Imagine Green: Schneider Electric opens new office in the Philippines

Schneider Electric Philippines has inaugurated its new corporate office at the Fort Legend Towers in Bonifacio Global City in Taguig on June 25, 2010. The new 1000 square-meter facility . . .

Read more: http://www.imaginegreen.org/2010/08/schneider-electric-opens-new-office-in.html?spref=bl

Kindle 3G Wireless Reading Device 

Geothermal energy: A product from hell that has heavenly potential

Deep underneath the ground is a hellish stone soup, kept hot by a torrent of radiation from poisonous isotopes of uranium, thorium and potassium in the earth's superheated mantle. This is the heat that helps cause volcanoes, geysers and hot springs, and it is also the same heat that powers a number of electricity generators across the globe.

In order to use this heat for power generation, engineers are drilling as deep as 15,000 feet into the earth's crust. Then, they will pump water down an injection wells where it is heated by the rock. The pressure forces the hot water to go up the production wells. The heat from the water is transferred to a working fluid, which boils at a low temperature. It's the heat that spins the turbine to create electricity.

However, despite of high-tech equipment, this geothermal energy source remains largely untapped. Thus, engineers are hoping to tap more of them some day.

WESM prices lower than NPC rates

There is a general perception that the generation rates of the National Power Corporation (NPC) is lower than the spot prices in the Philippine wholesale electricity spot market (WESM). However, based from the analysis of Nick Nichols of Asian Energy Advisors, the prices in the WESM for the first two years of operations are actually lower by an average of 12% than the state-ran power generator.

Such a revelation, for me, does not come as a surprise. Because as I often said to some colleagues in the power industry that only WESM price could beat the "subsidized rate" of NPC. Currently, no one among the present batch of retail electricity suppliers (RES) and wholesale aggregators could match NPC's effective rates.

Going back to Nick's analysis, here look at the chart I copied from his blog site. For more data, follow this link: http://www.editgrid.com/user/nicknich3/NPC_Effective_Rates.

I will momentarily leave the power industry effective Oct. 15 to take on a more challenging and strategic role in the property sector. But I'll be backed soon, especially so that the property portfolios we are having are all qualified contestable markets. Who knows? My principal might be interested to join WESM and procure part of his energy requirement from the spot market. Or perhaps, he might also want to diversify his business to power and put up an RES or WSA subsidiary. Anything is possible, and it boils down to the viability of my business plans.

Executives behind bars

Take a look at the list of prominent business personalities that have been charged before the Pasig Regional Trial Court for large-scale estafe following a case filed by power consumer group National Association of Electricity Consumers for Reforms (NASECORE) against the directors and executives of the Manila Electric Co. (MERALCO). The case stemmed from the alleged conversion of the interest earned by the meter and bill deposits of MERALCO customers in the amount of Php889-million as part of the corporate income of the distribution utility.

• Felipe Alfonso, vice-chairman of MERALCO and executive director of the Asian Institute of Management (AIM) Center for Corporate Social Responsibility;
• Arthur Defensor, Jr., a board member of the province of Iloilo;
• Gregory Domingo, former undersecretary of the Department of Trade and Industry (DTI) and current chairman of Outsource2Philippines (O2P);
• Octavio Espiritu, former president and chief executive officer of Far East Bank & Trust Co. and currently an independent director of the Bank of Philippine Island (BPI);
• Jesus Francisco, president and chief operating officer of MERALCO and a director of other MERALCO subsidiaries, and a board member of the Philippine Electricity Market Corporation (PEMC);
• Manuel Lopez, chairman and chief executive officer of MERALCO and a director of other Lopez-led firms;
• Christian Monsod, former chairman of the Commission on Election (COMELEC);
• Federico Puno, president of Marubeni Philippines Corporation and former president of the National Power Corporation (NAPOCOR);
• Washington Sycip, founder of SGV & Co. and AIM, a director of various major corporations in Asia, and considered as the "Dean of Philippine Banking";
• Emilio Vicens, a Venezuelan national and vice-president for business development of AEI;
• Cesar Virata, former Philippine prime minister and a current vice-chairman of the Rizal Commercial Banking Corporation (RCBC); and
• Francisco Viray, former secretary of the Department of Energy (DOE) and current president of Trans-Asia Power Generation Corporation.

The crime for which they are charged is non-bailable. Hence, they will surely be in jail once the release of warrants of arrest against them materialized. In this regard, the prognosis is that expect a management overhaul in the MERALCO when the Winston Garcia-led group assume full control of the special board meeting that will be called soon after the arrest of the said directors as seats of the Lopez-led allies will be empty.

