Clearer regulatory framework pressed on gas infra investments

Post-Malampaya gas supply

by Myrna Velasco – December 24, 2015

from Manila Bulletin

The Philippines will need to prepare for post-Malampaya gas supply, but the major hurdle to infrastructure investments on that sphere is on regulatory issues, hence, Anglo-Dutch firm Shell is batting for clearer pathway to it.

In an interview with reporters, Shell Philippines country chairman Edgar Chua is primarily hankering for a change of mindset on the part of the Energy Regulatory Commission (ERC) – as the regulating agency supposedly just typically looks at the technology based on cost impact to consumers.

“Instead of looking at the generation cost for a plant, they (ERC) should look at it from a portfolio point of view,” the Shell chief executive said.

He added that in terms of capital cost, setting up a liquefied natural gas-fired power plant will be considerably cheaper. Nevertheless, the LNG as fuel is still pricier compared to coal.

The multinational oil firm has intimated though that instead of just factoring in the peso-per-kilowatt hour charge in the electric bills, industry regulators must also re-assess energy fuel’s externalities – such as those on health and environment impacts.

“If they would have to look at it from a portfolio perspective, the cost pass-on to consumers may end up cheaper instead of just relying on one fuel,” he stressed.

He cited that if an entity has multiple fleets – for example bus, car, coaster and other vehicles, the overall cost from that variety of resources could be brought down.

Shell has indicated they have been working with the Department of Energy (DOE) as the government presses for diversification in the country’s power mix.

Chua, however, has reiterated that “investors cannot come in to build gas-fired plants or LNG import facilities if there is no guarantee that their capacities will be dispatched.”

On top of that, he specified that other commercial issues, including those with the Wholesale Electricity Spot Market (WESM), must also be addressed correspondingly.

The fuel-for-power generation mix being sorted out is anchored on the 30-30-30 rule – which sets 30-percent share of coal, 30-percent gas, and 30-percent renewables; and the balance will be for other fuels in the mix.