Product Market Study

Electricity

According to the Global Energy Statistical Yearbook, global electricity consumption per capita
and global electric production per capita has been generally increasing through the years as seen in
Figure 1.

Global electricity production and

consumption per capita from 2010 to
2016
3500 Production
Electricity (kWh per capita)

3300 Consumption
3100
2900
2700
2500
2010 2011 2012 2013 2014 2015 2016
Year

Figure 1. Global electricity production and consumption per capita from 2010 to 2016

A small decline was experienced in 2015 because the global coal consumption fell by 1.8% in
2015 according to the BP Statistical Review 2016. This decline is due to the retirement of several coal-
fired power plants in China and USA since natural gas, nuclear power, and renewable energy were used
as replacement. This action translated to a 12.7% decrease in coal consumption in USA, and a 1.5%
decrease in China, which are two of the major coal-sourced electricity producers ("Global Coal
Consumption Fell in 2015; Oil’s Market Share Rose to a 16-Year High - IER", 2016).

Electric production remains greater than consumption because some sources of electricity such
as solar, wind, and hydro are unreliable, thus there is a need to produce more electricity from other
sources which causes the supposed surplus. It should also be noted that changes in electricity
generation do not directly reflect changes in electricity consumption and vice versa as both are also
affected by changes in the supply and prices of the different sources of energy used production and by
changes in electricity imports and exports ("Electricity production, consumption and market overview -
Statistics Explained", 2017).

An analysis of the increase in power production comes from the idea that electricity is the
backbone or the key driver of a nation’s progress. An increase in a nation’s population tends to bring
about an increase in the energy demand and consumption. However, factors such as raw material prices
and supply also affect the energy production and consumption (Marketrealist.com, 2014). Figure 2
shows the relation of the global population growth to the power consumption growth. Although the
population growth rate is almost constant through the years, the electricity production and
consumption growth rates vary due to the previously mentioned factors. Nevertheless, the electricity
production and consumption growth rates follow the same trend, and it has now increased in 2016.

Population, electricity production, and

electricity consumption growth rates
from 2010 to 2016
2.5

2
Population Growth
Growth Rate

1.5

1 Electricity Production
Growth
0.5
Electricity Consumption
0 Growth
2011 2012 2013 2014 2015 2016
-0.5
Year

Figure 2. Population, electricity production, and electricity consumption growth rates from 2010 to 2016

Taking a look at the regional segmentation of the global data in Figure 3 and 4, we could see
that Asia-Pacific Region has the highest electricity consumption and generation out of all the regions of
the world. This is due to the large number of coal-fired power plants present in China alone.

Global Electricity Production by Region

from 2010 to 2016
30000
Electricity Production (TWh)

25000 Middle East

20000 Africa
Pacific
15000
Latin America
10000 CIS

5000 Europe
North America
0
2010 2011 2012 2013 2014 2015 2016 Asia
Year

Figure 3. Global Electricity Consumption by Region from 2010 to 2016

 Global Electricity Consumption by Region
from 2010 to 2016
25000
Electricity Consumption (TWh)

20000 Middle East

Africa
15000 Pacific
Latin America
10000
CIS
5000 Europe
North America
0
2010 2011 2012 2013 2014 2015 2016 Asia
Year

Figure 4. Global Electricity Consumption by Region from 2010 to 2016

In the manufacturing process of electricity, after power is generated it would be transmitted

and distributed towards the users. Looking at the country as a whole, the data from the Department of
Energy shows that the total power generation in the Philippines is balanced by the total power
consumption, as seen in Figure 5, indicating that there is no power shortage if both generation and
consumption are viewed as that of the whole nation. Power shortage occurs when generation is less
than consumption, while power surplus occurs when generation is greater than consumption. However,
when generation and consumption are viewed per grid, it would be seen that power shortages do occur.

Total Electricity Generation and Total

Electricity Consumption in the
Philippines from 2011 to 2015
85000

80000
Power (GWh)

75000
Total Electricity
70000 Generation
Total Electricity
65000 Consumption
60000
2011 2012 2013 2014 2015
Year
 Figure 5. Total Electricity Generation and Total Electricity Consumption
in the Philippines from 2011 to 2015

As seen in Figure 6, Mindanao grid’s production is offset by its consumption, but it should be
noted that unreliability of its plant sources causes shortages in this grid. The Luzon grid supposedly
experiences power shortage, while the Visayas grid experiences power surplus.

Electricity Generation and Electricity

Consumption in the Philippines per grid
from 2011 to 2015
70000
60000
50000 Luzon Generation
Power (GWh)

40000 Luzon Consumption

30000 Visayas Generation
20000 Visayas Consumption

10000 Mindanao Generation

0 Mindanao Consumption
2011 2012 2013 2014 2015
Year

Figure 6. Electricity Generation and Electricity Consumption in the Philippines

per grid from 2011 to 2015

Even if the grid data shows this, power outages are not that frequent in Luzon because the Luzon and
Visayas grids are connected to each other. The connection is the HVDC Leyte–Luzon which is a high
voltage direct current transmission link between geothermal plants in Ormoc, Leyte and Naga,
Camarines Sur. This link aims to feed the grid in the Manila region where the industrial, commercial, and
residential consumption sectors are highly concentrated. The current administration has also stated
plans of heavily integrating the Mindanao grid to the Luzon-Visayas grid since the former is heavily
dependent on hydroelectric power plants which are known to be unreliable (SunStar, 2016).

