Cebu's economic growth and impending energy crisis

Cebu, the bustling heart of the Visayas, is highly representative of the Philippines' renewed economic vitality.

With its rapidly growing economic centers, Metro Cebu is a major engine in the country’s current surge as ASEAN’s fastest-growing economy.

Cebu’s enduring reign as the country’s wealthiest province for the ninth successive year underscores its economic strength and resilience, with assets climbing to more than P200 billion in 2022.

Also, the summer months are setting in and tourist arrivals are increasing by the day.

After Manila, Cebu is the busiest point of arrival for international visitors, receiving more than 100,000 overseas tourists in January 2024 – a 59% jump from 2023.

In September 2023, Cebu recorded over 2 million international and domestic tourists, marking a 28% increase from the previous year.

Cebu welcomed 554,290 foreign tourists in 2022.

Another major growth driver, Cebu's IT-BPM industry generated a record $32.5 billion in revenue in 2022, employing over 121,000 professionals, with profound multiplier effects across Cebu's economy and society.

The real estate sector for example is booming as well with a notable increase in affordable and lower mid-income condominium units sold.

Yet, beneath Cebu’s thriving facade lies a looming challenge that threatens to dim its future: an impending energy crisis.

As a surge in tourism and other business activities fuels economic growth it also spurs a constantly increasing demand for energy – power supply upon which other essential services depend on, such as clean running water, connectivity, safety and security, and health services.

As industries thrive, so does the need for reliable energy infrastructure to sustain this momentum.

Panay Island’s protracted power outage earlier this year called attention to the vulnerability of the region’s energy infrastructure and the critical importance of taking immediate and comprehensive measures to address the issue.

A long hot Philippine summer

The El Niño phenomenon in the Philippines has been forecast to stretch through the first half of 2024.

As it stands, April to May across the country are peak electricity consumption months as mercury levels rise, El Nino or not.

The implications for Cebu are immediate, being dependent on power contributions from other regions who at this time will be equally challenged by El Nino.

A double, nay, triple-whammy as consumption rises with Cebu's increased economic activity and as hydroelectric plants are also de-rated owing to a protracted dry season.

The Department of Energy (DOE) has approved various power projects for Central Visayas, signaling a commitment to bolstering the region’s energy capacity.

Yet, the urgency of the situation demands a more localized approach for Cebu where the DOE predicts a substantial shortfall of 1,400 megawatts in electricity supply by 2026, posing a significant risk to economic stability and the well-being of its residents.

As it is, Metro Cebu with its economic hubs on hyperdrive (Mandaue City, 9% growth in 2022; Lapu-Lapu City, 13.2% growth; and Cebu City, 8.4%), accounts for half of Cebu province’s demands.

Cebu province, in turn, accounts for half of the entire Visayas region’s total demand.

Yet, Cebu is a net importer of power from neighboring islands, which makes it highly dependent on power supply transmission facilities and interconnections with Negros, Leyte, and Mindanao with contributions from Luzon as well.

The transmission facilities are subject to disruptions, with hard lessons from Typhoon Odette, making the energy security of Cebu quite fragile.

To begin with, the Visayas region already faces a precarious situation with limited reserves compared to Luzon and Mindanao – another reality highlighted by Panay's black January.

Thus, it is not a question of preference but of strategic necessity for Cebu to seek power sufficiency, security and independence.

In a recent interview aired over radio station DWIZ, Cebu Chamber of Commerce and Industry (CCCI) president Charles Kenneth Co Cebu said that Cebu faces imminent power shortages unless new plants are built.

“The NGCP (National Grid Corporation Philippines) forecasts Cebu’s power requirement is growing 7 percent a year. Maybe in the next 3-4 years, if no new power plants are built, magkakaroon na ng power shortage. This is the challenge since it also takes 3-4 years to build a power plant,” said Co.

Cebu is home to 64 percent of Central Visayas' population.

A scenario of long-drawn shortages and blackouts for Cebu will have catastrophic consequences.

The CCCI president made reference to the Cory Administration blackouts that brought the Philippine economy to its knees in the 1990s, warning that Cebu could ill afford such a "last-minute" mentality.

Indeed, if we do not secure the energy needs of Cebu now, a Cory-style energy crisis will cost the region billions of pesos in productivity, triggering shutdowns, job losses, dampening the investment climate and compromising all social services.

Cebu Governor Gwendolyn Garcia too has emphasized the importance of investing in inland baseload power plants for energy security.

While acknowledging the Mindanao-Visayas interconnection project, Garcia stresses the need for Cebu’s self-sufficiency in power to sustain its robust economy and growing population, urging immediate action rather than waiting until 2027.

The right energy mix and the way forward for Cebu

While renewables promise sustainability, their intermittent nature necessitates backup systems to ensure uninterrupted power supply, which is vital for societal and economic functions.

Gradual transitioning ensures the region and the country's economic viability, considering global GDP disparities.

All energy forms must be utilized judiciously to sustain growth and address challenges effectively.

For now, coal-fired plants remain indispensable for this stability and part of the equation or "the right mix" for the Philippines' energy security.

Under the clean energy scenario of the Philippine Energy Plan, a plan which is transitional by definition, a 50:50 mix of RE and non-RE is targeted by 2040 with 26% of non-RE to also come from go-to transitional fuel LNG.

Striking this delicate balance is pivotal for Cebu as well.

Increasing conventional power capacity alongside renewable energy investments is crucial for a balanced energy ecosystem that supports development and sustainability goals.

Critics raise objections, citing the imperative of transitioning immediately to renewable energy sources.

While the pursuit of clean energy alternatives is commendable, the reality is that renewable sources alone cannot meet the burgeoning energy demands of a rapidly developing region like Central Visayas.

As again, a diversified energy portfolio ensures a reliable and resilient power supply.

One can also argue that this gradual transition to RE under the Philippine Energy Plan is well underway, with other renewable energy projects, such as the solar plants located in Negros and Daanbantayan, Cebu.

Cebu with its thriving industries producing profound multiplier effects across society and uplifting living standards as we speak, literally needs energy to sustain its momentum.

The provincial governor’s strong support for power independence demonstrates a forward-thinking mindset in tackling the province’s energy requirements, safeguarding its ongoing development, and ensuring the welfare of its citizens and the environment.

Ensuring an energy-secure and energy-abundant future for Cebu becomes paramount.