Lawmaker rejects DOE proposal for legislated power-mix policy

by Lenie LecturaMay 19, 2016

from Business Mirror

The chairman of the House Committee on Energy Committee has rejected a proposal raised by the Department of Energy (DOE) to craft and legislate a law that will impose a power- mix policy for the power sector.

“It won’t work. The market should dictate. It is not for us to legislate,” Rep. Reynaldo Umali of Oriental Mindoro said, adding that “it is difficult to get out of it once it is legislated.”

Energy Secretary Zenaida Y. Monsada remains hopeful that the incoming administration of presumptive President Rodrigo R. Deturte would push for the legislation of a power-mix policy. As a start, the DOE is pushing for the industry to source 30 percent of its energy requirements from coal, 30 percent from renewable energy and another 30 percent from natural gas. The remaining 10 percent will come from oil-based power plants.

At present, coal dominates the power mix because it is cheaper to produce electricity from coal compared to renewable energy (RE) sources, such as wind, solar, hydro, biomass and geothermal.

 “We aspire for [a] balanced energy mix, because we can’t be dependent on a single resource. As far as the DOE is concerned, we need power to make sure that there is sufficient and reliable power supply. They say it’s crazy to have all these coal plants, but I say it’s crazier to have no power at all,” Monsada had said.

Umali, on the other hand, strongly believes that the county should “scale down on coal investments.”

He was referring to future coal projects that are under the DOE’s committed power-plant project list. For coal plants that are already under construction, “we can’t do anything about that.”

When asked what is an ideal mix for the country, Umali said, “we need to determine what is the baseload” or the plants that run 24 by 7.

“When we’re able to determine that then we peg whatever appropriate technology that will be for baseload, given the price and affordability. After that, it should all be sourced from clean energy.”

Besides, Umali pointed out, the DOE’s proposal for a 30-30-30 power mix should be “backed up by empirical basis.”

“I don’t even know if it is backed up by empirical basis, we need to look into it and we need to study that, what really is the appropriate policy mix. It should not be a pronouncement of one secretary or congressman. It should be based on something more empirical.”

AC Energy Holdings Inc. President John Eric Francia said it is easy to put in a number to come up with a power mix. The challenge, however, is in the implementation.

“The issue of the government is the challenge of substantiating this energy- mix policy. As it is now, the latest scoreboard is roughly half of the generating capacity, about 50 to 60 comes from coal and diesel-fired power plants and 30 percent comes from natural gas, then the remaining 10 per cent comes from renewables, which include geothermal, wind, hydro and solar, etc.

The government has to substantiate, and that represents an opportunity to the extent that the 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,” Francia said.

The power arm of conglomerate Ayala Corp. has currently assembled over 700 megawatt of attributable capacity. AC Energy is trying to strike a balance of providing cheap base-load power while also providing RE.

AC Energy, together with partners in GN Power Kauswagan Ltd. Co., South Luzon Energy Corp. and Northwind Power Development Corp., is pursuing several power projects, and is close to achieving its target of assembling over 1,000 MW of attributable capacity from power plants within this year.

“In terms of sector-specific, I think it will be more challenging to do more coal projects in the future because of the supply that we are seeing coming from the constructions we see recently and the pressure for the government to balance the energy mix,” Francia added.

Alsons Power Group, meanwhile, said the government must first be able to determine the country’s power-generation load profile.

“If you look at the load profile, and assume, for the sake of argument, that baseload is 50 percent and then midmerit is 30 percent and peak is 20 percent, then you’ll have to see what technology is appropriate for that type of a mix.

I think, whatever the load profile dictates should be also influenced by the ratio among coal, gas and renewable energy. We also have to consider what is already in place, and how long would it take for the market to absorb or digest all of these existing capacities,” said Joseph Nocos, vice president for business development of Alsons Energy Development Corp.

Alsons Power is developing the 105-MW San Ramon Power Inc. coal-fired power plant in Zamboanga City, with construction slated to commence on the second half of 2016 and commercial operations beginning in 2019.

Sarangani Energy Corp., also of Alsons Power, has started commercial operation of its 105-MW coal plant in Mindanao. The other 105 MW would be completed in 2018.

The group is also entering the renewable-energy segment with the development of a 15-MW run-of-river hydroelectric power plant at the Siguil River in Maasim, Sarangani.

Trans Asia Oil and Energy Corp. President Francisco Viray, a former energy secretary, said the company would definitely explore opportunities offered by the much awaited power-mix policy of the incoming government.

“An energy mix will define new opportunities, at least, for us,” said Viray, adding that “opportunities will be different” should there be no issuance of a firm energy mix by the next administration.

According to Viray, the company is aiming to produce 2,000 MW of power generating capacity in five years.

“Then we just have to do with whatever opportunity that comes along,” he said when asked to comment what if the government fails to come up a firmer power mix policy. “But we do hope an energy mix policy will be promulgated soon.”

The Phinma-led group’s power portfolio currently stands at about 500 MW.  Its list of power projects with partners include a 135MW clean coal power plant in Calaca, Batangas with AC Energy;  a 20MW geothermal project in Sto. Tomas, Batangas with the Yuchengco Group and the Philippine National Oil Co.; the 54MW San Lorenzo wind farm in Guimaras Island; and an expanded 30MW geothermal plant.

Trans Asia also acquired Power Barges 101, 1012 and 103, which have a combined capacity of 96 MW, from the government.

Manila Electric Company (Meralco) Chairman Manuel Pangilinan had also pointed out the government should come out with a clear policy identifying the power demand, supply deficit and type of fuel source to guide investors on how they will embark on future projects.

“We need to know that energy mix so that the private sector would know where to move. Should we turn to coal plants? Should we turn to gas plants? What are the limits?” lamented Pangilinan.

Meralco is the country’s largest distribution utility firm with over five million customers. It is also engaged in power generation business which is being handled by Meralco PowerGen Corp.

Based on latest DOE data, the country’s total installed capacity stood at 18,695 MW. Dependable capacity, meanwhile, stood at 16,451MW.

Of the installed capacity, coal-power plants make up 31.5 percent, while oil-based and natural gas-fired plants account for 19.3 percent and 15.3 percent, respectively.

The data indicated that the share of renewable energy sources such as geothermal, hydro, wind, solar and biomass stood at 10.3%, 19.3%, 2.3%, 0.9%, and 1.2%.

Energy think tank and global consultancy IHS of Singapore strongly urged the Philippine government to craft a stronger policy framework that will ensure a balanced power sector fuel mix.

The future, however, is uncertain as coal is seen to take up 56 percent of the mix by 2020 and only 35 percent for gas. This is because there are 23 new coal-fired power plants lined up for commercial operation in the next five years, IHS noted.

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