AROUND 1.2 million households residing in off-grid areas face the risk of prolonged power outages as fuel prices rise as a result of the Iran crisis, according to transition and transaction advisory firm Climate Smart Ventures (CSV).
In the latest analysis, CSV said that the energy security of communities in off-grid areas — typically remote or island communities — is at risk because of their reliance on diesel power plants.
“If oil prices continue to escalate and the conflict drags on, this can deplete the Universal Charge for Missionary Electrification (UCME) fund used to subsidize fuel in off-grid areas,” CSV Head of Philippine Operations Matthew Carpio said.
Mr. Carpio said the upward pressure on fuel prices could lead to an increase in UCME rates, which are collected from on-grid electricity consumers.
Citing the precedent of the Ukraine-Russia war in 2022, Mr. Carpio warned that a prolonged conflict could trigger blackouts of up to 16 hours in some off-grid areas if fuel subsidies are exhausted and diesel stocks run out.
Iran, currently under attack from the US and Israel, controls the northern shore of the Strait of Hormuz, which about 20% of the world’s oil and liquefied natural gas must transit.
Mr. Carpio said increasing the proportion of renewable energy (RE) for power generation can insulate remote communities against global price shocks.
“This is a reminder why a fast RE transition is not a negotiable but a necessary hedge, especially for off-grid,” he said.
Currently, island communities and off-grid areas depend almost exclusively on power plants operated by the National Power Corp.’s Small Power Utilities Group (NPC SPUG).
About 99% of the 79 SPUG power plants operating across 70 islands run on diesel fuel, leaving them exposed to global price shocks, according to CSV.
CSV cited NPC programs, such as the Accelerated Hybridization Program (AHP), which seeks to launch hybrid plants powered by a combination of diesel, solar, and battery, as holding promise for cushioning communities from the impact of oil price shocks.
Through AHP, NPC aims to reduce diesel consumption by at least 20% in the power plants, with the end goal of fully transitioning all SPUG areas to RE by 2030.
Mr. Carpio said electric cooperatives operating in island communities and off-grid areas being serviced by SPUG plants can develop their own RE plants to reduce dependence on diesel.
He said the “rapid decline” in the cost of RE and energy storage systems has made them more competitive than diesel on a per kilowatt-hour basis, especially in off-grid locations
“With more support, transitioning to RE sources can insulate the country’s off-grid and island communities from fuel supply chain constraints, strengthen energy sufficiency, and improve the overall resilience,” Mr. Carpio added. — Sheldeen Joy Talavera
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