DOE pushes for low-carbon scenario, new energy asset class

Date Published: 
December 21, 2020
  • As of 2019, the Philippines still has the highest renewable share in the total primary energy supply from among the ASEAN countries. (Image: The Philippine Star through
    As of 2019, the Philippines still has the highest renewable share in the total primary energy supply from among the ASEAN countries. (Image: The Philippine Star through

(PE2 note: Danessa Rivera interviews CEOs of DOE, NREB, AboitizPower, AC Energy and PE2 in this year-end energy feature for DOE. The article highlights PE2’s push for fiscal incentives to implement 45,900 MW virtual generation through energy efficiency as a “new energy asset class.”)

THE PHILIPPINES marks a pivotal year for the power industry as it decides to shun new coal power developments in the future.

From advocating a no-cap energy mix policy in 2016, Energy Secretary Alfonso Cusi announced the agency’s plan to stop endorsing greenfield coal power plants.

At the time he was appointed as the country’s Energy chief, the DOE pushed for a technology neutral policy on new power developments as long as they met the requirements of the country.

The technology neutral stance, Cusi said, aimed to foster competition so that the country would have adequate and reliable electricity supply while sustaining economic growth.

“We’re looking at all possible sources,” the Energy chief said at the time.

In the Association of Southeast Asian Nations (ASEAN) region, coal is an unchallenged power source as it remains the cheapest source of power.

The same holds true for the Philippines, where the dominant fuel source for baseload, or 24/7 power, is coal, cornering 35 percent of the total installed generating capacity as of end-June 2017. In terms of power generation, coal covers roughly 50 percent of the total.

In 2019, coal saw a significant growth in terms of installed capacity from 7,419 MW in 2016 to 10,417 MW. In terms of percentage, coal’s share in the energy mix even rose from 34.6 percent to 40.8 percent.

This is because coal is largely seen as the baseload power of choice due to continued perceptions of cheaper cost.

In its report last year, Fitch Solutions Macro Research said coal-fired power plants are seen to dominate the Philippine power sector in the next decade as it remains to be the cheapest and more reliable option to stimulate affordable electricity generation growth at the pace and scale needed to support continued economic growth.

Fitch Solutions forecasted coal to make up 59.1 percent of the country’s total power mix by 2028.

Its forecast is also underpinned by a strong pipeline of coal power projects with around 9.2 gigawatts (GW) of coal-fired capacity planned, which accounts for 56.7 percent of all power projects.

“While growing environmental and social opposition against coal pose an increasing risk to these projects, we still expect a significant amount of coal capacity to be commissioned over the coming decade,” Fitch Solutions said.

Now four years into his term, Cusi has declared a moratorium on endorsements for greenfield coal power plants.

A recent assessment of the country’s energy requirements, he said, revealed the need for the country to shift to a more flexible power supply mix.

He noted that this would help build a more sustainable power system that will be resilient in the face of structural changes in demand and will be flexible enough to accommodate the entry of new, cleaner, and indigenous technological innovations.

“While we have initially embraced a technology neutral policy, our periodic assessment of our country’s energy requirements is paving the way for innovative adaptations in our policy direction,” Cusi said.

Secretary Cusi also noted that as of last year, the Philippines still had the highest renewable share in the total primary energy supply among countries in the ASEAN region.

As of end-2019, renewables accounted for a share of 28 percent of the country’s energy mix. This was a stark drop from the past decade, contrary to the coal of the Renewable Energy (RE) Act of 2008. Prior to the passage of the law, the share of RE in the total energy mix was at 35 to 40 percent.

“This to me is the real story. Apart from the capacity that we have not realized, the share that keeps dwindling makes us pause. This demands a review considering that this is taken from the power development plan (PDP), which is the supply outlook of the DOE,” National Renewable Energy Board (NREB) chairman Monalisa Dimalanta said.

That’s why the government is looking to bring RE’s share back to the 35 percent level as it reviews the National Renewable Energy Program (NREP) 2011-2030.

