Coal to remain king in Philippines’ energy mix despite ban — Fitch unit

by Ian Nicolas Cigaral (Philstar.com), 4 Jan 2021

MANILA, Philippines — Coal will remain the Philippines’ top power source over the coming decade despite a recent government ban on coal-powered generators, the impact of which will likely be felt only on a much longer term, a Fitch unit said.

In a research note sent to reporters on Monday, Fitch Solutions expects the Philippines to continue its dependence on coal in the next years, saying it is still the most practical means to generate affordable electricity needed to support the country’s growing economy.

The inevitable decline of Malampaya gas field, which supplies all of the country’s current natural gas, and an ambitious government goal to energize the entire archipelago by 2022 also make it impossible for the Philippines to immediately abandon coal, Fitch Solutions explained. That said, Fitch forecasts coal to account for 59% of the Philippines’ energy mix by 2029, up from 29.1% as of 2019 based on latest energy department data.

“We stress that coal remains the cheaper and more reliable option to meet with the country’s power demand surge, driven primarily by strong macroeconomic and demographic fundamentals,” Fitch Solutions said.

The Duterte administration last year announced the government will no longer accept applications for the construction of new coal power plants, a policy shift that also came with allowing 100% foreign ownership on geothermal energy plants worth at least $50 million.

The move came as coal projects continue to face very strong public opposition, especially from climate activists. Prior to the announcement, conglomerate Ayala Corp. already promised to divest from coal-fired power developments by 2030. Meanwhile, San Miguel Corp., whose proposals account for majority of coal projects being explored, said it is abandoning future plans to construct coal power plants following the moratorium.

While the ban could limit the amount of new coal capacity in the next years, Fitch Solutions said its impact will not be immediately felt since new projects approved prior to the announcement were not covered by the moratorium. In fact, the government itself expects coal to corner 36.9% of the country’s power supply by 2030 before reducing the share to 27.3% come 2040.

“That said, we still expect a significant amount of coal capacity to be commissioned over the coming decade, with the impact felt only on a much longer term,” the Fitch unit said.

“The government has said that coal will remain the dominant generation source for years to come, with several projects in the pipeline that were already approved prior to the announcement,” it added.