Top trading firms take equity stakes from DME

The Dubai Mercantile Exchange Ltd. (DME) has concluded yesterday (Aug. 11) the sale of indirect equity stakes to a number of leading global financial institutions and energy trading firms.

Established as a joint venture between the New York Mercantile Exchange (NYMEX), Dubai Holding subsidiary Tatweer, and the Oman Investment Fund, the DME's new shareholding structure will now include Goldman Sachs, Morgan Stanley, Vitol, Concord Energy, Casa Energy Trading, and a Shell subsidiary.

UP Forum reduces power rates by Php2.00/kWh

Major players and stakeholders in the Philippine power sector convened last Aug. 4 at the forum “Reducing Power Rates by at least Php2.00/kWh” held at the University of the Philippines (UP) in Diliman, Quezon City. The presentors were composed of four faculty members of the UP College of Engineering.

The forum presents the preliminary results of the research study entitled, “Anatomy of Power Rates in the Philippines”, which shows that power rate reduction may be effected through a combination of regulatory and implementing policy adjustments, and amendment of the Electric Power Industry Reform Act of 2001 (EPIRA).

In a nutshell, the presentors have shown that the Php2.00/kWh savings can be generated from the following:

Among the items listed above, I think that only three are doable and they are items no. 8, 9 and 10.

Item no. 7 is unnecessary and must be removed. It's like paying for the power generators' CSR (corporate social responsibility). While the VAT (value-added tax) on system losses must be scrapped as transactions involving them can not be categorized as sales transactions. On the other hand, the royalty tax on the Malampaya natural gas must be removed also since the fuel is sourced in the Philippines and not imported from other countries.

Other issues that came up included overcharging by the National Power Corp. (rate base still include the value of assets that were already privatized), overcharging by distribution utilities (returns include uninvested capital due to high appraisal value of assets), non-VATable items that are being taxed (system loss, lifeline rate subsidy, power rate reduction and loan condonation), WESM's highly concentrated market (above the 1,800 HHI threshold for competitive markets), a PBR with no efficiency target, among others.

WESM 2nd Anniversary Highlights

The Philippine Wholesale Electricity Spot Market (WESM) enters its second year of service to the nation. With this year's theme, “A Ready, Steady Light: Sustaining Electricity Reform into the Future”, the spot market reflects its continued commitment to its role in the power industry reform process.

The 2nd anniversary celebration was held on July 31, 2008 at the Garden Ballroom of the Shangri-La EDSA Hotel in Mandaluyong City. Philippine Electricity Market Corporation (PEMC) President Lasse Holopainen did the welcome remarks.

The occasion was graced by the Energy secretary himself Angelo Reyes. Also in attendance were the new chairperson of the Energy Regulatory Commission (ERC) Zenaida Cruz-Ducut and Consumer Oil Price Watch (COPW) chairman Raul Concepcion. Almost all of the market participant's CEOs, executives, traders and other key officers were present too.

Meanwhile, here are some of the major highlights presented by PEMC's Vice-President for Market Operations Mario Pangilinan:

