on the Agus and Pulangi hydropower complexes continued to render its supply unstable.

The problem, however, is that Mindanao is torn between wanting to secure adequate supply and shunning the construction of new coal-fired facilities that could have served as their baseload source of electricity.

Some groups in Mindanao are looking at renewable energy sources as their hope to securing supply, but developers refuse to budge as FIT rates have yet to be approved.

A number of investors under the government’s natural gas for transport program had also urged the DoE to act on the inability of Shell companies in the Philippines to provide adequate supply of compressed natural gas. The bus operators’ losses reach millions of pesos monthly.

Good and bad

While there is now a move to take over the operations of Shell, bus operators have yet to see whether the participation of largely state-owned PNOC Exploration Corp. will truly boost the local natural gas industry as promised to them by the previous administration.

There are still many other issues left untouched—good and bad. But all things considered, the DoE has, in fact, managed to “settle down” and nitpick on each concern, however slowly.

More importantly, the deep understanding of the issues in the energy sector by new officials on board has also impressed industry observers and investors worldwide, who are now hoping to see fruition of the development plans outlined in what the DoE calls Philippine Energy Plan (PEP).

The PEP, which is targeted to ensure the smooth continuity of the country’s energy programs and projects until 2030, is expected to unlock the full potential of the country’s energy resources and technologies in the next 20 years.

Aside from identifying the major energy plans and programs, the Plan boasts of specific strategies to address challenges, such as energy-supply disruptions, volatility of oil prices in the world market, and increasing electricity rates.

The point to all the DoE’s achievements for 2011 alone is that these had, at least initially, assured many stakeholders that the Aquino administration has the ability to pursue its energy security plans, as it was able to lay down the critical groundwork, policies, programs and other necessary measures, following months of intensive reviews and consultations.

New beginnings

The year 2011 was in fact dubbed as the year of “new beginnings,” as Almendras had put it, given the new programs and policies implemented and instilled within such a short period.

The question now is whether the DoE will be able to consistently follow through and actually implement over the next several years all the projects as promised—amid the forthcoming challenges and controversies that may be hurled its way—and live up to the high expectations it has now built.

Deliver or bust, stakeholders are awaiting eagerly.