With the growing electricity consumption and population, there is really a need to generate
more electricity. Aside from this, increasing power consumption increases the gross domestic product
(GDP) as given by the GDP equation. Consequently, electricity supply can be boosted by reducing costs
of production, enabling economic activities, improving agricultural and industrial productivity, or
increasing investment. An increase in GDP allows for investment in technologies and equipment that
would make processes more efficient, thus increasing power generation (Eldis.org, 2017). In Figure 7,
the growth of GDP is plotted against growth of power generation, and the growths from 2011 to 2012,
and from 2013 to 2014 are similar in trend. With this, increasing electricity production will be beneficial
to the country.
 Gross Domestic Product Growth vs Total Power
Production Growth in the Philippines
8

6
Percent Growth

4
Power Generation
3
GDP
2

0
2011 2012 2013 2014 2015
Year

Figure 7. Gross Domestic Product Growth vs Total Power Production Growth

in the Philippines from 2011 to 2015

Power generated by power plants enter the grid, and move through a complex system of
electricity substations, power lines, and transformers until it reaches the end-user. Local grids are
usually interconnected for reliability and commercial purposes. This forms larger networks and
enhances the coordination and planning of power supply.

Origin of the electricity that consumers purchase varies. Some electric utilities generate all of
the electricity that they sell using the power plants they own. Other utilities purchase electricity directly
from other utilities, power marketers, and independent power producers or from a wholesale market
organized by a regional transmission reliability organization.

The electricity that power plants generate is delivered to customers over transmission and
distribution power lines. For long distances, high voltage transmission lines are used to carry electricity.
Higher voltage electricity is also more efficient and less expensive for long distance electricity
transmission. Conversely, lower voltage electricity is safer for short distances such as usage in homes
and businesses. Transformers at substations either increase or decrease voltages to adjust as needed
(NGCP, 2017).

In the Philippines, transmission is done by the National Grid Corporation of the Philippines
(NGCP). NGCP has the crucial role of connecting power generators from power plants to distribution
utilities in order to deliver electricity where it is needed. NGCP also acts as a system operator and
balances the supply and the demand of power to maintain the electricity quality through the grid. NGCP
operates on 21,000 circuit kilometers of lines, 20,000 transmission towers, and 140 substations.
 It is also the task of NGCP to ensure that the transmission assets of the country are in optimal
condition to ensure that electricity transmitted is safe, reliable, and of high quality. Regular inspection
and repair of lines and substations, and clearing of obstructions are done to fulfill this.

NGCP’s networks serve as the pathway for electricity to travel from the power station to the
distribution utilities and electric cooperatives until the electricity consumers. As of 2012, there are a
total of 19 private-investor owned electric distribution companies in the Philippines, and a total of 120
cooperatives recognized by the Energy Regulatory Commission. These companies and cooperatives are
in charge of distributing electricity to the end-users. They are localized and specific to the grid that they
are located (Eia.gov, 2016). In Metro Manila, Manila Electric Company (Meralco) is the only electric
power distributor, and yet it is the largest distributor of electricity in the Philippines.

Since the passing of the EPIRA Law, electric bills have been mandated to present an unbundled
list of charges and service costs. Generation charge refers to the cost from the cooperative’s purchase of
power from its suppliers. In Negros, where our plant location will be, which will be discussed in the next
section, the generation charge is Php 5.38 per kilowatt-hour.

References
Eia.gov. (2016). How Electricity Is Delivered To Consumers - Energy Explained,
Your Guide To Understanding Energy - Energy Information Administration.
Retrieved 2 October 2017, from
https://www.eia.gov/Energyexplained/index.cfm?page=electricity_delivery

Eldis.org. (2017). How does increased electricity supply and usage affect economic
growth? – Eldis. Retrieved 2 October 2017 from http://www.eldis.org/go/topics/resource-
guides/climate-change/key-issues/pro-poor-electricity-provision/how-does-increased-electricity-supply-
and-usage-affect-economic-growth#.WMO7D9KGPDd.

Electricity production, consumption and market overview - Statistics Explained. (2017). Ec.europa.eu.
Retrieved 2 October 2017, from http://ec.europa.eu/eurostat/statistics-
explained/index.php/Electricity_production,_consumption_and_market_overview

Global Coal Consumption Fell in 2015; Oil’s Market Share Rose to a 16-Year High - IER. (2016). IER.
Retrieved 2 October 2017, from http://instituteforenergyresearch.org/analysis/global-coal-
consumption-fell-2015-oils-market-share-rose-16-year-high/

Marketrealist.com. (2014). Why electricity demand is linked to GDP - Market Realist.

Retrieved 2 October 2017, from http://marketrealist.com/2014/10/why-electricity-demand-is-linked-to-
gdp/

NGCP (2017). Retrieved 2 October 2017, from https://www.ngcp.ph/operations.asp

SunStar. (2016). DOE: Mindanao grid connection with Luzon-Visayas grid priority.
Retrieved 2 October 2017, http://www.sunstar.com.ph/manila/local-news/2016/07/20/doe-mindanao-
grid-connection-luzon-visayas-grid-priority-486418