San Miguel's paradigm shift

"Strategy is seeing what everybody else has seen and thinking what nobody else has thought." – Sir Acid After a stunning surprise last year, the Philippine's leading food conglomerate San Miguel Corporation (SMC), in its effort to find "new engines of growth" would seem poise to undertake another corporate shake-up, which may see it sell part of its core food and beverage unit and more of its flagship beer operations. SMC Chairman Eduardo M. Cojuangco, Jr. has told in a stockholders' meeting that: "The restructuring may require the divestment of part of our interest in our major subsidiaries through either an IPO or follow-on offering and strategic partnerships with existing partners and other industry leaders... In the event that we do pursue such a partnership, San Miguel would retain controlling interest of at least 51%." SMC is said to be keen on venturing into power, mining, property and infrastructure businesses. However, the company has yet to make a major acquisition in those heavy industries, which perhaps has prompted Mr. Cojuangco, who has a 17% stake in SMC, to add: "Fellow stockholders, it may seem far too much is fluid. One year on, we are still on the lookout for potential and prospective investments... and we will report to you as soon as something concrete materializes." It's a paradigm shift for SMC! I'm sure most of us would not have thought, or dreamed of SMC would let go its lucrative beer business. And we may view such move as a nightmare. But there are few persons I know who thinks otherwise. Most vocal among them is Thads Bentulan, a Business World columnist who tagged himself as the Street Strategist. He is also a self-proclaimed future Nobel Laureate in Economics for his work on the Hyperwage Theory. His book Strategy Myopia, written in 1998, may have persuaded the current board members of SMC to embrace such a radical change. Here is what he told about SMC in his book: "SMC is a unique company. It was the single most qualified private entity to lead the country into economic prosperity. It had all the chances to bring this country into high tech value-added manufacturing or services. It had the clear chance to lead but it failed to grab the baton. "Unfortunately, it was content with being just a beer company instead of being the global world-class powerhouse it could have been. "SMC could have created its own computer brand for domestic and export markets in a technological partnership with HP or Intel... Instead of Acer or Compaq, we could have been using SMC laser printers and computers this time developing Filipino new technology along the way. "SMC could have gone into power generation. This is not too remote for its management as it already owns and operates power plants for internal use. Even granting it has no expertise at all, then it could have partnered with BC Hydro – not that I'm passing judgment on BC Hydro, but I liked their beautifully landscaped offices in Vancouver. "San Miguel could have gone into banking and financial services maybe by first issuing SMC Visa credit cards after all it had 20,000 employees as captive market. It could have gone into telecom, software, and infrastructure... For what it's worth, SMC could have gone into record producing, or book publishing to promote Filipino talents to the world. "SMC was poised to be the economic messiah; could have been the benchmark for Filipino companies with global ambitions; could have been our first chaebol... Can the country's only world-class, albeit single-sector, company afford to be myopic in its vision?" It seems that SMC is following the path drawn up by the Street Strategist. To continue, here are more excerpts from the book: "After 107 years, SMC is not a major regional player yet? You would have thought SMC would have moved on to bigger playing fields and developed new technology and diversified away from beer. The problem with beer is that it is consumption-oriented, hence counter-cyclical to the push for savings needed for a strong economy. Beer technology is mature, therefore being ahead does not translate into an advantage. It is not a basic human need and very volatile in terms of demand particularly for low-income countries like the Philippines. "By the way, how much is SMC's market capitalization? A mere US$2.7-billion... But Hyundai transformed itself in only 50 years from an auto repair shop into a US$93-billion group with artificial satellites, magnetic levitation trains, ships and semiconductors, oil refineries and stockbrokerages giving employment to 200,000 people. Why could SMC, after 107 years, only do US$2.3-billion employing only 18,500?" So there. Anyways, the name San Miguel seems flexible enough to carry its future businesses. It sounds pleasing to hear a corporate name such as San Miguel Electric Co. (SAMECO) or San Miguel Power Corp. (SMPC). Ditto with San Miguel Mining Co. By the way, follow this link if you want to know more about the books published by the Street Strategist: http://streetstrategist.googlepages.com

Another thing on system loss. . .

With the rising cost of energy, the Philippine government is thinking of lowering the system loss cost being charged by distribution utilities (DUs) and electric cooperatives (ECs) to their customers.

So many things have been said about system loss, from movie actress Judy Anne Santos' melting ice analogy to MERALCO's garment comparison. But there are other things that many people aren't aware of.

DUs/ECs determine their system loss by subtracting their energy sales to customers from their total energy purchase. Sometimes the delay in the processing of the energy sales, which may have something to do with meter reading error or accounting adjustment, make system loss higher or lower (even negative) than the actual figure.

Moreso, most utilities are using a 12-month moving average in charging system loss. Hence, even if a DU/EC breached the threshold level - 9.5% for DU and 14% for EC - chances are they could still pass through their costs in the long run, since actual rates would only be offsetting each other.

What I am driving at here is that, we may not be paying the actual figure or right amount of cost every billing month for system loss.

In addition, if a DU/EC buy directly in the wholesale electricity spot market (WESM) expect an increase in its technical system loss due to site specific loss adjustments (SSLA). This is due to the fact that the DU/EC's billing reference point would now be the market trading node, not the usual customer node being used as billing reference by the National Transmission Corp. (TRANSCO) and National Power Corporation (NAPOCOR).

In this regard, we may conclude that system loss is not just a physical thing that can be controlled; it is also an accounting item that is vulnerable to manipulation.

Aluminum prices hit all-time high

Aluminum hit a succession of all-time price highs this month despite a weak demand. A commodity broker pointed out: "When you hear producers in China are shutting production because demand is weak, that's normally bearish, yet the market saw insane price moves." On July 7, the price climbed to a record peak of US$3,327 per metric ton in the London Metal Exchange (LME), breaking previous high of US$3,260 per metric ton that was recorded about 10 years ago. Then on July 10, it soared to a fresh all-time high at US$3,380 per metric ton. A London-based trader said the July 7 price move must not have been due to Chinese power / production issues, but the move was due to a market exercise. Download podcast: Power shortages drive aluminum price rises

CNG: An alternative to gasoline and diesel

Soaring prices of crude oil and diesel made people scrambling to look for alternative fuel. In the Philippines, there are inventions that were made to turn LPG (liquefied petroleum gas), cooking oil, urine, and even water as car fuel. With lack of support from the government, these inventions will have a long way to go before they could penetrate the mainstream.

