The stability of the electricity supply, its reliability, and affordability are critical building blocks in fostering economic growth. Investments are more likely to flow into economies where these factors are assured. This is the consensus among industry experts in a recent economic forum held by Manila Times. In this blog, we delve into why the Philippine economy needs stable, reliable, and cost-effective electricity supply to power its growth.
The connection between power availability and economic growth is unequivocal. As Aboitiz Power Corporation President and CEO Emmanuel Rubio underlines, sufficient and cost-effective power capacity is crucial to fuel the economy. This notion is echoed by other industry stakeholders, such as Sheila Lobien, CEO of Lobien Realty Group, Inc., pointing out that their outsourcing firm clients cite electricity costs as a significant concern.
In contrast to its promising economic potential, the Philippines' electricity prices are among the highest in Southeast Asia. This stark reality, coupled with the nation's electricity generation per capita being the lowest in ASEAN, presents a pressing challenge that needs to be addressed urgently.
Meeting the projected annual increase in electricity peak demand, set to grow by 6.6% from 2020 to 2040, is a critical facet of economic planning. This increase is expected to correspond with the government's ambitious growth targets for the coming years, emphasizing the need for a stable electricity supply.
Despite the power challenges, the Philippine economy has shown remarkable resilience, growing by 5.6% last year— the fastest in Southeast Asia. This growth has been propelled by several energy-intensive industries such as wholesale and retail trade, motor vehicle repair, financial and insurance activities, and construction.
As the world transitions towards renewable energy, the Philippines is not far behind, with the government targeting a 35% share of renewable energy in its power generation mix by 2030 and 50% by 2040. However, achieving this goal while ensuring a continuous and consistent supply of electricity necessitates a balanced energy portfolio.
While solar power is often hailed as a solution to energy woes, its practicality is not without concern. George Siy, President of the Integrated Development Studies Institute, highlights that the actual utilization of solar power plants is less than 20%, necessitating backup power.
Industry experts argue that the full cost of electricity should encompass the entire system cost, from maintaining grid stability to delivery. This notion contrasts with the common focus on the levelized cost of electricity, which only compares the lifetime costs of different generation technologies.
The Green Energy Auction offers a ray of hope in the quest for more affordable renewable energy. However, caution must be exercised as the true cost of renewables extends beyond the peso-per-kilowatt hour when solar energy is generated.
In conclusion, the path to sustained economic growth in the Philippines hinges on reliable and affordable electricity. As the economy marches towards its ambitious growth targets, energy stakeholders must work collaboratively to ensure a stable, cost-effective power supply that will effectively fuel the nation's progress.
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