Energy transition plan needed

MANILA, Philippines — The Philippines should carefully plan its energy transition to strike a balance between cost and supply to meet the country’s growing demand post-COVID.

In his presentation during a webinar organized by the Institute of Corporate Directors (ICD) with The Climate Reality Project Philippines last Friday, Institute for Climate and Sustainable Cities (ICSC) chief data scientist Jephraim Manansala said evidence clearly showed even before the pandemic that coal has been intermittent and unreliable.

“As households and the private sector struggle with the economic impacts of COVID-19, data also showed that coal is the reason behind spiking electricity bills and rotating blackouts. Continuing with coal is Code Red for businesses,” he said.

Manansala said the Philippines has an overcapacity of baseload coal-fired power plants, yet rotating power outages were still experienced in different parts of the country in 2021 and over the past few years, which led to significantly high electricity costs.

In addition, coal-fired power plants have not met the newly mandated allowable planned and unplanned outages set by the Energy Regulatory Commission.

This is the same case in the global scene, where coal has continually proved to be unreliable and will soon be history globally, E3G program leader Camilla Fenning said.

“The pipeline of proposed coal power plants has collapsed by more than three-quarters, with 1,175 gigawatts (GW) of planned projects cancelled since the Paris Agreement negotiations in 2015, bringing the end of new coal power into view,” she said.

In the Philippines’ case, Fenning said the country’s pre-construction pipeline for coal has fallen by 65 percent in July 2020, even months before the Department of Energy (DOE) issued the moratorium on new coal plants.

The DOE declared a moratorium on greenfield coal plants in October last year as it recognized the need for the country to shift to a more flexible power supply mix.

China’s pledge to halt funding for new coal-fired power projects abroad is also seen to have potential implications on five coal power projects under construction in the Philippines.

With the phaseout of coal, AC Energy Corp. president and CEO Eric Francia said striking the right balance is crucial in this energy transition, and the country must recognize that it will take time.

“We need the transition. We need the runway. We cannot just switch it (coal) off. We need a replacement,” he said.

Management Association of the Philippines (MAP) energy committee Ernesto Pantangco agreed, saying that the transition should be carefully planned.

“We’re more concerned about our short-term problems of reliability of supply. As we transition, cost should be carefully monitored,” he said.

Currently, the transition technology is seen to be natural gas.

“Gas is less dirty than coal, but it is not clean. But what is the alternative? I still think we need gas. Renewables and storage will not be able to meet the demand growth. Where will we get that new baseload supply?” Francia said.

While government is advocating for the development of renewable energy, it is also pushing for the development of the fossil-based liquefied natural gas (LNG) sector.

To resolve the Malampaya supply issue and its contract’s expiry in 2024, the DOE has charted a vision of making the country an LNG distributor and exporter as well.

So far, it has cleared the development of six proposed LNG terminals to import the much fuel needed by existing and new gas-fired power plants.

But Institute for Energy Economics and Financial Analysis (IEEFA) energy finance studies in Asia director Melissa Brown cautioned against the use of fossil gas to fuel the energy transition.

“Financing gas will be a heavy lift. Although we expect fossil gas to play a part in the Philippine energy mix, it is not an inevitability. Gas is very significantly expensive and with prices extremely volatile, it may be unmanageable if the power sector is not ready,” she said.

For now, the development of an alternative fuel supply to Malampaya gas field’s uncertainties is important, Pantangco said.

He said the Malampaya project supplies one-third of Luzon’s supply and is close to half of that of Manila Electric Co. (Meralco), the country’s largest power distributor. Manansala made the economic case for variable renewable energy, estimating 28 percent savings in electricity costs during peak hours in the noontime despite only having a three percent share in the Philippine energy mix, based on spot market merit order data from the Independent Electricity Market Operator of the Philippines (IEMOP).

“We need to shift from centralized to distributed generation. Centralized generation through coal is expensive, unreliable, dependent on imported fuels, and will soon be stranded assets. We have seen that the price of coal in the world market has already tripled since the start of 2020, and this just further reinforces the need for this shift to indigenous renewable energy sources to stabilize the electricity prices,” he said.

For renewable energy development, Negros ENGINE Institute Senior Advisor Marlon Apanada said the government should mobilize state-owned banks to finance and speed up the development of these green power projects.