A STABLE and sufficient power supply is crucial to economic growth, especially when the country is gearing up for a post-pandemic boom.
The efforts of the power companies and that of the government are making headlines, not only because they need to catch up but also because the new administration’s priorities include diversifying the country’s energy sources by focusing on renewable energy (RE) and possibly adopting nuclear energy.
The Department of Energy (DOE), under the leadership of its new secretary, immediately went to work.
One major strategy of the government is to increase RE to 35 percent of the power generation mix by 2030 and at least 50 percent by 2040.
Along this line, the DOE just recently increased the percentage of the utilization of RE for on-grid areas from 1 percent to 2.52 percent. This shall take effect next year.
The increase is meant to encourage more investors and end-users to develop and utilize domestic energy sources, thereby gradually increasing the RE percentage in the generation mix which is still dominated by coal.
Wind
Another priority area in the country’s RE industry is offshore wind energy. The Philippines Offshore Wind Roadmap identified a total of 178 gigawatts (GW) of offshore wind energy potential across the country, particularly in the areas of Northwest Luzon, Manila, Mindoro, Guimaras Strait and Negros/Panay West. This is critical in supporting the country’s clean energy transition initiatives.
Moreover, in a legal opinion that boosted hopes for business among energy stakeholders, the Justice department said that exploration, development and utilization of inexhaustible RE sources are not subject to the 60:40 foreign equity limitation as provided under Section 2, Article XII of the Constitution.
This means that foreign ownership restrictions that hamper the flow of investments in the RE sector may now be relaxed following the legal opinion issued last month by the Department of Justice (DOJ).
“This favorable development will pave the way for the opening of foreign investments in renewable energy development,” Energy Secretary Raphael P.M. Lotilla said.
Last weekend, Sen. Sherwin Gatchalian, the vice chairman of the chamber’s Energy committee, said the DOJ opinion, which he called a “game changer,” will see the rise in the number of investments in renewable energy, such as solar, wind, hydro and ocean or tidal energies.
Power firms bet big on renewables
THE private sector is doing its part, too. They have positioned themselves to take advantage of the increasing demand for electricity from RE platforms.
ACEN Corp., the listed energy platform of the Ayala group, continues to invest heavily in renewables. It is currently constructing around 700MW of renewables capacity in the Philippines, and expects to start construction of over 700MW additional renewables capacity in the next 12 to 18 months.
“Given the faster construction timeline for renewables, these projects should help mitigate the country’s power situation,” said ACEN President Eric Francia in an interview.
ACEN has about 4,000 MW of attributable capacity in the Philippines, Vietnam, Indonesia, India and Australia, with a renewable share of 87 percent, among the highest in the region.
Its aspiration is to be the largest listed renewables platform in Southeast Asia, with a goal of reaching 20 gigawatts in renewables capacity by 2030.
Aboitiz Power Corp., which has been at the forefront of fast-tracking economic activity, is well on its way to achieving 50-50 growth aspirations to triple its current RE capacity. To date, the company has about 1,000 MW of disclosed renewable energy projects, including solar, wind, hydro, geothermal and battery energy storage systems (BESS) in the pipeline.
It plans to build an additional 3,700 MW of RE, growing its existing Cleanergy capacity threefold by 2030.
“Dependable power supply will be vital to ensuring we not only survive in the post-pandemic environment, but thrive in it,” said Aboitiz Power President Emmanuel Rubio via e-mail.
The power firm’s GNPD Unit 1 started commercial operations in January. Together with Unit 2, which is currently under commissioning, Rubio said this will help address supply issues in Luzon and will be crucial to ensuring stability across the grid.
First Gen Power Corp. has also lined up a number of hydro and geothermal projects, on top of its existing ones. These include the 120-MW Aya pump storage project in Nueva Ecija; the Bubunawan, San Isidro, Tagolo-an and Puyo run-of-river hydros in Mindanao (with additional 140 to 150 MW in estimated capacity); as well as the 20-MW Tanawon and 29-MW Palayan geothermal plants in Bicol.
Progressive and responsive policies
THE Philippine Independent Power Producers Association Inc. (PIPPA) said the road to economic recovery greatly relies on energy stability and supply. It stressed that power is an essential resource, just like food and water.
“A country cannot progress if it is riddled with power interruptions because the most expensive electricity is no electricity. We are currently working hand in hand with our policy makers and regulators to put together progressive and responsive policies such as the energy derivatives market, RE market, reserves market, WESM Mindanao, removal of the secondary price cap, removal of the reliability indices, transmission network improvement and decongestion, among others,” said PIPPA President Atty. Anne Estorco Montelibano via text message.
These mechanisms, she said, will greatly boost investor confidence and will signal that the Philippines is on its way to achieving economic recovery.
“We are hopeful that the new administration will place great importance on encouraging both local and foreign investors to build and operate generation plants to ensure energy security,” added Montelibano.
Gas as transition fuel
ACCORDING to First Gen, RE power plants have their own limitations. For instance, the country does not have enough geothermal and hydro resources and sites, while solar and wind have intermittency issues. A BESS may complement a solar or wind farm, but a BESS can operate for only three to four hours a day—meaning, insufficient to complement the overnight downtime of solar.
In short, these alternatives cannot match the sizable role being played right now by coal-fired, baseload power facilities, First Gen Vice President and head of corporate communications Ricky Carandang said via email.
But as more solar and wind projects enter the grid, the Lopez-led power firm sees the urgency for more counterpart power facilities that can quickly respond to the intermittent character of the RE power plants.
