Power firms await policy on fuel mix after Aquino

by Lenie Lectura – April 16, 2016

from Business Mirror

POWER producers’ long-term investment plans will largely depend on the priorities of the incoming administration. In particular, the power firms await the issuance of a more definite fuel-mix policy.

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

“We will pursue opportunities offered by developments in the regulatory environment,” he said in an interview, referring to a firm fuel-mix policy, which concurrent Energy Secretary Zenaida Y. Monsada hopes would be in the form of legislation.

A new energy secretary may replace Monsada when a new Philippine president is elected next month. For now, Monsada’s office 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.

“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 policy by the next administration.

Viray said the company is aiming to produce 2,000 negawatts of power-generating capacity in five years.

“Then, we just have to do with whatever opportunity comes along,” he said, when asked to comment if the government fails to come up with a firmer fuel-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 includes a 135-MW clean-coal power plant in Calaca, Batangas, with AC Energy; a 20-MW geothermal project in Santo Tomas, Batangas, with the Yuchengco Group and the Philippine National Oil Co.; the 54-MW San Lorenzo wind farm on Guimaras Island; and an expanded 30-MW geothermal plant.

Trans-Asia also acquired Power Barges 101, 102 and 103, which have a combined capacity of 96 MW, from the government.

AC Energy Holdings Inc. Chief Operating Adviser Patrice Clausse, in a separate interview, said a fuel-mix policy serves as a guide to investors. He underscored the importance of the government’s role in the future of power-supply security and reliability.

“A fuel-mix policy will be very important to the industry. It will obviously have a bearing on what kind of projects we will have to focus on moving forward,” he said.

The power arm of conglomerate Ayala Corp. has currently assembled over 700 MW of attributable capacity. Since its inception, Clausse said the company has been trying to strike a balance of providing cheap-based load power, while also providing renewable energy.

“That balance has to be maintained, and that goes back to the point of having a fuel-mix policy. Coal remains the cheapest source of power, and in the Philippines, electricity rates are relatively elevated. Having said that, you need a long-term, clear and consistent government policy,” he said.

AC Energy, together with partners 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.

Coal, a cheaper source of fuel to fire up power plants in the country, makes up about 40 percent of the country’s power mix, DOE Director for Electric Power Industry Management Bureau Irma Exconde said in an earlier interview.

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

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.

Data indicated the share of renewable-energy sources, such as geothermal, at 10.3 percent; hydro, at 19.3 percent; wind at 2.3 percent; solar, at 0.9 percent; and biomass, 1.2 percent.

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.

Aboitiz Power CEO Erramon Aboitiz has been urging the government to craft effective policies to protect the consumers, as well as the business interests of the private sector.

“The government has got to have a target or policy to work on moving forward,” he said. Aboitiz was particularly referring to a more comprehensive fuel-mix policy.

“What happens to the competitiveness of somebody’s power plants? If the private sector, on its own, is allowed to make decisions as to what fuel or what technology to use and still remains competitive in this market, then by all means let them.”

“From the national perspective, it makes sense to have some policy diversification. But how to achieve that has to be determined and worked on,” Aboitiz said.

Manila Electric Co. (Meralco) Chairman Manuel V. Pangilinan also said 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?” Pangilinan said.

Meralco is the country’s largest distribution-utility firm, with over 5 million customers. It is also engaged in the power-generation business, being handled by Meralco PowerGen Corp.

“I don’t know whether there’s enough time for such policies to be articulated between now and June, or will it move over to the next government?” Pangilinan said, referring to Monsada’s intent to legislate a fuel-mix policy.

“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 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 said.

The DOE’s position, she said, is “coal plants are not here forever. But we need them now, and if these coal plants comply with the standards, then we can’t do anything.”

Monsada’s office said previously the agency would impose stricter standards on coal-fired power plants as part of the country’s aspiration to lessen carbon emissions.

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