The new targets under NREP 2020-2040, around 34,000 MW of RE installations are set to be developed by 2040.

Aboitiz Power Corp., one of the country’s major power players, has thrown its full support to the DOE’s push for RE development.

“We fully support the government’s efforts to promote renewable energy, hence the continued expansion of our Cleanergy portfolio, so we can serve the growing demand for renewables,” AboitizPower president and CEO Emmanuel Rubio said.

In charting its 10-year plan, AboitizPower intends to grow its capacity from 4,432 MW this year to 9,300 MW by 2029.

The 10-year plan will trigger a major shift in its energy mix of almost 1:1 thermal to Cleanergy.

Currently, the bulk of AboitizPower’s capacity is dominated by thermal power while its Cleanergy brand amounts to 1,272 MW, or 39 percent of its total net sellable capacity, generated from its portfolio of hydro, geothermal, and solar power plants.

“We have significant capacities in our thermal portfolio. Today it’s the default option and probably in the next few years. It’s making sure to support the country’s growing demand for reliable and affordable energy,” Rubio said.

“But allow me to point out that Aboitiz Power is actually a pioneer in renewable energy and we have the largest nameplate capacity in terms of renewable and we are going to continue growing our renewable portfolio,” the official said.

The Ayala group, a recent entrant in the country’s power industry, has charted its plan to divest from coal investments by 2030, which was viewed as a sound business strategy to trigger a major shift in the country’s energy mix.

The group’s power arm, AC Energy Inc., launched an Environment and Social Policy (E&S), which aims to transition to a low-carbon portfolio by 2030.

“We are making a commitment to transition to a lower carbon portfolio by rebalancing our generation portfolio to grow our renewable energy assets,” AC Energy chairman Fernando Zobel de Ayala said.

Apart from renewables, the DOE said the Philippine energy sector will undergo a transformation to achieve a low carbon future by pursuing other clean energy technologies.

This includes the inclusion of nuclear in the country’s energy mix.

Since 2017, the DOE has been pushing for the inclusion of nuclear in the country’s energy mix.

In July 2020, President Duterte signed Executive Order (EO) no. 116 which supports the Philippine nuclear energy program.

EO 116 provides for the creation of the NEP-IAC to be chaired by the DOE, with the Department of Science and Technology as vice-chair.

The inter-agency body is mandated to primarily conduct a study for the adoption of a national position on a Nuclear Energy Program (NEP).

The NEP Inter-Agency Committee (IAC) will submit to President Duterte on December 20 a proposed national policy to include nuclear power in the country’s energy mix.

The Philippines was one of the first Southeast Asian countries to embark on a nuclear power program with the creation of the Philippine Atomic Energy Commission in 1958.

The 620-MW Bataan Nuclear Power Plant (BNPP) was built during the Marcos administration to supply additional power by replacing aging power plants. Various issues hounded the project, which led to its non-operation to date.

“I firmly believe that our country’s economic landscape would be much different had we tapped nuclear power back then. Instead, our economic development was stunted, whereas our regional neighbors who had boldly ventured toward nuclear had all been transformed into economic powerhouses,” Cusi said.

The DOE’s push for a low carbon scenario would also include energy efficiency and conservation measures, which would slow down the growth of total primary energy supply.

The Energy Efficiency and Conservation (EE&C) Act, which was signed into law in April 2019, is seen to unlock a capacity of 45,900 MW until 2040 through energy efficiency adoption and investments.

“Energy efficiency is all about harvesting 45,900 MW of virtual generation embedded as wasted energy in the demand- side of the market as a primary, indigenous resource in the country’s energy mix through 2040,” Philippine Energy Efficiency Alliance (PE2) president Alexander Ablaza said.

But in order to realize this, the government must do its part to encourage the development of the EE&C sector.

“The government should, however, enable enough fiscal policies that would enable such investment decisions to make for a new energy asset class, distinctly apart from those intended for renewable energy, and through innovative business models that would flow capital through new players and new risk regimes,” Ablaza said.

Written/Posted by: 
Danessa Rivera

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