Coal plant is not the solution, according to Carandang, because the cost is volatile and they spew a lot of CO2 to the atmosphere. These also lack flexibility to match the sudden surge or sudden drop in output of solar and wind.
Natural gas
Nuclear is an option, but government is still ironing out the policies. One immediate solution actually is available: natural gas.
Among local power companies, First Gen owns the largest platform of natural gas-fired power plants with close to 2,000MW in capacity. First Gen believes that shifting to natural gas will substantially reduce emissions from the energy sector without sacrificing reliability of the grid.
“Natural gas is acknowledged as the cleanest form of fossil fuel because its CO2 emission represents only a fraction of its coal counterpart when burned. Aside from their low carbon emission, natural gas-fired plants can operate 24/7 with flexibility to easily ramp up and down output in response to the intermittency of solar and wind,” Carandang pointed out.
While First Gen considers natural gas power plants as replacement for coal counterparts, the company shares with President Ferdinand Marcos Jr. the position that natural gas, including LNG, is a transition fuel.
“First Gen also draws inspiration from the statement of His Excellency, President Ferdinand Marcos Jr., that he considers natural gas as transition fuel. We believe that with the right kind of policies and regulations, natural gas can keep the lights on at competitive prices and at lower levels of carbon emissions,” he added.
Course correction
THE disruption resulting from the pandemic has given conglomerate San Miguel Corp. (SMC), which has interest in energy, among others, an opportunity to course-correct, particularly in regard to issues of sustainability, including decarbonizing energy infrastructure.
“We will do our share to rebuild the economy, our projects can help achieve energy sufficiency and help create sustainable value for not just San Miguel but also for the Philippines and the Filipino people,” said SMC President Ramon Ang.
Ang could not stress enough how important the role of the private sector in our economy’s recovery post-Covid is. “If prior to the pandemic we played our part in stepping up economic activity, it’s even more critical that we participate in the recovery, not only by providing jobs, creating competitive advantage, and getting the economy humming again but by making sure the shape of that recovery is an economy that is stronger, more resilient, and more inclusive,” he said.
SMC is scaling up investments in cleaner and renewable technologies even as it redoubles efforts to reduce emissions, and shift to low-carbon production models.
“We’ve invested heavily in battery energy storage systems totaling 1,000 megawatts to help facilitate our transition from coal to renewable energy and liquefied natural gas.
“We also have planned additional investments in renewable energy and in new baseload capacities utilizing natural gas to ensure that we’re able to meet the growing power needs of our developing economy over the medium term.
“The immediate challenge for us now is to help create an economy that is profitable and growing responsibly, socially and environmentally,” he said.
The power arm of SMC, SMC Global Power Holdings, Corp., said it remains focused on maximizing its existing power assets to help sustain the economy’s recovery, while investing in technologies that will facilitate the transition to cleaner energy.
‘Baseload’ power still the cheapest
While everyone is focused on renewables, Consunji-led Semirara Mining and Power Corp. (SMPC) said it will pursue expansion projects to continue delivering reliable and affordable power, amidst a tightening domestic power supply situation.
“SMPC has always been mindful of its unique role in the country’s power mix. We are, and will always strive to be, a low-cost fuel and baseload power producer because our communities and industries cannot afford runaway electricity prices like what is happening in some parts of the world,” SMPC Chairman Isidro Consunji pointed out via email.
He said the company plans to open new mines within its concession area. It also intends to apply for a contract extension so SMPC can continue investing in its operations and expand production.
“Energy security is central to economic recovery. We’ve seen how elevated fuel and electricity prices can significantly impact the cost of living and doing business. Reducing our country’s dependence on imported, expensive fuel is key to stabilizing and growing our economy,” added Consunji.
Indigenous resources
IN a bid to develop the country’s indigenous resources, the DOE has moved to address uncertainties on investment incentives in the upstream oil and gas sector.
“The President has directed that we address the uncertainties over investments in the upstream so that we can we can mobilize the natural gas around Malampaya and with other fields for our needs at the soonest time possible,” Lotilla said.
In 2021, he said the country’s energy supply stood at 56.8 percent imported and 43.2 percent indigenous. Indigenous sources include geothermal, natural gas, hydro, and other renewable energy sources like solar.
Of the imported energy supply, coal accounts for 37.1 percent, of which 98 percent is sourced from Indonesia.
Oil, on the other hand, accounts for 34.6 percent of the energy supply. It also accounts for 89 percent of power sources in off-grid areas.
The numbers, Lotilla said, show the country’s vulnerability to volatilities in global prices. “We need to be more energy-secure. And that means that we have to develop our indigenous resources. This is a top priority for us,” he said.
Clarifying legal, policy issues
THESE uncertainties include the interpretation of Presidential Decree 87, or the Oil Exploration and Development Act of 1972, which allows the service contractor’s corporate taxes to form part of the government’s 60-percent net share. This move, oil and gas exploration firms said, has hindered investments.
“We will do that through a number of measures, like through executive action clarifying the policy. Second, in order to stabilize the investment regime, to have the clarification by Congress as well,” he said.
Indeed, the long-term solution is to move from overdependence on imported sources and to go for more indigenous sources. But as has been seen in the past few years, there should be sound policies in order to encourage the private sector to mobilize more investments to achieve this goal as the country rises from the effects of the pandemic.
Image credits: Namhwi Kim | Dreamstime.com