The Philippine power industry is set to undergo a significant transformation with the recent announcement of a groundbreaking liquefied natural gas (LNG) deal. Meralco PowerGen Corp. (MGen), Aboitiz Power Corp. (AP), and San Miguel Global Power Holdings Corp. (SMGP) have joined forces to establish the largest integrated LNG facility in the country. This collaboration marks a crucial step towards achieving the nation’s twin goals of energy security and lower power rates. As stakeholders, experts, and consumer advocacy groups weigh in on the pros and cons of this $3.3-billion deal, it becomes clear that the benefits outweigh the concerns. (Read the BusinessMirror report: “Major leap forward in energy security,” March 23, 2024).
One of the primary advantages of this LNG deal is the potential for lower power rates. Aboitiz Power President and CEO Emmanuel Rubio highlights the synergy among the three power companies, emphasizing that it will make competitively priced and affordable power accessible to a broader base of Filipino consumers.
While there are no immediate estimates on the exact reduction in electricity rates, the collaboration’s ability to tap into commercial and logistical advantages offers hope for more affordable prices. This is a significant development, considering Meralco’s current rates stand at P11.937 per kWh. Lower power rates not only alleviate the burden on consumers but also stimulate economic growth by attracting new investments and sustaining existing ones.
Furthermore, LNG has been positioned as a “bridge fuel” to facilitate the transition to renewable energy (RE) sources. The Department of Energy (DOE) recognizes the benefits of LNG in diversifying and securing the country’s energy needs. LNG provides the flexibility to support various grid demands, from base-load to peaking power supply. This flexibility is essential for the development of intermittent RE technologies like solar and wind. Rubio explains that LNG-powered turbines can quickly adjust their electricity generation to complement the intermittencies of RE sources, ensuring grid stability.
While the LNG deal offers short-to-medium-term solutions to bridge the supply gap resulting from the moratorium on new coal plants and the retirement of existing ones, it is crucial to acknowledge the need for a definitive end to fossil fuels. Atty. Pedro Maniego Jr., Senior Policy Advisor at the Institute for Climate and Sustainable Cities, rightly emphasizes that a bridge must have an end. While fossil gas plays a role in the energy transition, the long-term plan should involve phasing out fossil fuels entirely in favor of clean energy sources.
It would do well for the government to set a clear date for the complete phase-out of fossil gas and prioritize the development of clean, indigenous power sources to achieve energy independence, self-sufficiency, and security.
In addition to the economic benefits and the transition towards cleaner energy, the LNG deal promises stable and reliable power supply, a critical factor for sustaining economic growth. The Department of Energy highlights that LNG’s entry into the energy mix enhances diversity and security in meeting the country’s energy needs. MGen, AP, and SMGP emphasize the importance of stable electricity supply in encouraging new investments and supporting existing ones. By establishing a capacity of 2,500 MW, the natural gas-to-power facility will play a vital role in meeting the projected annual increase in peak demand of 6.6 percent from 2020 to 2040. The Philippines’ emergence as a new frontier LNG market positions it for sustained economic growth and a greener, more sustainable future.
As this monumental LNG deal progresses through the necessary approvals and permits, it is crucial for all stakeholders to maintain their commitment to achieving the government’s twin goals of energy security and lower power rates. The collaboration among MGen, AP, and SMGP sets a powerful precedent in the energy industry, representing a solid groundwork for a more sustainable and environmentally friendly tomorrow.
The LNG agreement marks a momentous achievement in the country’s energy sector. By embracing LNG as a bridge fuel and working towards a cleaner energy mix, the Philippines can achieve its energy security objectives, lower power rates, and contribute to global efforts in combating climate change. However, it is essential to remain committed to long-term sustainability, prioritize renewable energy development, and continuously evaluate and adapt energy policies to meet evolving challenges and opportunities.