HOMEFRONT Column by Victor Consunji, founder and CEO of Victor Consunji Development Corporation (VCDC)
As we continue to witness an unprecedented global push toward green everything, the effects from this shift are reverberating across many sectors of our developing country. We want to leave the future generations a sustainable world and avoid the dire predictions of many climate scientists. Ultimately, these changes will impact the longer-term growth and strength of the broader economy.
This coordinated effort will, of course, affect the housing market, so investors and homeowners alike ought to be aware of what these initiatives truly entail and be ready to make whatever contributions we can.
In the past few months, we’ve discussed at great length the impact of interest rates and inflation, and the dependency on fossil fuels has been front and center as the price of this commodity has far reaching consequences for homeowners. The cost of cement, steel structures, copper wires, as well as any materials needed to be transported affects the cost of homes and, of course, energy prices will impact the cost of home ownership. The shift to green energy is a double-edged sword that can cut both ways depending on the time frame we choose to consider.
We’ve seen firsthand that supply disruptions and hot money translates to higher energy prices, and our transportation and utility inputs have risen to a point where the cost of moving goods and keeping our businesses open can choke corporate profits and devastate the spending power of the consumer. The longer-term effect of reducing the demand of fossil fuels for our vehicles and power production should in theory translate to lower and more stable prices.
The rapid shift to sustainable energy has the potential to raise energy prices for us in the short to medium term. The reality is that our energy grid is still overly reliant on fossil fuels for the time being and our growth rate is so high that the moratorium on new coal plants, dwindling of our natural gas reserves, and lack of sufficient renewable baseload to meet that demand is already leading to higher prices on the Wholesale Electricity Spot Market (WESM).
Since many utilities often source 30 percent or more from the spot market, this will negatively affect the average homeowner and businesses alike. As much as it pains me to say it, expect higher utility rates in the coming years as we continue our growth path in the new post-pandemic norm.
While we have seen a tremendous push into utility scale solar farm construction, with many Renewable Energy (RE) Developers setting ambitious targets in the thousands of megawatts, the truth is solar energy alone won’t alleviate the problem. That’s because of the obvious fact that solar only works when the sun shines and the peak demand typically comes between 6 and 10 p.m. when everybody comes home from work.
The current administration has mentioned that it will pursue a nuclear energy program but that will easily take over a decade to see any plant come online, so for now the quickest sources of new green baseload energy will have to come from solar with batteries, hydropower, and wind. Currently, to develop and build this type of power production is an arduous task with many different permits and studies to build and the 60/40 local ownership of power assets are the speed bumps. Hopefully, the new administration can ameliorate the process if we are going to increase the capacity.
On a positive note, the 2018 study “Greening the Grid” from USAID has confirmed that RE targets of 30 percent and 50 percent are achievable in the Philippines power system as planned for 2030, but there will be much needed changes to how the grid is operated.
The price of electricity remains one of the biggest risks to hampering the development of our economy, which, of course, significantly affects our long-term housing prices. Industrialized nations have long relied on factory automation to achieve productivity gains and if the Philippines cannot lower our energy prices, we will further lose out on the opportunity to become producers for the nations that continue to offshore their manufacturing.
Since the Electric Power Industry Reform Act of 2001 (EPIRA), we have seen great adoption of rooftop solar in businesses with the relatively permit light path to build own-use Self Generating Facilities (SGF). This coupled with the successful adoption of programs like residential net metering provides the basis for a decentralized power production network that reduces the demand on the grid, which lowers the carbon footprint and makes our businesses more competitive.
As a nation, we should hope that this RE development continues as this is one way we can offset the supply/demand imbalance that will be coming. The fact of the matter is, the government alone cannot be the only one pushing to facility change, it will take a concerted effort from private power producers, businesses, and the citizens at large. By lowering our reliance on fossil fuels for future growth, we would anticipate that improvements in lowering energy prices will increase our competitive standing in the global economy, leading to more incomes and continued demand for expansion of the housing market.
At VCDC, we have been making a concerted effort into building sustainable features into our communities, as well as always looking for ways to improve our construction practices, in order to do our part to help the cause. We implore other developers to continue on a similar path, so we can collectively make a larger impact.
In our new Vie at Southern Plains project in Laguna, we’ve introduced large sliding doorways all throughout every model unit so that when they are opened, it creates a cross current that cools the home, without having to resort to continuously running air conditioners at full blast. This feature, along with providing options for the latest energy efficient appliances, helps lower the energy consumption of our homes considerably.
Of course, the use of air conditioning cannot be entirely avoided fully so we’ve introduced premium all black solar packages that are tucked into the payment plans and integrated into the home upon turnover. While this adds a bit of complexity to our custom home concept and construction process, we are finding that our clients are responding well to the convenience of having a hassle-free integration that doesn’t impinge on the roof sealing and it enables the homes to have net zero bills earlier on into home ownership.
Conservation of materials during construction is an initiative that we’ve already employed with great success. For example, starting nearly a decade ago, we made the conscious effort to change all of our designs to the concrete slab style, employing state-of-the-art water sealing methods that lead to less leaks over time. Traditional corrugated sheet metal roof are notorious for water penetration after a few years, which trickles down into the home and creates damage that needs to be retrofitted, becoming as troublesome to the homeowner as it is wasteful in terms of unnecessary added materials and labor.
Furthermore, with our selection of wood simulated tiles, metal doors, and other engineered materials, we are able to reduce up to 96 percent of the trees needed for traditional home construction. This provides a long lasting finish that is both termite and temperature warp resistant, keeping more CO2 reducing trees planted in the ground during construction and throughout the life of the home.
Across all of our developments, we’ve introduced material light construction methods such as using PVC forms instead of the traditional phenolic board for our concrete pouring stages. The advantage is clear, as we can use these forms up to 50 times longer than the traditional plywood like material held together by resins, meaning we can save a lot of trees in the process and these construction materials can actually be recycled after their use.
We’re always looking at incorporating new methods of construction such as grasscrete walkways, which is a very low maintenance alternative to the generic fully concrete or paved surface. It is a type of void structured concrete cast using form work that creates beautiful patterns where the voids are filled with planted grass. In addition to lowering the amount of concrete used, it also provides better drainage during rainy season, eliminates additional CO2 across the development and we believe every little bit helps.
In order to avert a major climate crisis, the world needs collectively come together and the Philippines, being one of the most polluting nations, has a lot to improve on. While we don’t have the luxury of burning endless amount of fossil fuels to power our growth that our counterparts in the West enjoyed for so long, our government and populace aligned in this noble cause and we can make an outsized impact.
While the switch to a greener economy may lead to higher energy prices in the medium term, with a collective effort from both the public and private sectors, we can transform our economy and create a sustainable future, leaving this world a better place for future generations to come.
