Integrate the Informal Economy

Squatters have gained some kind of legitimacy as a result of the Philippines’ political process. In exchange for electoral support, many mayors protect squatters in their municipalities from demolition.  Economically, however, squatters and others who take part in the ‘informal economy’ are far from being integrated. This means that the country does not get the maximum possible benefit from their economic activities.

Rent
It may seem strange to collect rent from squatters. Local Government Units (LGUs) don’t collect rent from those squatting on government land because they fear that by doing so, squatters acquire some sort of right to stay.  They also feel that this is an added burden on the poor people.  Reality does not support the latter argument. Gangs regularly collect ‘rent’ from squatters, and the people readily pay them. They have the money to pay rent.

Collecting rent does not bestow renters a right to stay indefinitely. People who rent rooms or apartments can be told to leave, and so should people who rent land. The municipal government could make it clear that the land could still be used for another purpose, and that it will give something like a 3-month notice if it decides to do so. Collecting rent, however, changes the status of people from ‘squatters’ to renters; and this makes it easier to deliver other services to the area.  Part of the rent collected could also be shared with the local barangay (perhaps 1/5 of the rent). They could help ensure that nobody else collects rent from the people. The share of the rent could partly be used to pay for part-time barangay tanods to help police the neighborhood (who, among other things, would make sure that the gangs don’t collect ‘rental’ money anymore).

Vendors
Street vendors of all types should be licensed. And the license fee should be rather high; after all, it would not be possible to collect VAT or business taxes from them. With the license, the vendors will no longer be harassed by the police. Corrupt police regularly milk vendors, and if they don’t pay they are arrested. The license fee will be welcomed by vendors, just to avoid paying the informal tax to the police. Licensing vendors also clears the way for the government to enforce health standards for food sales and some other regulations.

Public Parking
Many people suffer from the hassle of street kinds forcing their ‘Watch Your Car’ services on them. If you don’t pay the kids, something bad may happen to your car. In Cebu City, the government issues parking ticket booklets, which are sold through street kids. The kid who sold you the parking ticket also watches over your car; because the moment your car leaves, another car would need to be sold a parking ticket. The city gains money from this arrangement, and so do the street kids. And the car owners at least have a structured way of making sure that someone is watching over their car. I think that this is an example that other cities could emulate.

Water and Electricity
Extending water and electricity services to slums helps to improve the quality of life in slums, and greatly reduces illegal taps on water and electricity lines. But measures need to be made to make this work well. The barangay, or a barangay-level organization, should ‘buy’ electricity and water from the wholesale providers and distribute these within a given slum area, and collect the payments. The cost of illegal taps or leaks will effectively be distributed among neighbors, providing people with an incentive to report illegal taps, and to demand action against these.

EVs Are Good for the Environment

I came across a comment in FB where the writer said that EVs are not really good for the environment. He said that we are in effect generating energy at a distance, and that could not be good, since there are inefficiencies in energy transport. Then, he said that EVs only transfer the source of pollution from gasoline to coal, and the latter is worse.

Well, I disagree with these positions, and here’s why:

Generation at a Distance
True, there is energy lost while transporting electricity from the power plant to your home or car, but we should also look at the energy savings we get from not having the energy source at every home or car. It is like the case where each home will have a diesel generator. This is not efficient, even though the transport cost for the electricity will be zero. Why? Because, for one, fuel needs to be brought to each and every house (and that costs energy). And also, the generator will be one which will produce electricity for your peak capacity; meaning that when you use less electricity, your generator will be running below its capacity, and will be quite inefficient.

With a car, it gets even worse. The car has to carry itself, and when the motor is set for your maximum power needs, it will be quite heavy. And this means that more power will be needed to carry both the rest of the car plus the engine. A hybrid or an electric vehicle has a much lighter engine. Even a hybrid will be lighter than an ordinary car because its engine is smaller – it will be built to provide the average power needed.  The battery will provide the necessary boost to power at times, but the rest of the time, the battery will be loading up, and the car will run using a lot less power. And since the engine of a hybrid will continue running at a steady speed, it will be quite efficient – any extra electricity produced will simply be stored. And using the engine always at its most efficient means that there will be less soot output due to unburned gasoline.

And then, there is the regenerative braking which only hybrids and EVs have. When you brake, using a normal car, the kinetic energy is merely turned to heat. When braking with a hybrid or EV, the kinetic energy is stored as electricity, which you could use later.

