PHL com­mit­ment to coal power flagged as re­new­ables ad­vance

Business World - - THE ECONOMY - Vic­tor V. Saulon

THE Philip­pines is “mas­sively” ex­posed to new coal-fired power plants worth P1.05 tril­lion that the coun­try may end up not us­ing, a US think tank said in a re­port re­leased on Thurs­day.

In­sti­tute for En­ergy Eco­nom­ics and Fi­nan­cial Anal­y­sis (IEEFA) and lo­cal pol­icy group In­sti­tute for Cli­mate and Sus­tain­able Cities (ICSC) said the plants, with a ca­pac­ity of at least 10,000 megawatts might be left stranded as re­new­able en­ergy re­sources dis­rupt coal’s dom­i­nance.

“Pru­dent re­form is re­quired to level the play­ing field in the en­ergy sec­tor and to hold in­vestors ac­count­able for their own in­vest­ment er­rors. The Philip­pines is heav­ily but need­lessly over-de­pen­dent on coal, which is a los­ing gam­ble,” said Sara Jane Ahmed, en­ergy fi­nance an­a­lyst at IEEFA.

“The en­tire na­tion could be locked into two decades of pay­ing for coal power it may not end up us­ing,” said Ms. Ahmed, the re­port’s co- au­thor along with Jose D. Log­a­rta, Jr., ICSC en­ergy pol­icy ad­vi­sor.

The re­port, “Carv­ing out Coal in the Philip­pines: Stranded Coal Plant As­sets and the En­ergy Tran­si­tion” points out that cur­rent en­ergy poli­cies pass on the costs of fi­nan­cial coal risks to con­sumers, who in turn shoul­der the higher elec­tric­ity bills.

It also shows that adding re­new­ables to the elec­tric­ity sys­tem will erode the uti­liza­tion rates of power sourced from burn­ing coal as clean en­ergy op­tions have be­come the least cost in many ar­eas.

Ms. Ahmed said “re­tail com­pe­ti­tion, nat­u­ral gas, and the cost de­fla­tion of re­new­able en­ergy and its in­ter­ac­tion with nat­u­ral gas and re­tail com­pe­ti­tion are fac­tors in­ex­orably dis­rupt­ing the dom­i­nance of coal.”

The re­port called on the En­ergy Reg­u­la­tory Com­mis­sion to re­quire “carve- out” clauses in all fos­sil fuel projects to shield con­sumers. It said that clause, which cuts the amount of power a dis­tri­bu­tion util­ity must buy from the gen­er­a­tor, can ex­empt the dis­trib­u­tor from the con­se­quences of re­duc­ing con­tracted ca­pac­ity from coal plants.

“Mer­alco ( Manila Elec­tric Co.) had the fore­sight to put a carve- out clause in its power sec­tor agree­ments, rec­og­niz­ing the in­evitabil­ity of stranded as­set risk and the need to pro­tect ratepay­ers from stranded as­sets by shift­ing stranded costs to the in­de­pen­dent power providers and their in­vestors,” Ms. Ahmed said.

In­vest­ments in re­new­able en­ergy and liq­ue­fied nat­u­ral gas are more cost-ef­fec­tive and less risky for in­vestors and con­sumers, the re­port says.

“Coal prices soared last year by 60% glob­ally while so­lar prices fell over 40% over the last six months in the coun­try. It is ironic that we im­port 75% of our coal sup­ply even though the Philip­pines is a global leader in geo­ther­mal en­ergy and holds a vast po­ten­tial for other sources of re­new­ables, in­clud­ing wind and hy­dro,” Ms. Ahmed said. —

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