THE change in the country’s prescribed mix of generating sources for electricity will soon change if Energy Secretary Alfonso Cusi has his way. But while the new plan has considerable merit, it will make the Department of Energy’s job considerably harder.
Cusi’s preference is to do away with quotas imposed on types of power generation – coal, oil, gas, and various forms of renewable energy – and instead simply maintain a ratio of 70 percent baseload power, 20 percent midrange requirements and 10 percent peaking power.
The ratio is important because different types of power have different generation costs. Under that 70-20-10 arrangement, the least expensive power should make up the baseload capacity, while more expensive types would be limited to the less-used middle range and peaking capacities. Under this arrangement, hydroelectric, gas, and coal generating plants would provide the base load power, while the less expensive renewables and the more expensive fossil fuel plants (whose costs are roughly similar) would make up the midrange, and the most expensive renewables – solar and wind – would be used to supply peak power. This scheme hypothetically assures that consumers pay the lowest reasonable price for the electricity they use.
Under the past PNoy Aquino administration, the DOE’s energy mix was based on technology – 30 percent for coal, 30 percent for gas, 30 percent for renewable energy, and 10 percent for other fuels. The rationale for that arrangement was that mixing power sources would tend to average out generation costs, and it would encourage the development of more climate-friendly renewable energy.
The scheme did not actually achieve either of those goals. Power prices remained high throughout Aquino’s term, and because a significant proportion – nearly a third – of the country’s existing electricity supply comes from hydroelectric and geothermal generating facilities, the opportunities for the development of more renewable energy were limited.
Cusi’s proposal could achieve those aims, or at least improve on the performance of the Aquino-era power mix. If most of the power consumers use is from the most economical sources, power costs should decline, and even though the demand for some forms of renewable energy would be restricted, development would still be an attractive prospect for investors, because they would be assured of higher prices for the electricity they produce, even without the DOE having to resort to the awkward market interference of feed-in tariffs or other subsidies.
The plan, however, is not without its potential pitfalls, and due regard must be given to sustainability. Without some limits, Cusi’s proposal could lead to a massive shift toward environmentally unsound choices such as coal or even more polluting fossil fuels as a matter of economy and expediency. Unfortunately, Cusi’s recommendation to let market forces guide energy development will likely take the country down that exact road, because the energy consumer does not ordinarily concern himself with how the energy was made or where it comes from, but only that it is available.
A better solution would be something in between Cusi’s “flexible” approach and the more restrictive, but more technology-conscious energy mix program of the previous administration. After all, some variety in the energy mix is prudent. For instance, if for some reason there is a significant increase in the price of coal, the country would be better able to manage the resulting increase in power costs if it could shift some reliance to other types of generation such as gas or renewables.
Managing this would not necessarily require a fixed mandate, but simply a careful assessment of proposed power projects and their prospective place in the country’s overall energy supply – something the Department of Energy and other concerned agencies should be doing anyway.