The cost of darkness: when brownouts become bad for business

By Janvie Soqueña- Amido

Iloilo likes to say it is open for business. We celebrate every new hotel, township, condominium, restaurant, BPO office and commercial development as evidence of a city on the rise. We court investors, applaud expansion and speak confidently about becoming one of the country’s most competitive regional economies. Yet there is something increasingly incongruous about that ambition. How do we keep telling businesses to come, invest and expand when we cannot assure them that the lights will stay on?

The rotating brownouts now confronting Iloilo are no longer minor inconveniences to be endured with rechargeable lamps and a few irritated social-media posts. When electricity disappears for hours, sometimes repeatedly within the week, economic activity disappears with it. Worse, businesses are confronting this unreliability while paying dearly for electricity in the first place. That is a particularly punishing combination: power that is expensive when available and costly when it is not.

Consider a restaurant losing electricity at seven in the evening. Two hours without power are not merely two hours on the clock; they could represent the most lucrative portion of its day. The kitchen slows or stops, air-conditioning disappears, refrigeration becomes a concern, and customers leave or decide not to come. Employees remain on the payroll, rent continues to accrue, and suppliers will still expect payment. When electricity returns at nine, the lights come back, but the dinner crowd does not.

This is why we need to stop discussing brownouts exclusively in the antiseptic language of megawatts, reserves, red alerts, forced outages and transmission constraints. Those terms explain what is happening to the grid, but businesses experience the consequences differently. Businesses experience megawatts in pesos. A baker does not contemplate reserve margins when an oven stops halfway through production. A café owner is not thinking about grid stability while refrigerators, espresso machines and point-of-sale systems become unusable. A printing shop facing a deadline does not particularly care which generating unit went offline. A convenience store worries about its freezers, while a home-based food entrepreneur worries about inventory. All of them, however, worry about how much money has already been lost.

The cruelty of the present situation is that electricity is not merely unreliable; it is expensive. If power were cheap but occasionally unreliable, businesses could perhaps absorb some of the inconvenience. If electricity were expensive but consistently dependable, entrepreneurs could at least incorporate the cost into their financial planning. What is increasingly untenable is having to contend with both simultaneously. Businesses effectively pay for electricity twice: first through the monthly utility bill, and then through diesel for generators, batteries, uninterrupted power supplies, damaged equipment, spoiled inventory, cancelled orders, idle workers and customers who walk away. That second bill is rarely quantified, but it is no less real.

The burden is also profoundly unequal. A large mall can operate industrial generators. A hotel can build redundancy into its electrical system. A large corporation can invest in solar panels, batteries and sophisticated backup infrastructure. A neighborhood bakery cannot necessarily do the same. Neither can the carinderia, laundromat, barber shop, small café, printing business, sari-sari store or home-based producer. These are the very enterprises we habitually describe as the backbone of the economy, yet they possess the least financial cushion against prolonged disruptions.

We constantly tell Filipino entrepreneurs to be resilient. It is a favorite word in development conferences and business seminars, but resilience costs money. Generators cost money. Fuel costs money. Batteries and solar installations cost money. Protecting equipment against electrical fluctuations costs money. Every peso a struggling entrepreneur spends merely keeping the business operational during a brownout is a peso that cannot be spent on hiring another employee, buying better equipment, developing a product or opening another branch. That is not investment in growth; it is capital diverted toward survival.

The implications become even more serious when we look beyond microenterprises. For Iloilo’s BPO sector, reliability is not a convenience; it is part of the product. Clients in Singapore, Sydney, London or New York are unlikely to be interested in explanations about a red alert in the Visayas grid. They expect calls to be answered, systems to remain online and contractual obligations to be met. Hospitals cannot ask patients to wait for the grid to stabilize. Hotels cannot repeatedly explain brownouts to guests and expect the experience to be forgotten. Cold-storage facilities cannot negotiate with perishable inventory, while manufacturers cannot halt production lines repeatedly without consequences.

