Coal to remain dominant energy source for PHL — Fitch Solutions

By Victor V. Saulon
Sub-Editor

COAL-FIRED power plants will remain the country’s dominant energy source in the coming decade, making up more than half of the capacity mix, results of a new research show.

“While the gradually improving environment for renewables present an upside risk to our renewables forecast, coal will still remain dominant in Philippines’ power sector expansion. We forecast coal to make up 59.1% of the total power mix by 2028,” said Fitch Solutions Macro Research in its latest industry report released on Wednesday.

It said coal remains the most practical base for affordable electricity generation at the scale needed to support economic activity.

“Our view is also informed by the government and power producers’ ongoing commitment towards coal,” Fitch Solutions said.

Its analysis matches the stance of Energy Secretary Alfonso G. Cusi that his department would be “technology-neutral” in approval of new power plants. He has also maintained his position that fixed and subsidized rates for renewable energy is over.

Fitch Solutions said the country’s renewable energy sector continues to face “multiple challenges, and will require strong political commitment and more incentives in order to support growth.”

“We expect non-hydro renewables generation to decline slightly to 10.2% of the total power mix by 2028 due to the development of thermal sources,” it said.

Mr. Cusi, earlier this month, reiterated the Department of Energy’s (DoE) technology-neutral approach to building energy capacity to meet rising power demand. In a forum in late July, he told ambassadors, as well as public and private officials the same.

“The technology-neutral approach taken by the DoE since I came into office has seen our generation capacity grow while maintaining our renewable energy mix and reducing our dependence on expensive oil imports,” he said in his speech. “All energy options are considered on the basis of affordability, reliability, security and sustainability.”

Coal power plants accounted for 39% of the country’s 21,241 megawatts (MW) of installed energy capacity last year, followed by renewable energy with 31%, while natural gas and oil-based plants had 16% and 14%, respectively.

Fitch Solutions said improving regulatory support for the renewables follows the recent pronouncement by President Rodrigo R. Duterte during his July 22 fourth State of the Nation Address about his intentions to cut the country’s dependence on coal for power generation with more natural gas and renewables.

Support for renewables include the DoE’s Renewable Portfolio (RPS) and the Green Energy Option Program (GEOP). RPS mandates power distribution utilities to source a minimum portion of energy from renewable sources, thus ensuring a market for it. GEOP empowers consumers who insist that the energy they use is sourced from renewables.

Still, Fitch Solutions said it expects the Philippine government to turn to coal to meet the country’s power demand surge, which is driven by strong macroeconomic and demographic fundamentals, and government goals to achieve a 100% electrification rate by 2022. “Coal remains a cheaper and more reliable option, particularly as resources in the Malampaya gas field depletes with limited scope for exploration success in alternative locations in the country,” it added.

It said while renewable energy costs are falling, the intermittency and low capacity of wind and solar power generation means the sector will only supplement base-load resources in scaling up power generation.

Fitch Solutions said its view is backed by commitment by both the government and the private sector to build more coal power plants. It cited projects that secured DoE certification as “energy project of national significance” such as the 1,200 MW ultra-supercritical coal-fired power plant in Atimonan, Quezon and the 1,336 MW supercritical “clean” coal power plant in Dinginin, Bataan.

“Our growth forecasts for coal is also underpinned by a very strong coal power project pipeline. As of the beginning of 2019, there was around 9.2 GW (gigawatts) of coal-fired capacity recorded in our key projects database, dominating the power project pipeline at 56.7% of all power projects,” it said.

“While growing environmental and social opposition against coal pose an increasing risk to these projects, we still expect a significant amount of coal capacity to be commissioned over the coming decade.”