PHL commitment to coal power flagged as renewables advance

By Ted Cordero, GMA News Online

Note: This article was originally published last October 13, 2017 in Business World.

The Philippines is “massively” exposed to new coal-fired power plants worth P1.05 trillion that the country may end up not using, a US think tank said in a report released on Thursday.

Institute for Energy Economics and Financial Analysis (IEEFA) and local policy group Institute for Climate and Sustainable Cities (ICSC) said the plants, with a capacity of at least 10,000 megawatts might be left stranded as renewable energy resources disrupt coal’s dominance.

“Prudent reform is required to level the playing field in the energy sector and to hold investors accountable for their own investment errors. The Philippines is heavily but needlessly over-dependent on coal, which is a losing gamble,” said Sara Jane Ahmed, energy finance analyst at IEEFA.

“The entire nation could be locked into two decades of paying for coal power it may not end up using,” said Ms. Ahmed, the report’s co-author along with Jose D. Logarta, Jr., ICSC energy policy advisor.

The report, “Carving out Coal in the Philippines: Stranded Coal Plant Assets and the Energy Transition” points out that current energy policies pass on the costs of financial coal risks to consumers, who in turn shoulder the higher electricity bills.

It also shows that adding renewables to the electricity system will erode the utilization rates of power sourced from burning coal as clean energy options have become the least cost in many areas.

Ms. Ahmed said “retail competition, natural gas, and the cost deflation of renewable energy and its interaction with natural gas and retail competition are factors inexorably disrupting the dominance of coal.”

The report called on the Energy Regulatory Commission to require “carve-out” clauses in all fossil fuel projects to shield consumers. It said that clause, which cuts the amount of power a distribution utility must buy from the generator, can exempt the distributor from the consequences of reducing contracted capacity from coal plants.

“Meralco (Manila Electric Co.) had the foresight to put a carve-out clause in its power sector agreements, recognizing the inevitability of stranded asset risk and the need to protect ratepayers from stranded assets by shifting stranded costs to the independent power providers and their investors,” Ms. Ahmed said.

Investments in renewable energy and liquefied natural gas are more cost-effective and less risky for investors and consumers, the report says.

“Coal prices soared last year by 60% globally while solar prices fell over 40% over the last six months in the country. It is ironic that we import 75% of our coal supply even though the Philippines is a global leader in geothermal energy and holds a vast potential for other sources of renewables, including wind and hydro,” Ms. Ahmed said.