It’s that time of the year again, when the state of our power grid is in the news. As I write this (before we head off to Puerto Princesa for this year’s Supply Chain Immersion – as you read this, we should be heading home) the Luzon and Visayas power grids are on red alert, due to some power generation plants being knocked offline, and others forced to operate in a reduced capacity.
Perfect timing. We are in the midst of a heat wave. Heat indices in parts of the country are in the mid-40s. There is no chance of rain in the coming weeks. The urge is there to turn on the air conditioning, but then we’re also told to consume less electricity for the meantime because the grid can’t handle it.
I’ve been thinking about our power grid for a while, but for different reasons. There’s a recent push to build more cold chain facilities, to improve food safety and security across the country. But one of the biggest hurdles to attracting investment in this front is the high cost of electricity in the country. Cold storage facilities require reliable and consistent energy to keep refrigeration systems going. Add to that the high levels of capital needed to build not just the facility but the transport fleet that supports it – refrigerated vans, for example – and the ask becomes a little more daunting.
We were taught in school about how the Philippines is rich in natural resources, some of which we have learned to harness for our energy needs. A third of our power is generated from renewable means – hydroelectric, geothermal, wind and solar – but some of these facilities are aging and are thus vulnerable to breakdowns and weather-related factors. (We may have something similar to what happened in Texas a few years back, when extreme cold literally froze the state’s power grid and led to outages.) In addition, the country is still heavily reliant on oil and coal to generate power, a combined 63% of the whole country’s needs. That makes us more vulnerable to price shocks – keep a watch on this as tensions in the Middle East look set to intensify – and directly contributes to our climate woes, as coal plants are known as heavy polluters.
All this means our electricity costs are some of the highest in the region, which makes us a less attractive investment destination, and also scuttles our initiatives to embrace cleaner energy sources. I’m thinking of the push towards electric vehicles, with government agencies being mandated to switch to a fully-electric fleet in the next few years, with the hope that this will pave the way for the private sector to embrace this. But, apart from fears the heavy traffic would lead to EVs running out of battery in the middle of the road, as well as a woeful lack of charging facilities especially for longer trips, the high cost of electricity could discourage others from at least thinking of buying a fully electric or a hybrid vehicle. What more businesses, who can also lead the way by embracing a fully-electric fleet?
The challenge, of course, is that upgrading our power generation and distribution network costs a lot of money, too. Even solutions presented as a “silver bullet” won’t come cheap: rehabilitating the dormant Bataan Nuclear Power Plant, for instance, requires roughly USD 2 billion across four to five years. I imagine this will not go down well with consumers and businesses, who balk at the idea of paying more to accommodate these upgrades, not to mention the potential interruptions that may happen along the way. It may not be worth the grief – and I imagine our elected officials, keen for opportunities to score political points among voters, may be risk-averse on this front, too.
But upgrading our power generation and distribution networks is something we should think about. The case has to be made for private players in the energy space to invest in our electricity grid while setting aside any immediate profit motives. As the greater ASEAN region gird for increased investments in light of the evolving situation in China and Japan, one way we can make ourselves more attractive is to reduce electricity cost. There is also, of course, a tremendous positive impact on the domestic economy, encouraging greater local investment in manufacturing, while also boosting consumption levels. For us in the supply chain profession, we can further reduce costs and embrace our commitments to our communities and the planet as a whole. Perhaps most importantly, it allows us to be more resilient to geopolitical shocks as well as our increasing vulnerability to climate-related disruptions.
I appreciate, however, that this issue has to be dealt with sensitively by policy makers and stakeholders. How can we guarantee them that the likely increased cost in the beginning will lead to better service in the long-term? And how can we guarantee that that increased cost will eventually, as it must, go down?
LogiSYM Asia Pacific 2024: SCMAP is happy to support the upcoming LogiSYM Asia Pacific 2024, a two-day event happening on 15-16 May 2024 at the Singapore EXPO. This conference will explore upcoming trends in our sector such as sustainability, e-commerce and generative AI. It will also be home to the LogiSYM Awards, highlighting best practices in the region. Learn more about this event by visiting logisym.org.
Henrik Batallones is the marketing and communications director of SCMAP, and editor-in-chief of its official publication, Supply Chain Philippines. More information about SCMAP is available at scmap.org.
