Mindanao Power Shortage: Cause and Effect

Topics: SOCCSKSARGEN, Power outage, Electricity generation Pages: 25 (5478 words) Published: October 11, 2014

A Term Paper Presented to the Faculty
of Northlink Technological College
New Pandan, Panabo city

In Partial Fulfillment of the Requirements
for the subject Econ1: ECONOMICS ,

Eddie L. Manungas Jr.
lkenn louie M. Palma
October 2014

Background of the Study
One of the potential contributors to the large productivity gap between developed and developing countries are low quality infrastructure. In the summer of 2012, India suffered the largest power failure in history, which plunged 600 million people into darkness for two days. Even under normal circumstances, however, the Indian government estimates that shortages currently amount to about ten percent of demand at current prices, and many consumers have power only a few hours a day. In the 2005 World Bank Enterprise Survey, one-third of Indian business managers named poor electricity supply as their biggest barrier to growth. According to these managers, blackouts are far more important than other barriers that economists frequently study, including taxes, corruption, credit, regulation, and low human capital. (Hunt Allcott, Allan Collard-Wexler, and Stephen D. O’Connell 2014)

In Mindanao, the nation's main southern island which relies mostly on hydroelectricity, has been grappling with chronic power shortages for years. The recent spate of massive power interruptions is a symptom of the predicament facing Mindanao. Plants have shut down, cutting off electricity in large parts of the region for hours on end. The reason for the outage: the demand for power far exceeds existing supply. Millions of people were left without electricity in the southern Philippines on February 21, 2014 after a massive power breakdown, officials said, as repair crews worked to determine the cause of the outage. The power cuts began before dawn and affected heavily populated areas in Mindanao, home to a quarter of the country nearly 100 million populations. (Agence France Presse 2014). As early as 2012, Dr. Gerardo Sicat, noted economist and the first director-general of the National Economic and Development Authority, warned that the electricity problem in Mindanao has been a crisis waiting to happen. In a paper he wrote, Dr. Sicat put the blame squarely on the government, which he said did not pursue the series of long term actions required to solve the power development problems of Mindanao. Dr. Sicat said there was no effort to connect the Mindanao grid to the Luzon-Visayas grid, which would have accomplished an integration of the grid system of the nation. Mindanao’s power base load was not increased sufficiently, and government-run power plants were not privatized, following the logic of EPIRA (Electricity Power Industry Reform Act). He considered as counter-productive government’s decision to use power barges to ease the shortage. The generation costs of electricity of these barges which depend on diesel are more than three times those of hydroelectric power, Dr. Sicat said. The government has done little since Dr. Sicat shared his thoughts on the looming power crisis. Now that the crisis looms larger than ever, the Aquino administration is still groping for solutions. (www.ManilaTimes.net 2014) The National Grid Corp. of the Philippines (NGCP) placed the power situation outlook for Mindanao yesterday at a shortage of 134 megawatts from the peak of 1,128 MW to the actual supply of 994 MW. The daily power outage in key areas such as Zamboanga City, Cotabato City, General Santos City and Cagayan de Oro City lasts from five to 10 hours. In Davao City, a two-hour rotating blackout has been implemented. The power shortage is also attributed to the shutdown of the coal-fired power plant of Steag State Power Inc. (SPI) based in Misamis Oriental with its two 150-MW turbine generators still undergoing restoration. SPI contributes 300 MW to...

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