A Caution to DOE Secretary Al Cusi On A Realistic Energy Mix Policy

David Celestra Tan, MSK
25 July 2016

Dear Secretary Cusi:

You are coming into the Department of Energy that had been touting an Energy Mix objective of 30% coal, 30% natural gas, 30% renewable Energy, and 10% all others.

We trust that you will not automatically buy into these numerical targets that had unclear basis.

Caution No. 1

Reducing Coal to 30% is not achievable for the next 40 years.

Meralco and the MVP Group are trying to preempt the Duterte Government and Your energy tenure by hurriedly signing seven (7) contracts totalling 3,551mw of coal power supply negotiated with sister companies, affiliates, and partners last April 26, 2016 and filed with the ERC at 7am on April 29, a day before the extension granted by the ERC.

Those 3,551 of “fast break” coal projects brought to 4,100mw contracts that Meralco signed recently that will supply up to 90% of the energy needs of the National Capital Region within the next 10 years and those contracts are valid for 20 to 25 years. If we do the math, those Meralco coal projects alone translate to 55.8% of the national energy needs considering that Meralco consumes 62% of the energy needs of the whole country. So adopting a 30% goal for coal in the energy mix target for your administration will not be credible nor meaningful.

If we add the 2,000mw of coal projects being developed in Mindanao and the 2,000mw coal projects in the Visayas, coals share in the energy mix will eventually be 80 to 90%.

Caution No. 2

Clean Energy is not necessarily Renewable Energy alone.

Any targets for clean energy should therefore be called clean energy and not Renewable Energy. What’s the difference? It must be realized that Renewable Energy has become synonymous to expensive subsidized energy and those who have influenced the Department of Energy into adopting 30% RE as an energy mix target is setting up the country for expensive subsidies. Towards that fallacy, the government even has a board named National Renewable Energy Board (NREB) acting as lobbyists for solar and wind.

RE Law of 2008 identified several technologies for support. Solar, Wind, Biomass, and Mini-Hydro. (forget about ocean energy, why should the Filipino consumers subsidize their development?) Of these, mini-hydro and biomass are both grid-competitive and deserving of more rational government support.

Clean Energy means the inclusion of large clean energy projects as a program for development. Large hydro, geothermal, energy efficiency. We have probably 3,500mw of large hydro projects and 2,000mw of geothermal. Let us support their rehabilitation and expansion. We already have a significant 25% of clean energy. Let us not be misled into thinking we need 30% Renewable Energy. The Philippines should welcome renewable energy but let us wait until they are affordable and the developers reasonable in their profit expectations.

There is a need to rationalize the role of hydro in the grids. Privatizing Agus in Mindanao will surely turn them into ancillary reserve plants which means they will no longer be baseload supplying power to the people of Mindanao at P2.50 per kwh and become ancillary power supplier selling at P5.00 to P10 per kwh to the private buyer. This is what happened to the hydro plants in Luzon whose population lost the source of P1.90 per kwh power when the hydros were privatized.

If Meralco were truly looking for cheaper sources on arms-length basis, they would be working hard to secure cheaper hydro as a main source.

Caution No. 3

Natural gas options need more determined DOE impetus as a way to balance our energy mix. There are pioneering CNG projects that deserve government support. They are being locked out of the Meralco market because the CSP policy is not being implemented with resoluteness at the regulatory level.

If the government sponsors a CSP for gas with Meralco as participant it is most likely that the private sector will come up with reasonable solutions. The existing natural plants of First Gas and Kepco will probably be interested in eventual conversion to LNG/CNG.

Caution No. 4

Energy Efficiency and Demand Side Management Programs must be part of a total energy mix approach for the country. The top 3 are all addressing supply. The country needs programs to address the demand side. Roof Top solar is a form of curbing the demand side of the energy mix.

Not all coal is the same. Perhaps the dirty coal should be eliminated and clean coal technologies can be improved. There is coal gasification technologies. If we cannot immediately reduce coal in the least we can make them cleaner. Why not look at the smaller new nuclear technologies that are a lot less risky. How about fission technology in the future? And let us not allow Meralco to force the issue and lock up their supply with self-negotiated contracts and prices for the next 20 years, rendering the DOE policy of CSP useless.

We wish you success in providing a more rational, practical, and achievable energy mix policy for the country.

God Bless
Matuwid na Singil sa Kuryente Consumer Alliance Inc.


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