THE Philippines is trying to work out an arrangement with Indonesia for an emergency procurement of coal to ensure sufficient supply and avert possible higher coal prices.
“We have agreed to discuss for purposes of our bilateral Memorandum of Agreement or Memorandum of Cooperation, that there will be…what we would call an emergency response or assistance in case of again of supply constraints,” said Secretary Raphael Lotilla of the Department of Energy (DOE).
Indonesia is the biggest supplier of coal in the country. In 2021, the Philippines sourced 2.3 million metric tons monthly from Indonesia to fuel the country’s coal-fired power plants. Power generated from coal comprises nearly 60 percent of the country’s power demand.
In January last year, Indonesia imposed a ban on coal exports. The Philippines expressed grave concern over the decision saying this was detrimental to economies that rely on coal-fired power generation systems.
Data from the DOE showed that as of October 2021, the Philippines acquired 96.88 percent of imported coal supply from Indonesia, 1.82 percent from Australia, 0.35 percent from Vietnam, and 0.94 percent from other exporting countries. Of the total 42.476 million metric tons of coal produced and imported in 2020, 69.51 percent were imported and 30.49 percent came from local sources.
“We discussed with Indonesia the [need for] making sure that the Philippines continues to have access to regular coal supply,” Lotilla said, recalling “what we experienced in early 2022, when they imposed a moratorium on the export of coal to all countries, that’s after the recovery of demand.”
The Indonesians, he said, explained the reason for their move: they had a two-tiered pricing system where the prices for domestic use of coal was much lower than the export prices. So the Indonesian miners would rather sell to the international market, the export market, than to the domestic ones.
“And it reached a point that they were running out of supply for their domestic coal fired power plants and that’s why they had to impose a moratorium. But that now they gave an assurance that they will make sure that we will have an uninterrupted supply,” said Lotilla.
One of that assurance, Lotilla said there are discussions on possible uninterrupted coal supply whenever similar incidents arise in the future.
“In other words for a BIMP EAGA (Brunei Darussalem-Indonesia-Malaysia-Philippines East Asean) member like the Philippines that is importing coal from Indonesia, then we can have arrangements whenever there are constraints.
So, these are some of the things that we discussed,” said the energy chief.
A repeat on the ban could cause concerns on the country’s supply of coal for power plants which, if insufficient, could lead to widespread blackouts.
As of end-June this year, the DOE estimates current coal power capacity at 12,473 megawatt(MW), with dependable capacity at 11,394 MW. This accounts for 44.1 percent and 46.1 percent of the Philippines’ energy capacity, respectively.
In October 2020, the DOE, under the leadership of then energy secretary Alfonso Cusi, issued a moratorium on new coal-fired power plants.
This policy remains effective until now.
“One day, we say there’s a moratorium, then the next day with the change of administration, no more moratorium. We have to be more considerate and consistent—considerate to investors because they get their signals from government—especially both foreign and domestic investors do not make distinction between one administration and another,” Lotilla commented.