e-Vehicles in the Philippines

I am writing this in response to a discussion with a friend who saw some e-Trikes in Mandaluyong.

The e-Trikes program is a program of the Department of Energy, called (prepare for this) "Market Transformation through Introduction of Energy Efficient Electric Vehicles Project (e-Trikes)." For brevity, it is called the e-Trike Project.

The US$504-million (roughly, P21.672-billion) project was approved by the NEDA Board in 2012. The ADB Loan component was US$400 million, and an additional grant was US$5 million (for solar charging stations). The rest is from the Philippine Government's counterpart and the Clean Development Mechanism.

The goal of the project is to replace 100,00 traditional, gasoline-fed tricycles in the Philippines with electric tricycles to reduce carbon footprint of the transport sector. The DOE also says that with the efficiency of the e-Trikes, the e-Trike operator will earn more.

Upon observation, my friend said that, considering that the e-Trikes are more expensive, they should be larger (i.e., even larger than the one now, which is larger than the traditional ones) to accommodate more passengers and become more profitable for the drivers.

While I do not know the price of either the gas-fed tricycles and the e-Trike, I said that e-Trikes will take on the roles of tricycles, which serve shorter distances than jeepneys. E-Trikes will transport passengers to very specific destinations, like tricycles, as against jeepneys which drive in routes. Thus, e-Trikes cannot be larger than they are now, because making it bigger will make it energy-inefficient - the motor has to carry the heavier body (which would entail more energy consumption) without any passenger paying for it.

I also added that e-vehicles, in general, are more energy and cost-efficient than gas-fed vehicles because e-vehicles do not consume* energy during idle time. Electric vehicles also have nearly higher energy efficiency on any speed, compared against gas-fed vehicles which decrease with lower speeds. Also, even if some say that e-vehicles use electricity produced from fossil fueled power plants, the power plants are more efficient in converting fuel to electricity than individual vehicles converting fossil fuel to mechanical energy. This efficiency also means less carbon emission, if at all, as e-vehicles may have zero carbon emission if the power plant is RE-sourced.

Tesla, a renown electric vehicles manufacturer, even promotes use of solar power panels at home, so you can charge your e-vehicle and have ZERO carbon emission.

Regarding income for the drivers, this is what ADB says:

A conventional tricycle needs between 5 and 7 liters of gasoline to travel approximately 100 kilometers (km), costing 250 to 350 pesos. To travel the same 100 km, an e-trike will use between 3 kilowatt hours (kWh) and 5 kWh of electricity, costing only 30 to 50 pesos. The 200 peso difference in fuel savings will help the driver pay for the cost of the e-trike.

The e-Trikes Project (and e-vehicles in general) has many advantages and promises. While its proliferation would probably mean additional demand on power generation capacities, its long-term effect of efficiency and reduced carbon emission makes it a viable replacement to fossil-fueled, energy inefficient, greenhouse and acid rain-inducing gases emitting vehicles.

Just my thoughts.

For more info about the DOE's e-Trike project, go here.


NOTE:
*In physics, it is a basic law that matter and energy are neither created nor destroyed, only transformed. For the purpose of our conversation, we use "consume" to refer to the transformation of electric energy to mechanical energy.

DISCLAIMER:

The above, and all posts in this blog, is the author's best-effort attempt to understand and communicate the benefits of the project, and is not to be used as an official source of opinion or interpretation. The below sources are provided for that purpose.

Sources:
ADB, E-Trikes - Driving Change, accessed on July 8, 2014.
DOE Website, The E-Trike Project, accessed on July 8, 2014.
Philippine Gazette, NEDA Board approves e-trike and hydroelectric power plant uprating projects, accessed on July 8, 2014.
Wikipedia, Electric Vehicles, accessed on July 8, 2014.
Tesla Website, Top 5 Questions, accessed on July 8, 2014.
NEDA Board, "NEDA Board approves six projects in infrastructure, education & agriculture,"
accessed on July 8, 2014.

Determining Price of Electricity in WESM

First and foremost, the price of electricity as paid by the customers is regulated by the Energy Regulatory Commission, as mandated by Republic Act 9136, or the Electric Power Industry Reform Act of 2001. Part of the amount customers pay is the generation charge, which itself has to be approved by the ERC. Usually, the ERC approves a formula so that distribution utilities don't need to get ERC approval every billing month.

How does the generation charge come about? A distribution utility (whether a private distribution utility like Meralco or an electric cooperative) may source its power from two main sources: its own contracted power supply (through power supply agreements with independent power producers, or IPPs) and from the Wholesale Electricity Spot Market, or WESM. While the price of the electricity a distribution utility gets from its contracted power supply is fixed (e.g., P9/kilowatt-hour for 10 years), the price of electricity the distribution utility sources from WESM fluctuates as the WESM is, well, a "spot market." Among other things, this means that its price is determined every interval of time (in the Philippine situation, every hour).

As a market, this means there are many consumers and many suppliers. Due to the technical limitation of electricity (i.e., electricity goes where the circuit leads to, not necessarily to who ordered the electricity), determination of price of electricity in WESM is based on "least-cost solution meeting demand." Here is how it works:

1. NGCP forecasts demand level (including reserve requirement and customer submitted demand in WESM) for each hour. 
2. IPPs submit their bids, including capacity and price offer (baseload and peak).
3. The bids are arranged from lowest-priced to highest-priced to determine which generator will be dispatched first.
4. The market price of electricity is determined by the price of the bid at the level of capacity (based on price bid) that addresses the demand, and all bidders (including lower price bids) will be paid that price. Those generators which priced their bid too high would not be dispatched, hence, not paid.
5. Reserve capacities dispatched will be priced based on the highest priced. 

To illustrate the determination of price and how demand level and supply interact to determine price of electricity in the spot market, you may see this online simulation. (You can play with the elements.)

In this simulation, you can see that the price of electricity in the spot market will be the price of the bid that meets the demand level. If the demand for electricity lowers, it is possible to have the price of electricity go down, because the next higher bid price will be dispatched. 

This says two things, among others:

1. For the IPPs, there is an incentive to increase operational (i.e., production) efficiency (i.e., lower the price). If you are an IPP and you bid at a lower price (presumably, because you have the operational efficiency to do so), when someone else with a higher price gets approved, the price of that higher offering IPP will be the price that will be paid to you.
2. For the consumers, there is an incentive to increase energy efficiency. The lower the demand, the lower the price of electricity that will be cleared (i.e., selected as that which meets demand).

However, as a free market, the determination of price is limited on the assumption of rational decision making to pursue the most cost-efficient level. This means that the WESM methodology of price determination is not exempt from outlier behavior of an IPP pursuing individual higher revenue by creating an artificial shortage of supply in one power plant and bidding a very high price on another, knowing that the artificial shortage will ensure dispatch of the highest price bid.

Reminder: Most distribution utilities source their power from power supply agreements, or contracts with IPPs. Usually, they get only 10% or unexpected demand from WESM, unless 1) their power supplier goes down or 2) there is an unexpected higher demand that their power supplier cannot provide.

Disclaimer: The above is an unofficial and non-technical interpretation of how the WESM works. WESM operation is a very complicated integrated process of economics and engineering. There are other rules and limitations in WESM that have not been included here. The above is just an attempt to  focus on the economic side of determining price of electricity. Corrections and comments will be appreciated.