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Letter to the Editor

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Dear Editor,

We would like to react to an article penned by Mr. David Tauli entitled  “Renewable energy for Mindanao” which saw print in your newspaper last October 4, 2011.

Mr. Tauli starts by outlining DOE Secretary Rene Almendras’ “…bias against the development of renewable energy resources…” and attributes this to the fact that “…RE (renewable energy)-based power plants are going to displace oil- and coal-fueled power plants…” and further insinuates a vested interest of the Secretary in these type of technologies. He goes on to say that opposition to RE projects really stems from “owners and proponents of oil- and coal-fueled power plants…” and that “RE-based power plants will make unnecessary the coal power plant proposed for Davao City.”

As the developer of the Davao coal power plant mentioned above, we at AboitizPower would like to clearly state that the 300-MW baseload plant we propose cannot in any way be made unnecessary by the RE-based power plants most favored by Mr. Tauli---solar PV (photovoltaic). A baseload plant by definition provides a reliable foundation of power generation for a power grid. It should be able to run 24 hours a day 365 days in a year on reasonably priced fuel.

Solar PV, on the other hand, according to industry standards only produces electricity 16% of the time, meaning, for the other 84% of the time, it does not produce any electricity. From a cost perspective, plants such as our proposed facility sell power at P5.00 per kilowatt-hour (kWh) while the tariff for Mr. Tauli’s solar PV electricity is P17.95 per kWh, a glaring 260% price differential. Based on these facts alone, it is clear that RE power plants, by virtue of their intermittent nature and price disadvantage, are not meant to displace vital baseload capacity. This is the reason why Sec. Almendras always states the need for additional baseload plants not just for Mindanao, but for Luzon and Visayas as well, because these are very necessary.

Mr. Tauli says Sec. Almendras is “…being hypocritical” by espousing the privatization of the Agus and Pulangui hydroelectric power plants, and goes on to espouse solar PV that will only entail “…an increase of 2.28 centavos per kWh…”

In various fora, Mr. Tauli has compared the unitary cost of power from an oil-fired power plant that has the same ownership as his employer, CEPALCO, at P10.34 per kWh with power from solar PV at P17.95 per kWh and claims the latter comes out cheaper. What kind of math makes P17.95 cheaper than P10.34? The kind that involves cross-subsidies, which were supposed to have been removed years ago. It’s really quite simple. Whereas CEPALCO customers would have had to carry the full cost of the P10.34 power from the oil-fired plant, the approximately P14.95 incremental cost of solar (P17.95 less P3.00 average generation cost) is spread across all power consumers throughout the country. Some 100 megawatts (MW) of solar PV will cost the country around P2.5 billion a year even if it will only provide less than 2% of Mindanao’s annual power generation. Of this, P2.1 billion is subsidy to be paid by power consumers nationwide. So how was the 2.28 centavos per kWh arrived at? By dividing the cost burden of 100 MW of solar, or P2.1 billion, among each and every kWh of electricity sold to consumers nationwide for the next 20 years. 2.28 centavos may seem trifle, but P2.1 billion can build us 2,625 classrooms. In 20 years, you do the math…

It is precisely these concerns over cost which led the DOE to reduce the installation targets for the more expensive RE technologies like solar PV and increase the targets for the cheaper ones. While this would seem rational for most people, granting that a unit of cheap RE is equally renewable as expensive RE, this did not sit well with solar PV project developers, who are busy lobbying to increase their allocation from 50 to 100 MW. Some opponents, like the Foundation for Economic Freedom, in fact have argued that even 50 MW is too much at this time since everyone, solar PV developers included, agree that costs of solar panels will continue to drop. So, they ask, why lock in current high costs now for a 20-year period?
Mr. Tauli and solar PV developers have since gone overboard with their negative reactions, calling Sec. Almendras “anti-renewable”, calling for his immediate removal and even accusing him of having vested interest in fossil fuels. This baseless accusation can easily be debunked when one considers that Sec. Almendras’ most recent former employer is among the proponents of solar energy in Mindanao. All it shows is that he is trying to do his job, past affiliation notwithstanding, and that places like Mindanao need more coal baseload plants, not more expensive RE.

As one of the largest producers of renewable energy in the country with 1,183 MW of hydroelectric and geothermal power plants nationwide, we at AboitizPower are saddened that this debate over expensive RE has held back the development of the cheaper RE sources like run-of-river hydro and biomass. At the P6.15 per kWh price for hydro, you can get almost 3 kWh of its equally renewable energy for the price of 1 kWh of solar PV. Another way of putting it is that in the real world of finite resources, every kWh of solar PV displaces 2 kWh of extra renewable energy because of its cost. That’s not a very good trade-off no matter how you look at it.

It is unfortunate that expensive solar PV is being touted as the panacea to all of Mindanao’s power woes. It is not. In Mindanao alone, AboitizPower has five hydro power plants and another five to be constructed soon. Not once have we thought of these reliable, durable and subsidy-free plants as taking the role of providing much-needed baseload for our grid.

We trust you will find space in your newspaper to accommodate this reaction letter.

Thank you.

Sincerely yours,

Manuel M. Orig
FVP – Mindanao Affairs
AboitizPower




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