15 OCTOBER 2012
Growth relies less on power
Decline or growth of electricity demand does not appear substantially linked to economic growth. This tends to prove that the main driver of the economy is the service sector, no longer the power-intensive light and heavy industries.
For years, growth in electricity demand and consumption was closely associated with the country’s national output.
According to Jhoana Bautista, Science Research Specialist II of the DOE’s Electric Power Industry Management Bureau, it is estimated that the economy needs to increase use of energy by 1.5 percent to support a percentage growth in gross domestic product.
Last year, the ratio has gone down needing only half a percentage point to support a percentage point in GDP growth.
“The country’s economy is not that dependent in electricity anymore because of our shift from manufacturing sector to services sector. The country’s structure has changed,” Bautista said.
For the past three years alone, electricity demand-to-economy elasticity dropped by an average of 0.6.
Energy elasticity is the relationship between electricity demand and consumption with a country’s GDP.
The country’s energy elasticity for 2011 was at 0.5, way below the energy elasticity in 1991 which was at 4.5.
Average energy elasticity has also plummeted by almost half over the last ten years to 0.9 from the average of 1.7 during 1992 to 2002.
Today, growth may no longer be measured by electricity demand because the country’s economy has now shifted to services, Bautista said.
The Philippines’ shift towards a more service-oriented economy has resulted in a slower electricity demand and electricity consumption growth, but it is not holding back the country’s economy to improve.
Data from the Department of Energy show that from 1992 to 2002, the country’s average annual electricity consumption and electricity demand growth rate were both at 6 percent.
These translated to an average yearly gross domestic product growth rate of 3.5 percent.
In the past ten years, however, GDP annual growth rate continued to increase to an average of 4.6 percent while annual electricity consumption and electricity demand growth rate went down to 3.9 percent and 3.5 percent, respectively.
Total electricity consumption last year was recorded at 69,050 million kilowatt-hours (kWh) while peak demand was at 10,379 MW.
Bautista said that the correlation between the country’s national output and electricity consumption and demand is evident.
“If there is a change in GDP, then there’s also a change in the power consumption and demand. You can see that as power consumption and demand increases, GDP also increases. And if it drops, then it just follows,” she said.
While noting that the service sector may consume a significantly less amount of power compared to the manufacturing sector, Energy Undersecretary Josefina Patricia Asirit said industries like business process outsourcing (BPO) have their respective “electricity needs” as well.
In Visayas, for instance, Asirit said that power demand jumped from 4.6 percent to a high of eight to 10 percent upon the entry of BPOs in Cebu City.
“We asked if there were new manufacturing plants that were built but they said it was more of the BPO because zones started sprouting in the IT park (in Cebu). Plus, of course, when you have a bigger population concentrated in a particular area which is up 24 hours, it will have a ripple effect from the work station, the homes, the condo units and residences that they live in up to the restaurants,” she noted.
Asirit said that power is not only important in the national level but also in the local level.
According to her, electricity availability and sustainability somehow affects the progress of a community, especially in its way towards development and attracting private investors.
“Energy is certainly a critical factor in the development of any nation. Industries will always require that. Government is actually the highest consumer of power and it’s not just availability that is crucial or critical but reliability and sustainability as well,” Asirit said.
“What we need and what is important is that there is sufficient transmission both on the national level and the distribution side to be able to carry the power,” she added.
The National Electrification Administration said that areas located mostly in Mindanao are those which have the lowest energization level in a household basis.
According to NEA, Maguindanao is the least energized area in the entire country wherein only 11 percent of its current households have electricity.
Tawi-tawi and Sulu follow with 17 and 18 percent of energization level, respectively.
Mindanao is not interconnected to Luzon and Visayas which would have allowed it to import electricity to power its low-energized areas.
Other areas in the country with the lowest energization level according to NEA include Sulu, Lanao del Sur, and Basilan with 18 percent, 34 percent and 36 percent, respectively.
“We have embarked on a sitio electrification program to enhance rural electrification in which our electric utilities receive subsidies from government to be able to extend the lines to the areas which has not been reached by electricity before,” Asirit said.
“What we have been doing is to attract investors in the energy sector. For commercial investors, we leave that to the local government units. But us (the DOE), we are partners (with the LGUs) so that once an investor enters in their area, we will be able to provide them with t power requirements,” she added.
As of April 2012, DOE data show that the country has a total installed capacity of 16,162 megawatts (MW). Luzon holds the biggest chunk with 11,739 MW. Visayas and Mindanao has 2,402 MW and 2,022 MW, respectively.
Total committed capacity from the private sector as of end-June, was 1,404 MW with the bulk still coming from Luzon at 856.5 MW.
Of the total committed capacity in the entire country, coal based generation is still preeminent accounting for 1,135 MW followed by geothermal with 90 MW.
Committed capacity refers to the private sector initiated power projects which are already in the process of financial closing after securing the necessary permits and clearances of various agencies and concerned local governments.
“The bottom line is electricity is important to the progress of a country,” Asirit said
Read article source in Malaya Business Insight