Meralco’s CSP HELE HELE with Super Critical Coal Technology

David Celestra Tan, MSK
11 October 2019

Meralco has been super publicizing its adoption of this ultra super critical coal technology with high efficiency and low emission (HELE) for the 1,200mw Atimonan One project. It is supposed to be the country’s first (after Mauban’s San Buenaventura) and implying a high bar for high efficiency and low emission. Such high standards and big project size of 1,200mw were the reasons there were no bidders other than Meralco’s own Atimonan One Energy Corp.

(Not to mention that Meralco’s “Third Party” Bid and Award Committee gave bidders only 7 days to pay P6 million to buy the bid documents and only 40 days to do technical studies, due diligence, and prepare a bid for the approximately $ 3billion project!)

One more “failed bidding” for such super critical technology would mean a legal negotiated contract for the 1,200mw project in Atimonan, Quezon.

Meralco ally San Miguel Corp. who won most of the initial CSP for the 1,200mw and 500mw  brownfield projects due for delivery in December 2019, had his two companies (Panasia and Mariveles Power) withdraw from the bidding. (Paying P12 million for bid documents is small change in this game). SMC President and COO Ramon Ang is quoted in the press saying “allowing power plants with a wide range of technology to join the bidding would allow a level playing field in Meralco’s bid. We want to make an offer, so allow us to join the CSP”. “We did not join the bidding because CFB plants do not meet the requirements” the SMC COO continued. Meralco’s President Ray Espinosa said “we want all gencos to join, but we have considerations why the terms of reference for the greenfield supply are stringent”.

So What’s Ado with Meralco’s Ultra Super critical HELE technology?

Supposedly the high efficiency part (HE) means an improvement in energy efficiency from about 34% to 44%. To you and me it means supposedly lower fuel costs that are passed on to us consumers. The “low emission” (LE) part means it will have much lower harmful emissions specially CO2 and contribute less to global warming.  The ultra super critical part I think refers to the much higher combustion temperature and other thermal processes in the system.

As you can guess, this is much more expensive technology. Meralco had been announcing a project cost of $3 billion for the 1,200mw capacity or $2,500 per kw capacity compared to less than $2,000 for circulating fluidized bed or CFB.

In other words, Meralco is nobly trying to “introduce” this advanced coal technology to be charged to the consumers, who is supposedly going to benefit from “HELE” or high efficiency and low emission.  In so doing, they are able to restrict the CSP to this particular technology and project magnitude, effectively discourage competition and hence be able to negotiate among themselves a rate and terms of PSA. In the past, Meralco evidently tried to secure an “unsolicited proposal status for Atimonan One for a “swiss challenge” type CSP where A1E will have the right to match, another way to tilt the playing field for MeralcoPowerGen.

By super publicizing this super critical HELE technology, Meralco is evidently trying to acquire entitlement to the preferred status in biddings as provided for under Sections 10.2 and 10.3 of the Revised IRR of Republic Act No. 6957 otherwise known as the Built Operate Transfer law.

Project proposals for this advanced technology can acquire original proponent status must meet more or less 1) it is a project not envisioned by current policy programs of the government; 2) it must represent advanced technology not yet used in the Philippines and 3) it must be certified so by the National Science Development Board.

Now let us grant that Meralco’s Super Critical coal HELE meets number 2 and 3, clearly the power development is an established government policy and the introduction of efficient and environment friendly technology.  And CSP is similarly a primordial government policy.

The key question and I guess the main point of this article is, to achieve “high efficiency and low emission” (HELE), does the bidding really have to be restricted to super critical coal or even advanced ultra super critical coal technology that effectively they will scare away competitors, cause a failed bidding, and be allowed to negotiate PSA and prices that will be passed on to the consumers?

At the time Meralco and MeralcoPowerGen negotiated the Atimonan One project in April 2016, it was publicized with a rate of P3.75 per kwh. A few months ago this year 2019 we updated the rate using the escalation rates and fuel adjustments and it became P5.60 per kwh, higher than the then rates of other coal at P5.10 per kwh. Given that all competitors and pretenders have been shooed away from the CSP by the “super critical” requirement, and the 1,200mw greenfield project could eventually be negotiated due to failed biddings, what makes us think it will be lower than the current coal rates of P5.10 per kwh? 

The economic and environmental benefits of “HELE” can be achieved by other proven technologies most notably natural gas, a known cleaner and cheaper fossil fuel than coal and their old combined cycle technologies already beats the HELE of advanced coal technologies.

So if the government (and Meralco) really wants to be faithful to the true competition spirit of the CSP policy and now mandated by the Supreme Court in the Alyansa para saBagongPilipinas case, Meralco should not be allowed to restrict the bid specifications to this ultra super