Investors notice these things, and this may be the most consequential part of the problem. Investment decisions are not made entirely in conference halls, promotional videos and ribbon-cutting ceremonies. Eventually, someone opens a spreadsheet and begins asking less glamorous questions. How much is land? How much are wages and taxes? How expensive is electricity? How reliable is it? How much backup generation will be required? How much fuel will that consume? What is the financial cost of an hour of downtime? That spreadsheet is considerably less sentimental about Iloilo than we are.

The true cost of electricity for business, therefore, is not merely the rate printed per kilowatt-hour. It is the electricity rate plus the cost of making unreliable electricity reliable. That distinction should trouble anyone concerned about Iloilo’s competitiveness, particularly because we are building an economy that will consume considerably more electricity in the coming years. Every new condominium brings hundreds of appliances and air-conditioning units. Every hotel adds kitchens, elevators, laundry facilities and cooling systems. Every BPO office adds computers, servers and air-conditioning operating for long hours. Every new hospital, mall, factory and township adds another layer of demand. We celebrate these developments because they signify confidence in Iloilo, but buildings do not run on confidence. They run on electricity.

We cannot endlessly discuss attracting investments without asking whether the infrastructure required to sustain them can keep pace. Energy security cannot remain an esoteric conversation among engineers, regulators and power companies. It belongs at the center of economic planning. At the same time, the conversation must mature beyond finding one convenient villain whenever the lights disappear. The present crisis involves generating plants going offline, inadequate reserves, transmission constraints and mandatory load shedding when the Visayas grid cannot maintain sufficient supply. A distribution utility cannot distribute electricity that is unavailable upstream, but understanding that complexity should not become an excuse for diffused accountability where everyone points somewhere else.

If generating plants repeatedly suffer forced outages, the public deserves to know why. If transmission constraints prevent sufficient electricity from reaching the Visayas, we should know what investments are necessary and when they will become operational. If Panay lacks adequate dependable capacity, we should know what the plan is for five, ten or twenty years from now. More importantly, who is responsible for ensuring that Iloilo’s economic growth is accompanied by sufficient energy security? These questions deserve answers before the next red alert, not explanations after another brownout.

Perhaps Iloilo should also begin measuring something we almost never discuss: the economic cost of a brownout. How much revenue disappears for every hour commercial districts lose electricity? How much diesel do businesses burn because of interruptions? How many employee-hours become unproductive? How much food is discarded? How many transactions are lost? How much capital is being diverted into generators, batteries and backup systems? Then there is the most difficult number to measure: how many investors quietly choose somewhere else?

This is how competitiveness can deteriorate—not necessarily through some spectacular economic collapse, but through hundreds of decisions we never hear about. A restaurant owner postpones a second branch. A manufacturer delays expansion. A BPO company places its next facility elsewhere. An investor compares Iloilo with another city and concludes that the additional cost of electricity and redundancy makes the numbers less attractive. There will be no press conference announcing the investment we lost. There will simply be businesses that never arrive, expansions that never happen and jobs that are never created.

Iloilo has spent years building its reputation as an emerging investment destination. We have capable people, excellent universities, an entrepreneurial culture, tourism, a growing service economy and a quality of life many cities envy. But competitiveness ultimately depends on remarkably ordinary things working extraordinarily well. Water must flow, internet connections must work, goods must move and electricity must be dependable. There is little sophistication in economic development that can indefinitely compensate for unreliable basic infrastructure.

Perhaps we have learned to tolerate brownouts because electricity eventually returns. We wait, complain, check for an advisory and continue with our lives when the lights come back. Businesses cannot afford to forget so easily. The power returns, but spoiled food remains spoiled. The lost sale remains lost. Employee-hours are gone. The production deadline has passed. The customer has already walked away, and the hotel guest has already formed an impression. The investor who quietly decided to put his money elsewhere may never bother telling us why.

We can build wider roads, taller buildings and grander townships. We can organize investment forums, celebrate every new groundbreaking and repeatedly proclaim that Iloilo is ready for the next wave of growth. But economic ambition means very little if the infrastructure beneath it cannot carry the weight of that ambition. A truly investment-ready city should not merely have places where businesses can locate; it should create an environment in which they can operate efficiently, competitively and predictably.

Iloilo wants more businesses to open their doors. Perhaps it is time we paid considerably more attention to what keeps their lights on.

Reach the author at itsjanvie@gmail.com.