One particular comment has sparked today's discussion: the feasibility of interconnecting islands for electricity.
Interconnecting islands for electricity may seem desirable for enhancing energy efficiency and reliability, but it may be paradoxically utterly wrong today.
Smart use of funds
One of those who contacted me pointed out that the Mindanao-Visayas Interconnection Project was worth $950 million. A more efficient use of the money is to build about 900MW of power plants — 450MW in Mindanao and 450MW in Visayas. This will bring generation closer to the loads, avoiding congestion on transmission lines between generators and loads.
These generation assets will be more than the capacity currently needed on the island of Panay. By building an interconnection project, the consumers will pay the unnecessary increase in transmission charges (as well as transmission energy losses). The generation projects would have eliminated congestion issues and made these islands more resilient at a lower cost.
This idea of interconnecting islands is about the economics of where to locate generating power plants.
Challenges of interconnection
The interconnection I undertook during my time looked at the economics of developing 700 MW of geothermal power plants on an island whose demand was only 50 MW.
As we were faced with a power crisis, the question was: should we build coal-fired power plants on the islands of Luzon, Cebu, Negros, and Panay, or should we export the geothermal power? With Malampaya, the question was: should we draw the gas from Palawan, where the power plants would be built, and connect the islands with submarine cables?
Connecting the islands with Leyte had one major downside: reliability. This was starkly evident in the experience of Bohol and Panay. Simply, Bohol and Panay are not only at the end of NGCP's transmission lines but also do not have enough generation capacity to back up the grid. This creates a risk of cascading failures rather than localized issues, undermining the intended benefits of interconnectivity.
Let's take the case of the Mindoro-Batangas interconnection. The Batangas-Mindoro Interconnection Project (BMIP) is estimated to cost P90.7 billion. With this amount, Mindoro can build 1,500 MW of conventional power. Mindoro's peak demand as of 2023 was not more than 100 MW. According to the local utility, the island expects to grow at 7 percent a year. The 1,500 MW can supply the island reliably for the next 50 years!
Shaping a sustainable energy future
Today's Distributed Energy Resources (DERs) allow the generation of power nearest the load centers, making it more reliable and less costly. Artificial intelligence (AI) makes the energy management system operate the DERs more efficiently and use renewable energy. Essentially, this is bringing power to the people.
It's time to reevaluate the interconnection business and consider more cost-effective alternatives. Let's take a stand and steer the future of our energy sector in a more sustainable direction.
Mr. Delgado has served as Chief Executive Officer (CEO) of various firms ranging from banking, power, and advisory services for over 40 years.
