Energy players on stand-by as DOE cranks up machinery
The power sector is on a wait- and- see mode pending the resolution of some issues in the industry, with a still- learning energy chief taking over the reins of the department.
As soon as he was named energy secretary, Alfonso Cusi vowed to resume programs aimed at achieving full electrification, reliable power supply and affordable power rates.
He said consumers are at the heart of his leadership, focusing on improving electricity service to every Filipino, especially the poor, by bringing in the much sought change people have been clamoring for.
Cusi said he will undertake a major re- organization at the Department of Energy ( DOE) and a sector- wide review on the country’s energy sector.
To keep things going, the new DOE chief said he is retaining some key personnel in the agency as he brings in his own staff to form focus groups that will study and address sectoral issues at hand.
“The question is, will there be change? Yes, because we have a mandate to achieve and that is the services to the people. We are going to re- organize to make sure that we have a team that is up to the challenge,” Cusi said during his first media briefing.
In the first 100 days of the Duterte administration, the DOE’s primary focus is achieving, or at least knowing how to achieve, 100 percent electrification for every household, even to informal settlers.
Cusi tasked the National Electrification Administration ( NEA) and National Power Corp. ( Napocor) to evaluate the problems in electrification and come up with a solution for that.
“In the bigger picture, the first thing we’re going to do is 100- percent electrification of household connection nationwide,” the DOE chief said.
While his leadership focus is more on the perspective of the consumers, Cusi said he is not forgetting his responsibilities to the power industry stakeholders.
The industry has been pressing for a clear fuel mix policy as this will direct private sector- initiated power projects and will be thoroughly studied by the new administration, the DOE head said. “That one, we really need to study. We need to find the correct mix,” he said.
The previous administration has pushed for a fuel mix of 30 percent from coal, 30 percent from renewable energy, 30 percent from natural gas and 10 percent from oil- based power plants. And then there is a push for a renewable energy ( RE) shift by the Climate Change Commission to reduce the country’s dependence on coal and meet global commitments in reducing green house gas emissions.
But as it stands now, over half of the power mix is dominated by coal and diesel-fired power plants, 30 percent from natural gas plants and 10 percent from renewables — geothermal, wind, hydropower and solar.
Business titan Manuel V. Pangilinan has been among those pressing the government to come up with a clear- cut policy direction on the appropriate power fuel mix the country needs as it pushes for cleaner technologies.
“We need a policy direction ( on) what is the appropriate fuel mix for our people. And once that’s decided, businesses will build the plants, whether it’s a gas plant, coal plant or renewable plant. So we just need direction,” he said.
Coming out with a fuel mix policy will present opportunities for investors on what kind of power source is needed by the country, said John Eric Francia, AC Energy Holdings Inc. president and chief executive officer.
“Government has to substantiate and that represents an opportunity to the extent that government can really make it very tangible on how to grow the renewable energy and natural gas contribution for an overall energy mix to obviously represent opportunities for investors,” he said.
The government’s policy could lean towards more renewable sources to meet the country’s commitments made in Paris, First Gen Corp. chairman Federico Lopez said.
But the question on whether the power grid system’s capacity to absorb a number of renewable plants remains.
“While we need more renewables, the questions are can we afford it and can the power grid system take it?” Francia said.
Pangilinan earlier said the Philippines needs to build 10,000 megawatts ( MW) of capacity in the next 15 years. While the country wants to move towards the cleaner renewable energy plants, it is intermittent and still too expensive for an ordinary Filipino.
The need for dependable power and the consideration of the power cost are points the new energy chief recognizes, to which he said: “We cannot just discount coal.”
“As a developing country, we cannot afford to not have coal. We have to find that balance. It should not all be renewable,” Cusi said.
Last February, former energy chief Zenaida Monsada bared plans to impose stricter standards on coal-fired power plants on emissions and fuel quality and storage handling distribution to contribute to climate change mitigation programs and the country’s commitment to lessen carbon emissions.
The standards will be part of a sustainable energy policy to be formed by the DOE with the Department of Environment and Natural Resources (DENR). Both agencies have yet to meet following the transition, DOE OIC-Undersecretary Mylene Capongcol said.
AES Philippines, which partly owns the 600-MW coalfired power plant in Zambales, is in support of the standards, managing director Neeraj Bhat said.
“We support strict operational and environmental norms. We’re not opposed to it. I think a lot of the decisions we made on the emissions control technologies we chose to employ are with that in mind with the view that there’s going to be greater scrutiny on coalfired power plants,” he said.
The company, with its partners Electricity Generating Public Co. Ltd. and International Finance Corp., are working on the 630-MW expansion of the Masinloc plant, which is a supercritical power plant.
Supercritical coal- fired power plants operate at higher pressures leading to higher efficiencies and significant reductions in emissions over the expected life of the plant.
“We expect that to be the first supercritical plant online in the country and that was a decision driven by environmental and emissions benefits using the technology. It’s more expensive upfront but we think it’s the smart way. We continue to believe the country needs affordable, competitive baseload power but we’re committed to make sure if we’re going to do coal-fired power plants, we’re going to do it as responsibly as possible from an efficient and environment perspective,” Bhat said.
Coal plants will face greater scrutiny as the DENR is now headed by Regina Lopez, a staunch critic of mining and coal plants.
However, Cusi said they need to strike a balance in mitigating emissions and providing stable power supply. “We will discuss it. We have to help one another to find the solution and the solution for adequate energy supply. We have to find the balance,” he said.
With greater pressure to move to cleaner sources of power, industry players are also asking government to support the development of more renewable power plants through another round of feedin tariff (FIT) and the issuance of the Renewable Portfolio Standards (RPS).
FIT is a set of incentives given to power developers to invest in the more expensive RE sector while RPS refers to a market- based policy that requires electricity suppliers to source an agreed portion of their energy supply from eligible RE sources.
A new round of FIT, especially for solar, and the circular on RPS would be a big help in directing investments in the RE sector, said Salvador Antonio Castro, president and CEO of CleanTech Global Renewables Inc.
“We need the framework for investors to come in. So, that means higher quotas for feedin-tariffs and the definitiveness of the mechanisms so that the investors and developers can continue to plan,” he said.
As the country forms a longterm RE plan, FIT will be necessary to keep the momentum going in the renewables sector and to solve the controversy in the second round of FIT for solar technology, Alternergy Philippine Holdings Corp. executive vice president and chief operating officer Knud Hedeager said.
“FIT-3 allocation is to fill out a void where a substantial portion of solar has already been built. There’s 800- 900 MW sitting on the ground with an allocation of 500 MW only. That has to be solved and the new allocation will take care of that problem,” he said.
A “win-win” solution to the dispute is to award all the solar developers the FIT rate of P8.69 per kilowatt-hour (kwh), the Philippine Solar Power Solar Alliance (PSPA) said.
This was also proposed by Bronzeoak Philippines Inc. director Don Mario Y. Dia, which was done in the first round of FIT for solar where an excess of 108.90 MW were granted by the DOE a FIT rate of P9.68 per kWh for a 50-MW installation target.
As for the over capacity, Cusi said the agency is now studying what happened and is exploring other options for the solar projects that did not make it to the second round of FIT for solar.
“We are evaluating how we are going to handle it. We can’t have a very big solar percentage with FIT. Maybe the FIT, can be through competitive bidding. It’s the ERC’s (Energy Regulatory Commission) job but we can say this is the policy we are going to do because there are many players that are interested,” he said.