From Gasoline to Coal?
With regards to the accusation that we will be mainly using electricity from coal to run EVs, well he has more of a point. But the objection here is that this is quite a static way of looking at things.

The first wave of EV owners will not overload electricity systems, they will merely “level it out”. They will mostly recharge their cars at night, when the rest of the grid doesn’t use too much electricity; thus, they will not cause the electricity utility to build new capacity just yet. However, as time goes on and there are more EVs, then daytime electricity will be used more often, with people recharging at work or while shopping. This will be the time when extra generating capacity will be needed. But then, the question will be: what will be the source for this new electricity? Well, chances are it will not be coal. It will most likely be something like a natural gas or fuel oil plant, which are faster to set up, and with less delays due to environmental hassles.

Grid electricity is a combination from all kinds of sources: from solar and wind, to hydro, nuclear, geothermal, natural gas, fuel oil, and then coal. The question is not whether an individual EV will use up more coal or alternative energy.  But rather if the coming of EVs in general will lead to more coal plants or to more wind, solar, hydro or geothermal plants. I think the latter will be true.

And then there’s the battery which EVs use are also used for solar installations. It’s the same technology. This means that as EVs get manufactured in scale, the price of batteries will go down, and that lower price will affect both the price of cars and the price of solar power. Thus, EVs will indirectly cause the price of solar electricity to go down. And of course, lower prices for solar power will mean that more people will install solar panels.

And there is also the matter of having a smart grid. By smart grid, I mean having software and regulators that optimize the flow of electricity, that is capable of delaying some uses when there are peaks, that is capable of storing excess capacity when needed.  An economy with many EVs will really need a smart grid to cope with the varying loads caused by the charging of autos. The same smart grid will also be needed to handle alternative energy – where the variability will not only be on the use of electricity, but also on its generation. This is the same technology, which I suspect will be put in place first to handle EVs, but which will serve both EVs and alternative energy management.

EVs in use in Europe can be set to only use “clean energy”.  Here, consumers have a choice of electricity suppliers. I expect that buyers of EVs will also choose to tap electricity that is “green”, for their household use. Since most EVs will probably be charged at home (at the beginning, at least), this means that most EVs will be running on green electricity also from the beginning. Of course, in the US or in developing countries, you may not have the chance to choose for green electricity. But perhaps this is something that your electricity net should also do.

EVs will promote and stimulate the growth of alternative energy. We won’t see this right away, or in such a dramatic way, but it will happen. Look from it from another way: how else will society shift from “dirty” gasoline to alternatives, except through EVs? It will happen, and that is going to be good for the environment.

Solar Cheaper than Meralco in April

Don’t look now: with the astronomisch prices for electricity in the Philippines,  solar became cheaper than electricity for commercial or industrial applications (in comparison with Meralco rates) in April. This is what is called “grid parity”, when solar costs the same as electricity from the grid. In May, the Meralco prices dipped a bit, making it cheaper again for commercial applications. So far, Meralco prices are still cheaper than solar for residential applications; but the difference there is also closing.

Let us go into this a bit more.

We’ll use a measure for Solar Energy Prices in the US to come up with the cost of solar power in $cents/KwH. The index is based on a monthly survey of US solar energy installation companies, with an assumption of 5.5 hours of average sunlight, a US location, and 5% interest over 20 years. The price for solar for Residential includes batteries; but the price for solar for Commercial and Industrial do not include batteries (and are thus grid connected).
The index is a good indicator for solar installation prices in the Philippines. The cost of the solar equipment may be a bit higher in the Philippines, but at the same time we have more sunlight than the US and the cost of labor is lower. So all in all, US prices would either be the same or a bit higher than that of the Philippines.

Using the index, and computing for a Php 45: $1 exchange rate, the figures for April are:

• Residential: Php15.68/KwH
• Commercial: Php 11.16/KwH (for 50+ KWs)
• Industrial: Php 8.70/KwH (for 500 + KWs)

Let us compare to this with the prices for electricity from Meralco:

• February: Php 10.20/KwH
• April: Php 13.28/KwH

Meralco says that their prices for May will go down to the level of February.
From this, we could see that Solar for Industrial uses is cheaper than Meralco power even in February. And, that Solar for Commercial use is cheaper than Meralco power in April, but not in February. But since these prices are for grid connected electricity (thus, no batteries), the companies that decide to install solar will continue to receive electricity from the grid.

The trend is clear, though. The cost of solar installations keep falling, from month to month; while Meralco prices keep rising, though not in a continuous straight line. The difference between the two, even for Residential consumers, will surely close as the months go on.

