Political will needed to solve power crisis, says think-tank

by Doris Dumlao (Philippine Daily Inquirer)

http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20100318-259343/Political-will-needed-to-solve-power-crisis-says-think-tank

MANILA, Philippines—The country’s next president must have the political will to tackle a threatened power crisis that could undermine investor confidence, according to the New York-based Global Source think tank.

In a March 18 report titled “Power, Interrupted,” Global Source said that beyond election and short-term macroeconomic risks, incidents of massive blackouts would undermine investor confidence as well, especially in a country that has a history of power shortages.

“This risks under-investment all around resulting in an inability to expand the country’s growth frontier, thus bringing forward to the present the issue of long-term supply adequacy,” it said.

Global Source noted that the Department of Energy’s power supply and demand outlook underscored the need for immediate new investments in power-generating capacity, especially considering the three- to four-year lead time needed to get all the requirements and financing for building power plants.

Worst-case scenario

“A worst-case scenario, if the next administration dilly-dallies, is a repeat of the 1990s crisis that will seriously damage investor confidence, pull down economic output and lead to expensive solutions that will affect the country’s long-term competitiveness,” Global Source said.

Citing a rough calculation based on the $1 million per megawatt rule of thumb for costing power plants, Global Source said every foregone 1 percentage of gross domestic product growth would translate into over P70 billion in losses for the economy, which is enough to pay for a 1500-megawatt power plant.

“When viewed in the context of a repeat of the economic contraction of the early 1990s, the losses can be quite staggering if the next administration fails to avert another power crisis,” it said.

However, Global Source said the situation is not yet as dire as the power crisis seen 20 years ago.

Unlike the power crisis seen in the 1990s, the study noted that today’s outages have not been caused by an acute shortage of power-generating capacity but are due largely to an El Niño-induced drought, hence the suddenness and surprising severity.

Another point of difference with the 1990s power crisis is that severe power outages have so far been limited to Mindanao, Global Source said.

Mindanao has been the worst affected because of its dependence on hydroelectric plants for more than 50 percent of its electricity needs. Power interruptions in Luzon by comparison have been intermittent and of much shorter duration.

The critical period is all but over for the Visayas, which had been experiencing rotating blackouts for a couple of years, with the construction of a new baseload coal plant, expected on stream by the third quarter.

“From a macroeconomic perspective, Mindanao’s less than 20 percent contribution to economic growth (versus two-thirds for Luzon), while not insignificant, is not expected to cut into overall growth appreciably,” Global Source said.