Powering the future: Promoting energy for inclusive growth

ARSENIO M. BALISACAN, PhD Secretary of Economic Planning

National Economic and Development Authority

EPDP Conference 2016 13 January 2016 | New World Makati Hotel

Takeaway

• The Philippines has become one of the fastest-growing economies in Asia

• But it is important to sustain rapid growth and make it inclusive

• Infrastructure development is key to achieving inclusive growth

• The issue of providing energy access to all can be broken down into: availability, quality, affordability, compliance to SDG

• The goal of being a high-income country by 2040 can be met with the proper infrastructure support, especially for energy

2

Philippine growth from 2010 to 2014 is among the

highest in Asia — no longer the “sick man” of Asia.

Source: WB 3

0

1

2

3

4

5

6

7

8

9

10

1970 -1979 1980 - 1989 1990 - 1999 2000 - 2009 2010 - 2014

GD

P g

row

th (

ann

ual

%)

Average growth of GDP per decade

Indonesia

Malaysia

Philippines

Singapore

Thailand

Vietnam

2015

2016

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

GDP in 2000 billion Php, 1960-2016

The Philippine economy is on a higher growth

trajectory since the beginning of the current decade.

Real GDP growth

6.2% (2010-2014)

6.1% (2014)

7.2% (2013)

6.8% (2012)

Source: PSA

Structural break of potential real GDP at around 2009

4

Growth-enhanced fiscal space has allowed major investments in

infrastructure, with spending more than tripling...

National Economic and Development Authority

215.7 306.9 346.2

595.8 766.5

2

2.7 2.7

4.3

5.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

2012 2013 2014 2015 2016

% o

f G

DP

in B

illi

on

Pe

sos

Actual (2012-2014)/Program(2015)/Proposed(2016)

Ratio to GDP (rhs)

Public infrastructure spending, Billion Php and % of GDP

Source: Department of Budget and Management Note: 2012 to 2014 - Based on actual GDP and infra spending 2015 – Based on 2016 BESF Program spending 2016 – Based on 2016 BESF Proposed spending

“Lost decade” in 2000s owing primarily to low income growth and to the high inequality of access to employment & social development opportunities.

Source: WB

0

10

20

30

40

50

60

70

80

90

Poverty headcount ratio at $1.25/day, PPP (% pop.)

EAP (developing only) Indonesia Philippines

Thailand Viet Nam China

6

However, …weak performance in

poverty reduction relative to the

country’s neighbors…

• Continue addressing key infrastructure constraints

• Maintain high levels of public investments in human

capital, particularly in health, education, and social

protection

• Invest in disaster resiliency

• Deepen policy and institutional reforms toward

substantially improving the business climate

7

Lesson: we need to sustain rapid

growth

Infrastructure: There have been improvements in the overall quality of

infrastructure, but we’re still lagging far behind ASEAN counterparts.

Infrastructure ranking (2011-2015)

Source: WEF Global Competitiveness Report 2011-2015

8

2011 (142

economies)

2012 (144

economies)

2013 (148

economies)

2014 (144

economies)

2015 (148

economies)

Malaysia 26 32 29 25 24

Philippines 105 98 96 91 90

Thailand 42 46 47 48 44

Indonesia 76 78 61 56 62

Access to energy for all as a

strategy for inclusive growth

• Availability

• Quality

• Affordability

• SDG-”compliance”

Availability: Household Electrification Status

Accomplishments Target

2011 2012 2013 2014 2015 2017

Household (HH) Electrification Level (%)

74 77 79 81 88 90

HH with electricity (‘000)

15,184 16, 114 16, 943 17, 658 18, 896

Survey Question: How would you assess the quality of the electricity supply in your country (lack of interruptions and lack of voltage fluctuations)?

1 = insufficient and suffers frequent interruptions; 7 = sufficient and reliable

Source: EPDP, World Economic Forum, Global Competitiveness Report, various years.

Rank Score Rank Score Rank Score Rank Score

PHILIPPINES 82 4.2 101 3.4 98 3.7 87 4.2

Cambodia 117 2.5 112 3.1 105 3.6 110 3.0

Indonesia 92 3.9 97 3.6 93 3.9 84 4.3

Malaysia 31 5.8 40 5.7 35 5.9 39 5.7

Thailand 43 5.5 42 5.7 44 5.5 58 5.1

Vietnam 104 3.2 98 3.6 112 3.1 88 4.2

Total surveyed

Country

144

2007-2008 2009-2010 2011-2012 2013-2014

134 139 144

Quality

Affordability

Residential Industrial

Source of basic price data: Philippines MERALCO; Indonesia- PLN; Thailand-EGAT, MEA; Malaysia- MEIH Stat; Singapore- SingStat, EMA and CPI- WorldBank