So there is good news that comes out of the bad news over the high cost of electricity in Manila. The electricity price is so high that it has reached grid parity for solar. But what does this mean? Well, not much immediately. Companies will not go out immediately on the basis of this, and buy solar panels. Why not? First of all, they are not sure if the high prices of April will be repeated. Perhaps the government will do something to lower prices. Or something like that. Then, there is also that installing solar panels cost so much money up front. It is as if you buy 20 years worth of telephone load all at once – not too many people will do that. And the third reason is that most companies will not have enough roof space for all the solar panels that they would need to cover their needs. So, most companies will opt to wait. But for companies who are more daring, solar energy will not really cost them more than grid electricity, so they could actually shift without suffering increased costs.
But the prices are getting more and more in favor of those who will install solar panels. If the government would like to help things along, it does not need to implement feed-in tariffs like other countries. What it  would need to do would be to : first, offer a partial rebate on the cost of installing solar panels. The partial rebate could be as low as 20% of the cost of installing solar panels – and with this, even Commercial applications will be cheaper than grid electricity.
And, the government can also help to provide loans for alternative energy projects. One way of doing this will be by requiring banks to have a minimum portion of their loan portfolio (say, 5%) for alternative energy projects.

These steps will surely encourage some companies to install solar panels, and perhaps help the country go through its “shortages” of electricity, especially during the dry season.

Electric Cars – coming soon to the Philippines

Electric cars, mostly of the hybrid type (i.e. they have both gasoline and electric engines) is on the verge of entering the mass market. Many car producers have unveiled plans to produce a hybrid electric car by as early as 2010.  Recently, electricity distributors in the Netherlands have set up a project to install 10,000 recharging stations (for electric cars) throughout the country. This trend is driven by the many factors: the drive to lower carbon emissions, high oil prices (or the threat that oil prices will rise again), technological breakthroughs in electric engine and battery design…

This trend will most certainly affect the Philippines too – in as soon as a year or two from now. Perhaps it then not too early to look into how electric cars could impact the country.

Relatively Fast Adoption
People who have cars in the Philippines mainly use them for short distances, usually within the city or metropolitan area. The first wave of hybrid electric cars will have a range of 200 kilometers on a full charge. Already, this would be more than enough for most cars. In addition, the electric car is quite suited to the stop-go traffic in the city, being a lot more economical than oil-based cars.

Already, Filipinos are starting to get used to having electric vehicles. The solar jeepney in Makati and the E3 tricycles in Taguig show that public transportation operators are open to having electric vehicles.

An important factor that would affect the rate of adoption of hybrid electric cars would be its cost.  The cost of the electricity needed to charge the cars would be much less than that of the gasoline or diesel needed by ordinary cars.  But the price of the car itself should not be too high as to negate the advantage of the cheaper fuel. Hopefully, if Chinese companies are able to produce hybrid electric cars that are cheap – or at least not much more expensive than ordinary cars -Philippine auto buyers will buy a lot of them.

Effect on Electricity Supply
The adoption of electric cars, if massive enough, would have an effect on the overall supply of electricity.  There would be a need to rapidly build more capacity in the electric grid, to be able to cope with the increased demand. If the cars are recharged mainly overnight, the effect would be somewhat lesser, since it would not burden the electricity grid during the daytime peak hours. However, if cars are recharged mainly during the day – while being parked near workplaces – then it would really increase the burden on the grid.

The price of electricity will increase in response to the increased demand. This in turn will help to bring alternative sources of energy nearer the break-even point, where it would be competitive with fossil-fuel sources of electricity. And the increased price will also force consumers to conserve electricity.

There is a danger that the rapid adoption of electric cars will result in electricity outages. And that new fossil-fuel electricity generating plants may have to be built to cope with the increased demand. But since electric cars are more efficient than traditional cars, the net effect will be to reduce overall fossil-fuel consumption.

Less Pollution
Electric cars do not pollute during operation. The pollution is made in the electricity generating plant instead. And the pollution will depend on how the electricity is generated – naturally, a fuel-oil  generator will still emit pollution, while wind or hydro generators will not.
But since electric cars operate cleanly, it means that the pollution in the streets and the cities will be less. There would be less fumes from traffic, our clothes will get less dirty, noise levels will be less, etc.  And since the pollution is generated in the electricity generating plants, anti-pollution measures could be more easily put into place.

See also:   Electric Cars