Philippines’ new energy dev’t plan shows that coal change is coming

By Victor V. Saulon, Sub-Editor

If things go as planned, the Philippines should have a new power development plan by yearend that will set out how coal can be replaced with renewable energy sources.

Or at least this is what the Climate Change Commission (CCC) said on June 16, 2016.

A few days later, President Rodrigo R. Duterte appointed staunch environmentalist Regina L. Lopez to head the Department of Environment and Natural Resources (DENR), one of the three state agencies that will review the government’s energy policy along with the CCC and the Department of Energy (DoE).

This left then-DoE Secretary Zenaida Y. Monsada pondering on the fate of 13 coal-fired power plant projects, six of which are in Luzon and five in Mindanao, which are currently being built.

“The shift from coal does not seem accurate,” she said. “Are you going to kill the coal plants? You just cannot… if they meet the environmental standards and all the requirements.”

She said the DENR could impose stricter standards in its issuance of environmental compliance certificates of proposed projects, but she doubts if these can be applied to existing plants.

“Maybe the thrust is, if you need to stop issuing permits for new coal plants? When should you start doing that, so that by 2030 you have more renewable energy or at least almost equal to coal in terms of output,” she said.

The Philippines by 2030 should already have reduced emissions by 70%, as part of its commitment during the December 2015 Paris climate talks, which in turn also resulted in nearly 200 countries agreeing to limit the increase in the earth’s temperature to well below 2˚Celsius while aiming for an ambitious goal of 1.5˚Celsius.

By that same year, the DoE also aims to achieve a generation mix that sources 30% of power from coal, 30% from natural gas, 30% from renewables, and 10% from other sources such as oil-fired plants.

Ms. Monsada has since been replaced by Alfonso G. Cusi, who admitted that he was still studying many issues involving the energy industry.

“I’m asking for the rationale. What’s the rationale of that 30-30-30-10… I’d like to understand. I’d like to know,” he said.

In the meantime, companies building coal-fired power plants up for completion between this year and 2020 have invested millions of dollars to stay on schedule, as indicated by their commitments to service contracts awarded to them by the DoE.

They account for 68% or 4,792 megawatts (MW) of the 7,040 MW new capacity in the four years. Of the additional power from coal plants, 2,762 MW will come from Luzon, 420 from the Visayas, and 1,610 MW from Mindanao.

Apart from these projects, several others are awaiting “financial closing” — bank loans or investments — that could move their proposed plants from the “indicative” phase to “committed” or those that have started construction and have clearer target dates for commercial operation.

These indicative projects are the ones most likely to be hit should the government come up with a stricter policy on coal-fired power plants, or if indeed these will be replaced by renewables.

In Luzon, nine such projects are in the pipeline with an estimated capacity of 5,600 MW. Visayas has about 900 MW while Mindanao has five projects with 1,400 MW. They still outpace the future capacity coming from renewable energy. For instance, solar power plants in Luzon, Visayas, and Mindanao are expected to deliver only 178.1 MW, 263.2 MW and 166 MW, respectively.

As it stands now, the country has about 16,451 MW of dependable capacity, which looks sufficient to meet an estimated demand of 12,000 MW.

Ideally, the grid operator maintains contingency reserves that can answer any reduction in supply due to the loss of the largest generating unit, which is the 670-MW coal-fired power plant in Sual, Pangasinan.

However, for five times in June, these reserves fell below the capacity of that plant, prompting the “yellow alerts” and leaving doubts about electricity reliability and sufficiency.

“If you project it, say, up to 2030, the consensus view is that demand from the current 12,000 MW could rise to as much as 20,000 or even 22,000 or 24,000 MW. Clearly the country needs more capacities to build in the next 15 years or so,” Manuel V. Pangilinan, chairman of Manila Electric Co., said in a recent press briefing.

Coal power plants remain the most viable option cost-wise.

Rough estimates place the cost of producing a megawatt of power from coal at $2 million, well below wind power’s $2.25 million or hydro’s $3 million per MW. These plants are also the most dependable source of base-load power that can consistently meet demand for 24 hours straight.

“Over the time the cost of solar is really going down, so we don’t really know what it will be… over five years. But the rough estimate is about $1.5-2 million total project cost per megawatt,” said Salvador Antonio R. Castro, Jr., president of CleanTech Global Renewables, Inc.. which, in March 2016, switched on a 15-MW solar farm in San Ildefonso, Bulacan.

By the end of the month, Mr. Cusi is expected to meet with Ms. Lopez about striking a balance between the country’s need for reliable power and meeting the demands of a society that has increasingly looked at coal plants as out of place in a planet wary of global warming.

This may leave a comforting thought to project developers, at least until such time that the case for solar power has become more compelling. With the advent of new and cheaper technology that can store the energy from the sun, this lull may be short-lived.

—–

Victor V. Saulon (@victorsaulon on Twitter) covers the energy beat and handles a section for the BusinessWorld on weekends. Outside work, he travels and hones his skills in photography.