Transitioning toward renewables

IRECENTLY saw many discussions on how a phase-down of fossil fuels may not be enough to combat global warming, with many industry stakeholders in the Philippines calling for a more pragmatic strategy to address the energy security needs of our developing country.

Besides the barriers to promoting 100 percent renewable energy, not just in the Philippines, a lot still has to be done to make our transition towards renewable energy really beneficial to the country.

This transition, as we all probably know but sometimes fail to acknowledge, entails costs that would affect already burdened consumers whose main priority clearly isn’t climate change.

But even when it’s not the major concern of an ordinary Filipino, it is the responsibility of our government to lay down the rules that will pave the way for our inevitable transition away from fossil fuels like coal and oil.

It is widely known that for fossil fuel-dependent countries like the Philippines, natural gas is a “bridge fuel,” as this is considered much cleaner than coal but more dependable than intermittent renewable energy sources.

But one of the challenges the country’s energy industry has had to address is the cost associated with using natural gas. Coincidentally, there have been many news articles about the recent increase in Meralco’s overall rates — which in part was said to be due to the higher fuel prices of power plants that use natural gas.

Discussions and statements on this rate movement were highly technical, but consumers just really care about how much they’re paying in their monthly bills.

Unfortunately for us, we cannot live without these gas-fired power plants at this point, especially with the moratorium on the development of new coal power plants and the scale of supply these plants could deliver.

Even the Department of Energy (DoE) itself has been promoting natural gas it even issued a directive in October last year to enjoin electricity distributors in Luzon to conduct a competitive selection process (CSP) for power supply using indigenous natural gas as transition fuel.

But I ask again, would this really be beneficial to consumers, considering the cost associated with it? At least, it is good that this undergoes a competitive bidding process, but if there’s one thing I’ve observed, the DoE’s move to prioritize indigenous natural gas — which in our case is the gas coming from the Malampaya field — may not be the best move.

For that particular DoE directive, Meralco conducted a CSP for its 1,200 MW supply requirement, in which three bidders participated. What bothered me the most when I read the announcement of Meralco on the offers received was the unreasonably high offer of First Natgas Power Corp., which is one of the natural gas plants that use indigenous Malampaya gas.

The winning bidder offered a rate of P7.07/kWh, while the second-best bid was not far behind at P7.10/kWh. But what was incredibly surprising was First Natgas’ bid of P8.45/kWh.

It did lose the bidding, but these things are worth looking into because if push comes to shove and it’s the only supplier that can supply Meralco, it would be a huge disservice to the consumers.

Based on the generation charge tables uploaded by Meralco on its website, the highest rate of First Natgas in the past three years was the rate last month of P6.60/kWh — even with imported LNG already blended into the fuel mix.

I can only imagine what a big burden this would have been if First Natgas had secured that contract and priced its supply at that rate. Meralco consumers would see in the monthly generation charge table that the price from the exact same power plant for the exact same base load supply increased by around P2/kWh.

The more serious question remains. The government has been promoting the utilization of indigenous natural gas resources and claims it is much lower than imported LNG.

Does prioritizing indigenous natural gas really benefit consumers? A recent TV report showed that recent prices of Malampaya gas were at $13.05/MMBtu — cheaper than liquid condensate at $18.60/MMBtu but still more expensive than imported LNG at $12.38/MMBtu.

The DoE should really look into this and encourage an environment that doesn’t violate the least cost principle. It should work closely with the Energy Regulatory Commission and private sector players to avoid policies that mislead and cause disservice to the many consumers whose only concern is how much they will pay in their monthly bills.

We need the least cost, and this DoE directive certainly is not.