However, there is this alternative fuel that is gaining ground from governments all over the world. And that is the compressed natural gas (CNG).

Did you know that a kilogram of CNG costs just a third of a liter of gasoline and half of that of diesel? That's how affordable this fuel is, that's why it acquired the needed support for its development and usage in some countries.

The transport sector of India is every much into CNG. The Philippines, on the other hand, has already launched CNG-ran buses plying it the cities major thoroughfares.

According to the Gas Authority of India, vehicles running on CNG emit 88% to 98% less carbon, and 12% to 32% less hydrocarbon than those vehicles powered by gasoline and diesel.

So there. CNG is not only cheaper, but more environment-friendly than mainstream fuels.

The Philippines emerging as No. 1 geothermal producer

The Philippines, through the Department of Energy (DOE), has recently awarded three geothermal service contracts to Guidance Management Corporation (GMC), Biliran Geothermal Inc. (BGI), and Basic Energy Corporation (BEC) to explore and develop the geothermal sites in Amacan, Biliran and Mabini, respectively. It is estimated that the deals, which are expected to produce as much as 120 megawatts in additional capacity, could raise up to US$900-million worth of investments in the next 25 years. That figures could bring the country to the verge of becoming the top producer of geothermal energy in the world. The Philippines is presently ranked second to the United States in terms of geothermal energy output. According to the DOE, the country will need only 70 megawatts more to overtake the leader. Currently, generation from geothermal facilities in the country totals 1,978 megawatts. Among renewable energy sources, geothermal is one of the most competitive in terms of generation cost, which could be developed at a unit cost of US$0.064 (Php2.88) as compared to oil's US$0.078 (Php3.51), solar's US$0.043 (Php1.935), and nuclear's US$0.030 (Php1.35). The Philippine government is expecting that exploration would commence by August of this year.

No deadline for Calaca

The president of the Power Sector and Liabilities Management Corporation (PSALM), Jose Ibazeta, was quoted as saying by the media that his agency has already set the 40% payment deadline for Calaca power plant on August 4. But on a succeeding inquiry by some press people, PSALM, through its spokesperson Conrad Tolentino, explained that the said deadline is only for the submission of documents by the winning bidder, such as creditor's consent and land warranties.

Bait-and-Switch watch

I want to share with you the bait-and-switch ploy being used by some gas stations in the U.S. Watch the video to know what it is and how to avoid it. The video is courtesy of Yahoo.com.

http://cosmos.bcst.yahoo.com/up/player/popup/?cl=8732718

The Philippines' first methane-fired power plant

The newly-built methane-fired power plant in Rizal province, owned and operated by the Montalban Methane Power Corporation (MMPC), will start its operations this July. The power plant, which costs around Php1.5-billion, is designed to be environmentally friendly with a technology that captures methanes and prevents the potent gas from escaping into the atmosphere. Methane is an odorless and colorless flammable gas derived from decaying wastes that could be converted to electricity.

Initially, MPPC will produce two megawatts of electricity that will be sold to the country's largest power distributor, the Manila Electric Co. (MERALCO). However, the power facility is expected to produce up to 15 megawatts of electricity annually for a period of five years once it becomes fully operational.

The power plant will source its “clean” energy from a dumpsite in Rodriguez town. Currently, the landfill receives up to 2,500 metric tons of garbage per day.

MMPC, meanwhile, plans to qualify the waste-to-energy project under the Clean Development Mechanism (CDM), an arrangement under the Kyoto Protocol that allows heavy polluting countries to invest on emission-reduction projects in developing countries via trading of carbon credits or Certified Emission Reductions (CER) wherein each CER is equivalent to an emission reduction of one ton of carbon dioxide (CO2). It is expected that the project would earn at least 500,000 carbon credits.

Once registered, the MPPC project will be the fourth largest landfill gas-to-power CDM project in the world.

Another crude peak

Global crude oil prices have doubled in the past year and have risen by almost 50% since the start of 2008. On Monday (June 30), prices breached US$143-per-barrel level to settle at a new peak of US$143.67 per barrel in New York trading.

Oil producers blame speculation, growing demand and high taxation of oil products in consumer countries as the reasons for rising oil prices. However, consumers train their sight on tight supplies, the middle-east crisis and "the cartel", i.e., the OPEC (Organization of Petroleum Exporting Countries), as the culprits.

