Erramon Aboitiz, CEO and President, Aboitiz Equity Ventures and Aboitiz Power Corporation: Interview

Interview: Erramon Aboitiz

How do you assess the current condition of the energy generation market?

ERRAMON ABOITIZ: With the entry of new players, the electricity market has become very competitive – especially in the contestable market. New capacity has also been created to meet growing demand, and some regions such as Mindanao now have an electricity surplus. This is a clear sign of the positive impact of the Electric Power Industry Reform Act of 2001: investment is pouring into the sector and prices are falling as a result of competition. However, the transformation of the power sector has placed a strain on the regulatory system. Regulators face the challenge of reducing prices for consumers while also attracting the investment needed to meet the growing power requirements. Unfortunately, success in just one of these areas is not enough – both must be achieved together. Securing consistent and clear policies, as well as maintaining competition to keep prices in check, will be crucial.

In what ways can generators reduce energy costs?

ABOITIZ: Electricity generators are working to bring down the cost of power and become more competitive by installing larger and more efficient capacity. New power plants are being financed in pesos instead of dollars, reducing price volatility and eliminating the foreign exchange risk that was traditionally passed on to the end user. However, there is more to be done. The country still has legacy contracts that are expensive, as well as stranded costs from the National Power Company that are being passed on to the consumer. On top of this, there are feed-in tariff allowance charges and taxes added on to the cost of power.

What will be the optimal energy mix to enable the country to install an additional 43,000 MW by 2040?

ABOITIZ: The country needs to utilise a variety of resources to avoid dependence on one form of energy. Renewables should be developed further, but we cannot depend solely on renewables as the country’s power requirements are growing rapidly. Renewable sources must be combined with cheaper base load power to drive industrial and economic growth, and enable the country to become globally competitive and create jobs for Filipinos coming into the work force. We cannot rely on solar and wind generation to provide a consistent supply until an economically viable way of storing electricity is found. Therefore, for the next couple of decades the Philippines cannot rely on renewables as the bulk of its energy needs.

Which steps should power producers take to reduce their carbon footprint?

ABOITIZ: Investing in technology to increase efficiency will reduce carbon emissions, softening power producers’ impact on the environment and local communities. Producers should also be at the forefront of the development of renewables. Other programmes that can be implemented include planting trees to offset carbon emissions, and improving the handling and storage of coal to eliminate coal dust. However, it is most important that producers, distributors and consumers work together to encourage responsible power usage. The cheapest and cleanest plant is one that we do not have to build: conservation is the most effective way to reduce our carbon footprint.

Could nuclear become a viable source of energy?

ABOITIZ: The marginal cost of producing nuclear energy is low, but the investment required to develop a plant is considerable. It is therefore necessary to weigh up the operating costs against the initial investment. As new technologies are developed for smaller plants, nuclear energy in the Philippines may become more feasible. However, there is an ongoing global debate about the risks related to nuclear energy, so it would be wise to wait for a greater understanding of this source before taking steps to begin building nuclear plants.