Philippines needs energy transition plan ASAP

by Danessa Rivera (The Philippine Star), 16 Aug 2021

MANILA, Philippines — The Philippines needs to come out with an energy transition plan tailored to its specific requirements as a developing nation and as an economy recovering from the COVID-19 pandemic, officials said.

The country has decided to shun new coal power plant developments after the Department of Energy issued a moratorium on new coal plants in October last year as it recognized the need for the country to shift to a more flexible power supply mix.

But nearly a year after the pronouncement, the agency has yet to come out with a detailed plan on how to execute the energy transition, Sen. Sherwin Gatchalian said in a recent webinar.

“After the DOE made that pronouncement of implementing a moratorium on new coal fired power plants, we asked DOE about the details on how to execute it. We were not yet supplied with the details…it’s easy to pronounce, but of course, there are a lot of technicalities intertwined with one another. For example stranded contracts, another one is what technology can we use to replace it, what is the price impact to consumers,” said the lawmaker, who chairs the Senate Committee on Energy.

With the global movement to shift to sustainable power sources, Gatchalian said the country needs a well-studied transition to keep up with the growing electricity demand while making contributions in the fight against climate change.

“I acknowledge that the whole world is moving into that energy transition into cleaner and a more sustainable energy source. But the Philippines is unique in its own setting – consumers are price sensitive; technology is limited, we have red tape. It’s important that we have our own energy transition that we study and research very carefully,” Gatchalian said.

Congress, as pushed by the Senate Committee on Energy, hiked the budget of the DOE this year to fund studies on new technologies to achieve a holistic energy transition in the Philippines towards a decentralized, digitalized, and decarbonized energy system without sacrificing energy security and affordability.

A budget of P20 million was earmarked specifically for energy transition study.

“We funded DOE to come up with that transition. I believe they’re doing that right now, but I don’t believe in shutting off coal plants tomorrow and expect everything will be alright. We need to have that transition and that transition should be started carefully,” Gatchalian said.

“We need to start the ball rolling by doing a lot of research and engaging experts in how to have that Philippine-style transition,” he said.

The crafting of an energy transition plan should be done hand in hand by the government and the private sector, said Manila Electric Co. (Meralco) president and CEO Ray Espinosa.

“We have to map out a just transition for the Philippines that caters to its unique requirements as a developing country and given the price sensitivity of our customers to electricity prices. It’s not going to be easy. It’s something the private sector and government should work on together,” he said.

As the country’s largest power distributor, Meralco has no intention to prolong the country’s reliance on coal fired plants, but the transition away from coal needs to be balanced with the needs of the country in terms of energy security.

“So hopefully, with the partnership with government and private sector, we can forge a framework for an orderly transition out of coal fired plants into a more sustainable energy security arrangement,” Espinosa said.

Currently, Meralco sources roughly 33 percent of its power requirements from coal power plants. Its largest source of supply is from natural gas at 39 percent; 26 percent from multi-fuel sources; two percent from liquid fuel and supply from renewable energy, particularly solar, is the smallest.

To shift its energy mix, Meralco announced plans to bid out 1,000 to 1,500 megawatts of renewable energy generation in the next five years.

In its latest power supply procurement plan submitted to the DOE, Meralco said it would subject to competitive selection process (CSP) a total of 3,850 MW starting this year until next year.

For purely RE contracts, the power utility is looking to bid out a total of 1,650 MW, broken down into 100-MW RE baseload and 850-MW mid-merit capacities in July this year, 500-MW mid-merit capacity in August this year, and 200-MW RE baseload in January 2022.

The 100-MW RE baseload capacity is targeted to start supplying in March 2023 until February 2043 and the 200-MW RE baseload from March 2025 to February 2045.

Meanwhile, the two mid-merit RE capacities are targeted to supply from March 2026 to February 2046.

“From a distribution utility (DU) standpoint, we do encourage renewables to come in. We want to get more RE supply. Here is where the govt policy is becoming very important. We need the good policies and good framework in place that the private sector can follow. The private sector has the capital to make the investments, but we need to see which way the government wants us to turn and take, and that becomes very important when it comes to RE,” Espinosa said.

In particular, the requirement for DUs, electric cooperatives (ECs), and retail electricity suppliers (RES) under the Renewable Portfolio Standard (RPS) must be increased to be able to speed up the transition to RE.

The RPS is a mechanism under the RE Act of 2008 where DUs, ECs and RES are prescribed to source a percentage of electricity requirements from RE sources. Currently, the RPS level is set at one percent until 2022.

The RPS Composite Team (CT) is evaluating a proposal to raise the RPS requirement to 2.92 percent starting 2023 to achieve the goal of reaching 35 percent RE share in the generation mix.