RE, gas, BESS top power firms’ agenda amid crunch

(PE2 Note: Energy journalist Lenie Lectura reports on PE2’s push for Tier III re-classification of energy efficiency projects as a critical policy measure to attract local and foreign investments toward this new energy asset class.)

MORE power projects and enforcement of key policies should be the focus of the energy sector moving forward, in the view of industry players.

Most of the power firms’ projects lined up for the years ahead are renewables, battery energy storage system (BESS), and gas. While they are determined to finish these projects as soon as possible, AC Energy Corp. (ACEN), the power arm of conglomerate Ayala Corp., stressed that it is critical to address medium to long-term imperatives such as developing the next Malampaya, establishing LNG (liquefied natural gas) infrastructure, and scaling up renewables and energy storage.

“2022 could be a similar picture, especially as the economy reopens. It is critical to stabilize Malampaya output, complete the construction of GN Dinginin, and ensure reliability of existing plants,” said ACEN President Eric Francia in an interview.

The Malampaya gas field in northwest Palawan experienced frequent and longer gas restrictions last year that resulted in tight power supply because gas is fast depleting.

7 of 12 wells only

According to an industry source, only seven out of the 12 production wells are “actually producing.”

“The pressure in the gas reservoir is really low. It can only give as much as it can,” cited the source.

One solution, albeit temporary, is to drill more wells as soon as possible. The cost to do that is estimated at $50million-60 million per well. If done, gas supply could last until 2027. “But it won’t produce the same quantity of gas back in its early years. Still, it would help,” added the source.

The drilling activities, however, are dependent on the license of the gas field operator—if it will be extended by the government when it expires in 2024.

The Department of Energy (DOE) had already set eight parameters as basis for extending the license. These include Malampaya gas reserves, a work program, decommissioning and restoration plan, assets disposal, gas price, banked gas and revenue sharing between the government and the contractor.

The gas restriction incidents and facility shutdown of the Malampaya deep-water gas-to-power project last year led to an increase in generation cost—a major component of an electric bill, according to Meralco (Manila Electric Company) utility economics head Lawrence Fernandez.

“In general, Meralco generation costs in 2021 gradually increased mainly to higher fuel prices, for both Malamaya gas and coal; use of alternative fuel by gas plants due to persistent reduction in Malampaya gas supply; and higher WESM (Wholesale Electricity Spot Market [WESM] charges, as a result of higher demand and plant outages,” said Fernandez in an interview.

Francia said the recent supply shock and spike in fossil fuel prices is a stark reminder of the need for energy independence through the development of indigenous resources, inducing renewables.

“We believe that we can and should be bolder with our renewable energy goals. Renewables are already competitive to thermal, and enabling technologies such as BESS are increasingly becoming more competitive and scalable. With the right policies in place, we believe that we can accelerate the energy transition.”

SMC’s BESS

The power arm of conglomerate San Miguel Corp. (SMC) will be able to switch on an initial 690MW of its BESS facilities early this year.

“A total of 690MW of our 1,000MW BESS facilities nationwide will be operational early 2022. By year-end, we will have completed all 31 facilities for a total of 1,000MW in capacity,” said SMC President Ramon Ang.

The BESS facilities are seen to not only improve power reliability throughout the country, but also make way for the integration of some 3,000MW of intermittent renewable power into the grid.

Aboitiz Power Corp. is also involved in many power projects this year. “For 2022, we are looking forward to seeing our capacities come in. This will also be the year we expect to gain more momentum in our 10-year renewable energy growth.  Last year was definitely a good year and we are hopeful at a better 2022,” said company president Emmanuel Rubio in a text message.

Aboitiz Power has set a goal of achieving a 50:50 clean energy and thermal capacity mix by 2030.  It is earmarking P190 billion in the next 10 years to build an additional 3,700MW to achieve the goal.

ACEN, SMC and Aboitiz Power are all keen on exploring liquefied natural gas (LNG) given the depleting supply of gas from Malampaya. “We do foresee certain issues such as gas availability from Malampaya, but we are ready to augment capacity in the grid with GN Power Dinginin. We are hopeful at a better 2022,” added Rubio.

They said enabling laws are already in place, but the industry still awaits the execution of critical market mechanisms such as the renewable energy market, reserve market, and lower RCOA threshold.

Francia said implementing these mechanisms would spur much needed investments. “We also need to accelerate the upgrade and expansion of transmission network to enable additional generation capacity. It is also critical to complete the Mindanao-Visayas interconnection so that the excess capacity in Mindanao can help the tightening supply in Luzon and Visayas,” he added.

Philippine Energy Efficiency Alliance Inc. (PE2) agreed that there should be more fiscal policies to aide investment decisions and more policy issuances to make the Energy Efficiency and Conservation Act (EE&C) fully enforceable.

“This is made evident by DOE’s momentum to finalize six draft department circulars through first quarter of 2022. What remains critical now is the BOI [Board of Investments] and FIRB’s [Fiscal Incentives Review Board] willingness to quickly re-classify energy efficiency projects as Tier III industry activities under the CREATE-SIPP incentive framework and reduce the over-regulation of projects, which may serve to constrict rather than attract local and foreign investments into this new clean energy asset class called energy efficiency,” said PE2 President Alexander Ablaza.