Power companies urged to put up more facilities

The government must encourage power generation companies to put up new facilities that will generate the much needed additional electricity whether by “incentive or compulsion” to help ease the country’s tight supply.

Manuel V. Pangilinan, president and chief executive officer of power distributor Manila Electric Co. (Meralco), stressed the need for developers to build new and more power plants to enable the country to meet the increasing demand for electricity.

This goes not only for Meralco, which is currently building a $2.3-billion 1,500-megawatt power portfolio over the medium term, but for all other players as well.

According to Pangilinan, having more facilities will bode well in Meralco’s goals of helping the government bring down power rates.

As it is, Meralco has found ways to negotiate for power supply contracts with generation companies that will benefit the customers. However, the utility can only negotiate so much given the tight power supply.

Pangilinan has already said that Meralco expects electricity supply to be “fairly tight” in two to three years’ time should the growth in demand continue for a prolonged period.

The sales volume in January this year rose by 8 percent compared to the same month last year, driven mainly by new connections from the commercial and industrial sectors, and from organic growth.

Meanwhile, Pangilinan said that incentives like the feed-in-tariff (FIT) mechanism are not expected to “move the needle” because renewable energy sources are expensive and will not be able to provide large baseload capacities that are instead needed to provide stable and adequate power supply to the country.

“How large a wind farm or a solar plant can you build? It’s small, say 50 MW to 90 MW? We need more (capacity) than that. It’s not gonna solve the power supply problem, but it will sort of help. But it will be expensive,” Pangilinan explained.

He noted that there is a premium that comes with using environment-friendly renewable energy resources. While he does not have a problem with RE, Pangilinan noted that consumers must be willing to pay for higher rates should they want power generated from renewable energy sources.

The feed-in-tariff scheme, a much-awaited mechanism provided under the Renewable Energy Law, is among the most critical considerations in a renewable energy project. The scheme will determine if a project is economically feasible and viable.

These will likewise assure developers of future cash flows since electricity end-users will be charged fixed amounts to cover production of energy from renewable sources.

“Are they willing to pay for it? The FITs are higher than traditional fuel source. If they’re wiling to pay for more expensive power, then the country can build more solar plants and wind farms. That’s not a problem. But you have to build a lot of these facilities to address the needs of the country. There’s also a price for protecting the environment and this is it. So this country’s got to make up its mind,” Pangilinan further said.