POWER industry stakeholders, experts and consumer advocacy groups weighed in on the pros and cons of a $3.3-billion liquefied natural gas (LNG) deal that seeks to achieve the country’s twin goals—energy security and lower power rates.
Meralco PowerGen Corp. (MGen), Aboitiz Power Corp. (AP) and San Miguel Global Power Holdings Corp. (SMGP) forged a deal to establish an integrated LNG facility—the biggest of its kind in the Philippines.
This will be possible via AP and MGen’s investment in SMGP’s 1,200-megawatt (MW) Ilijan power plant and a new 1,320-MW facility that is targeted for commercial operations by yearend.
Moreover, all three will acquire Linseed Field Corp.’s LNG import and regasification terminal to store and process LNG for SMGP’s two plants, thus, integrating their operations into the global LNG supply chain.
MGen and AP formed a joint venture to make the investment in SMGP happen. They signed an investment agreement to form Chromite Gas Holdings (CGHI) in which MGen will acquire 60 percent interest, while AP will acquire the balance of 40 percent.
“For the first time, three leading power companies are working together to secure our country’s energy needs, while transitioning towards cleaner power sources. This represents a major leap forward for our energy future, ensuring not just reliability but also cost-efficient power for many Filipinos,” said SMGP Chairman Ramon Ang.
Lower power rates
ABOITIZ Power President Emmanuel Rubio said the synergy would make competitively priced and affordable power accessible to a broader base of Filipino consumers.
There are no estimates yet on how much this deal can bring down electricity rates. Former Energy Undersecretary Atty. Jay Layug, who now leads an umbrella organization of all renewable energy (RE) associations, said, “The collaboration, hopefully, will result in lower prices given that each party can tap into its respective commercial and logistical advantages.”
Meralco’s rates for the month stood at P11.937 per kWh.
Stable and reliable electricity will also encourage new investments and will help sustain existing ones. As it stands, the Philippines’s electricity generation per capita is the lowest in the Asean.
‘Bridge fuel’
LNG has been pitched as “bridge fuel” to help transition to RE.
The Department of Energy (DOE) had said that the entry of LNG as a new type of fuel into the energy mix increases diversity and security of the country’s energy needs.
It likewise provides the country with fuel and technology that allows flexibility in supporting the various grid demands from baseload to providing reliable mid-merit to peaking power supply. This flexibility also enables the push to further develop intermittent RE technologies, such as solar and wind.
As a transition fuel, Rubio said LNG would complement the variabilities of solar and wind power generation, helping maintain the stability of the aggregate supply and the whole power system.
Gas-to-power generation is considered a natural complement to variable RE, especially if the aim is to maintain grid stability and strengthen energy security. Rubio explained that LNG-powered turbines are able to quickly ramp up or down the quantity of its generated electricity to complement the inherent intermittencies of RE.
A bridge must have an end
In the Energy Study conducted by the UP College of Engineering, ICSC (Institute for Climate and Sustainable Cities) Senior Policy Advisor Atty. Pedro Maniego Jr. said fossil gas, solar and wind power plants are the preferred options over the short to medium term to make up for the supply gap resulting from the moratorium on the construction of new coal plants and retirement of new coal plants.
Since Malampaya is projected to run out in several years, LNG terminals are needed to store the imported fossil gas required to operate the existing and new fossil gas power plants.
Maniego said that while the fossil gas has been recognized as the bridge between coal and renewable energy, “a bridge must have an end.”
“The long-term plan should be to phase out fossil fuels entirely with clean energy. There must be a definite date when fossil gas will be totally phased out. EPIRA mandates clean and indigenous power sources. Without a new source of fossil gas after Malampaya, we are simply replacing imported coal with another imported fuel. How could our country ever attain energy independence, self-sufficiency and security?” Maniego said in an e-mail reply.
Stable, reliable power supply
THE DOE said the entry of LNG as a new type of fuel into the energy mix increases diversity and security of the country’s energy needs.
Further, MGen, AP and SMGP stressed that stable and reliable electricity will encourage new investments and will help sustain existing ones.
They also pointed out that this unprecedented move would steer the country towards a cleaner, more sustainable future in line with the Marcos administration’s push for more natural gas in the country’s energy mix.
“This is a path-breaking venture,” said MGen Chairman Manuel Pangilinan. “Apart from transforming the energy landscape of the Philippines, this symbolizes a milestone alliance among major players in the energy industry towards a more sustainable future. We are thrilled to have such reliable partners as we lay the foundation for a brighter, greener future.”
Under the Clean Energy Scenario of the Philippine Energy Plan, it was forecasted that 50 percent of gross generation would come from RE sources, while 26 percent will be from LNG by 2040.
The natural gas-to-power facility will also help support and sustain economic growth in the country, as it needs stable and reliable electricity supply. A capacity of 2,500 MW will be critical since, according to the DOE, peak demand is projected to increase annually by 6.6 percent from 2020 to 2040.
In the near to medium term, the national government has set economic growth targets of 6.5-7.5 percent for 2024 and 6.5-8 percent for 2025 to 2028.
The Philippines indeed is emerging as a new frontier LNG market, especially with this mega gas deal. After all the necessary approvals and permits are issued for this power deal, industry stakeholders are hoping that this collaboration among three tycoons stays forever in order to achieve government’s twin goals.