0

0.05

0.1

0.15

0.2

0.25

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

in US$/kWh

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

in US$/kWh

0

5

10

15

20

25

30 Residential Commercial IndustryUS¢/kWh

Source: ACE as Compiled by IEEJ (2013); from Del Mundo (ppt during 2016 EPDP conference)

Philippines’ electricity price is almost twice of the average price of the Region

ASEAN Power Rates (2011)

0

1

2

3

4

5

6

7

8

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

toe/hab

Total Energy Consumption Per Capita

Indonesia Malaysia Philippines Singapore

Thailand Japan China South Korea

0

2000

4000

6000

8000

10000

12000

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

kWh/cap

Electricity Consumption Per Capita

Indonesia Malaysia Philippines Singapore

Thailand Japan China South Korea

Source: EPDP, Enerdata

Power consumption has been increasing, but still

below consumption of our neighbors.

The poor pay a high price to meet their

needs for energy

Average Poorest quintile

Quintile 2 Quintile 3 Quintile 4 Richest quintile

Share of electricity, gas, fuels in the budget

7.0 7.2 6.9 7.2 7.4 6.7

Source: FIES 2012

Impact of electrification on

household welfare

Source: Chakravorty, Emerick, and Ravago EPDP paper “Lighting up the last mile: The costs and benefits of extending electricity to the rural poor” (today’s presentation).

Ensure universal access to affordable,

reliable and modern energy sources

Increase substantially the share of

renewable energy in the global energy mix

Double the global rate of

improvement in energy efficiency

Enhance international cooperation to facilitate

clean energy research and technology

Expand infrastructure and upgrade technology for supplying modern

and sustainable energy services for all in developing countries

SDG-compliant

0

5

10

15

20

25

30

35

40

45

50

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

% Share of Renewables in Electricity

Capacities

Indonesia Malaysia Philippines Singapore

Thailand Japan China South Korea

0.95 1.81

4.04

6.5 7.46

9.08 9.69

11.61

0

2

4

6

8

10

12

14

tCO2/cap C02 per inhabitant, 2014

The Philippines’ share of renewable energy has been the highest in the

region since 1991. In 2014, RE share stands at 33%. At the same time, the

country has low CO2 emissions.

0.24 0.26

0.47 0.58

0.96 1.02 1.17

1.7

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

kCO2/US$05 C02 intensity to GDP, 2014

Source: EPDP, Enerdata

0%

20%

40%

60%

80%

100%

Luzon Visayas Mindanao

Installed Capacity by Grid, by Source, 2015

Oil

Coal

Renewables

Natural Gas

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Luzon Visayas Mindanao

Expected Capacity Mix, 2019

Oil

Coal

Renewables

Natural Gas

Natural Gas, 2,862 , 15%

Renewables, 6,138 , 33%

Coal, 5,844 , 32%

Oil, 3,608 , 20%

Installed Capacity, by Source, 2015

Natural Gas, 4,012 , 17%

Renewables, 6,783 , 29%

Coal, 9,261 , 39%

Oil, 3,639 , 15%

Expected Capacity Mix, by Source, 2019

Source: EPDP, DOE

The goal is to attain “high income” status by 2040

30,000.00

25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

- 1980 1987 1994 2001 2008 2015 2022 2029 2036 2043 2050 2057 2064 2071 2078

PH past (1980-2009) PH future (Daang Matuwid)

PH future (Daang Tiwali) PH present (2010-2014)

GD

P p

er

cap

ita

(in

cu

rre

nt

USD

)

2057

South Korea (2014)

PH future (Strong growth)

2043 Rich-country threshold

PH future (Weak PH present (2010- growth)

2014)

Source: Ravago, Fabella, Alonzo, Danao, and Mapa Filipino 2040 Energy: Power Security and Competitiveness (EPDP presentation)

With good governance and good economics, we are confident that we can achieve sustainable and inclusive growth in 2016 and beyond

30,000.00

25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

- 1980 1987 1994 2001 2008 2015 2022 2029 2036 2043 2050 2057 2064 2071 2078

GD

P p

er

cap

ita

(in

cu

rre

nt

USD

)

2057

South Korea (2014)

PH future (Strong growth)

2043 Rich-country threshold

PH future (Weak PH present (2010- growth)

2014)

From Elsevier: http://store.elsevier.com/Sustainable-Economic-Development/isbn-9780128004166/ From Amazon: http://www.amazon.com/Sustainable-Economic-Development-Environment-Institutions/dp/0128003472 Online version: http://www.sciencedirect.com/science/book/9780128003473

Thank you!

23

Copy will be uploaded in EPDP’s website

http://www.upecon.org.ph/epdp/

Powering the future: Promoting energy for inclusive growth

ARSENIO M. BALISACAN, Ph.D. Secretary of Economic Planning

National Economic and Development Authority

EPDP Conference 2016 13 January 2016 | New World Makati Hotel