Due to another round of crude price hikes, the Philippines is set to remove tariffs levied on imported oil to help local consumers and businesses cope up with oil-induced inflation.

Upshot: From JFC to IPP to Open Access

I've read today an interesting article from Bernardo V. Lopez's Upshot column in the Business World. It's about his open letter to the Joint Foreign Chambers (JFC).

I agree with him that, even though they are contributing immensely to our economy, it doesn't mean that these foreign investors have the right to do whatever they want. I think it is but right for us to resist on legal and moral grounds their illegal and oppressive means of doing business in our country.

Along the way, he mentioned about the lowering of the threshold of the privatization of the National Power Corporation (NPC), which is currently pegged at 70% level. In this regard, I am also for the lowering of the NPC privatization level to 50% to fast-track open access regime. Although, this amendment to the Electric Power Industry Reform Act (EPIRA) would only maintain NPC's position in the power industry as a dominant seller of electricity; nonetheless, we still have a dominant buyer in Meralco who controls about 70% of the market. This would even out the equation.

Likewise, an EPIRA amendment regarding cross-ownership must be included. This time Congress should make a provision that will disallow distribution utilities to own generation firms or supply companies, or vice-versa. This is to prevent conflict of interest and exorbitant transfer pricing.

With regard to PIPPA (Philippine Independent Power Producers Assocition), whom Lopez pertains to its members as lesser monopolists, they too are lobbying for an early open access even on an interim basis. However, I guess competing with Meralco is not in their agenda; but rather, they are vying for NPC's customers. Perhaps, Lopez might be referring to PEPOA (Philippine Electric Plant Owners Association), whose members are the ones he mentioned in his article such as Angeles Electric, San Fernando Electric, Davao Light, VECO, et al. However, their being monopolists is but a stature granted by law via their legislative franchise to operate in certain areas. By the way, PEPOA members are not IPPs or generators, but they are distribution utilities like Meralco.

On the other hand, I guess it would be bad timing to implement interim open access this year. I'm afraid that electricity prices would only shoot up, instead of going down, as supplier's rate will reflect the true cost of fuel, foreign exchange and inflation in the power bill.

As early as now, there are already few suppliers who are approaching distribution utilities and contestable markets to offer their services to them. However, the benchmark that they are using are not reflective of WESM, but rather international indices like US consumer price index (CPI), peso-dollar exchange rates, imported coal prices, among others. Therefore, the beta coefficient is way off the mark. Thus, there's a need to put up a forward price benchmark or a mixed generation index so that buyers must have a good reference point and comparative figure.

However, if more hydro and geothermal power suppliers will join the interim open access, then for all intents and purposes, we must push for its early implementation this year. So far, the petitioners for interim open access are mostly coal and natural gas power generators and suppliers.

Nonetheless, I'm still looking forward to the liberalization of the power industry in the near future.

By the way, in case you want to read the full article, here's the link to Bernardo V. Lopez's column: http://www.bworldonline.com/BW061908/content.php?id=144

WESM registers lowest price at Php1,800 per MWh

According to a media report released by the Philippine Electricity Market Corporation (PEMC), the operator of the wholesale electricity spot market (WESM) in the Philippines, the spot price of Php1,800 per megawatt-hour (MWh) recorded in May of this year is so far the lowest since the spot market began its commercial operations in June 2006.

The variables behind the sudden drop in electricity prices were said to be because of reduced demand due to cooler weather condition, early monsoon rains and typhoons which increased the dispatch of hydro power plants, and lower generation capacity outages.

Despite of a general expectation of a higher demand in May by most industries, the average power demand recorded was down by 4.07% to 5,035 megawatts (MW) for the said period. May temperatures, on the other hand, posted a lower 28.2 degrees Celsius as compared to April's 29.2 degrees Celcius, which further led to decreased power demand to cool households and establishments.

NPC to re-tender for 130,000 tons of coal

State-owned power generation firm National Power Corporation (NPC) of the Philippines would be re-tendering on July 3 for two lots of panamax coal cargoes for the 1,294-MW Sual power plant after declaring a bidding failure on the previous bid. The tender is for 130,000 tons of coal with a gross calorific value of 5,960 to 6,750 kcal/kg.

The budget for the tender will be based on latest published market reference rates, such as Platts, Barlow Jonker and Global Coal. It will be announced two days before the submission of bids.

The coal for the Pangasinan-based Sual power plant is slated for delivery between September 30 and October 9 and then December 21 to 30 of this year.