Volatile coal price seen as risk for PHL power sec­tor

Business World - - THE ECONOMY - Vic­tor V. Saulon

THE coun­try’s cur­rent ac­count deficit could in­crease by $1.75 bil­lion each year by 2021 be­cause of the dou­bling in the price of world-traded ther­mal coal since the start of last year, the In­sti­tute for En­ergy Eco­nom­ics and Fi­nan­cial Anal­y­sis (IEEFA) said.

In a new anal­y­sis re­leased on Mon­day, the in­sti­tute said at cur­rent mar­ket prices for bench­mark coal of $100 per ton, the Philip­pines is poised to spend $3.5 bil­lion ev­ery year for 35 mil­lion tons per an­num (MTPA) of im­ports by 2021 in the International En­ergy Agency (IEA) Mid-Term Out­look.

“The un­pre­dictabil­ity of the coal mar­ket over the past year will drive higher elec­tric­ity prices and threat­ens the in­dus­trial strat­egy of the Philip­pines,” said Sara Jane Ahmed, an an­a­lyst at IEEFA.

“The dra­matic price spike should sig­nal to the Philip­pines’ En­ergy Reg­u­la­tory Com­mis­sion (ERC) to put an end to the au­to­matic pass-through of costs, which means ratepay­ers ab­sorb the price in­creases and util­i­ties have no in­cen­tive to adopt cleaner, cheaper re­new­able en­ergy,” she added.

IEEFA said rais­ing coal im­ports re­sults in com­mod­ity price and cur­rency risks for lo­cal elec­tric­ity con­sumers, with its neg­a­tive im­pact on the cur­rent ac­count deficit, which it said is “a sig­nif­i­cant driver of im­ported in­fla­tion.”

“The Philip­pines should avoid lock­ing it­self into fur­ther new longterm coal- fired power plant con­tracts,” Ms. Ahmed said. “Re­new­able en­ergy in­fra­struc­ture is de­fla­tion­ary, and tech­nol­ogy gains com­bined with economies of scale mean in many coun­tries, in­clud­ing the Philip­pines, it is al­ready the least cost op­tion.”

IEEFA cited In­dia’s ex­pe­ri­ence where it said on the back of a dou­bling of re­new­able en­ergy in­stal­la­tion ac­tiv­ity in 2016 to 2017, so­lar and wind tar­iffs have both fallen nearly 50% since the start of last year. This set record low whole­sale elec­tric­ity tar­iffs of $38 per megawatt-hour. New im­port ther­mal power plants are un­able to com­pete at this low pric­ing.

The in­sti­tute said the dou­bling of the coal price to al­most $100 to­day from $50 in Jan­uary 2016 was largely “a re­sult of Chi­nese cen­tral gov­ern­ment pol­icy aimed at an or­derly coal mar­ket tran­si­tion by main­tain­ing a de­gree of profi tabil­ity for do­mes­tic Chi­nese coal min­ers, while the cen­tral gov­ern­ment forges ahead with an ac­cel­er­at­ing tran­si­tion to clean en­ergy.”

It said China is set to in­stall 50 gi­gawatts of so­lar in 2017 alone, a record for a sin­gle coun­try in a year.

It said due to the rise of the global green bond mar­ket, cap­i­tal is avail­able for coun­tries that are will­ing to set a clear pol­icy di­rec­tion to tran­si­tion to clean en­ergy.

“The dou­bling of the ther­mal coal price over the past 12 months should be an­other wake-up call for gov­ern­ments that it is a high-risk $20-bil­lon stranded as­set gam­ble,” Ms. Ahmed said.

“Gov­ern­ments should pur­sue re­new­able en­ergy as the path to en­able in­dus­trial growth,” she added.

IEEFA con­ducts re­search and analy­ses on fi­nan­cial and eco­nomic is­sues re­lated to en­ergy and the en­vi­ron­ment. Its mis­sion is to has­ten the “tran­si­tion to a di­verse, sus­tain­able and prof­itable en­ergy econ­omy and to re­duce de­pen­dence on coal and other non-re­new­able en­ergy re­sources.” —

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