COAL OR NATURAL GAS IS NOT AN EITHER OR QUESTION
David Celestra Tan, MSK
December 5, 2017
There is an ongoing battle for the minds of the people and policy makers between pro-coal and pro-LNG. It is however not an either or question.
The country needs a diversified energy source mix for security, price flexibility, and environment.
First on the country’s list must be cleaner and cheaper indigenous energy. That means hydro and geothermal. If the solar, wind, and biomass people get over their “windfall from Fit” mindset, these too can become part of the country’s cleaner and cheaper priority.
Then comes balancing between coal and LNG. Since the enterprising Meralco cartel members have understandably gravitated already to the highly profitable and less risky coal, the government will need to give special impetus to LNG development.
LNG is an essential part of our energy mix. Even the imported kind. It is comparatively cleaner than coal and the prognosis for price volatility is better. Our coal sources are mainly Indonesia, Australia, and the Kingdom of Semirara. Something political or environmental disaster happens in Indonesia that constrains supply and consumers are screwed because fuel is a pass on charge.
The supply curve of LNG is much better. Even the USA have come on strong in the global supply from fracking. Our challenge is creating the infrastructure for LNG importation. If not by the government, by encouraging the pioneering private investors in LNG.
Depending on the price trends of the two main fuel source, the country can calibrate its power production mix. Lets run more the LNG plants if the prices and supply are favorable.
The addition of imported LNG to the energy mix additionally opens up opportunities beyond price and environment. It will facilitate the development of suitable and cheaper “fast responding” peaking and reserve capacity such as gas and aero-derivative turbines. These cannot run on coal. Currently most of them are diesel and bunker c.
Industries and commercial users can convert to natural gas fueled on-site generation even for standby generators. These are logistically and environmentally difficult with coal.
Let us promote LNG fueled power generation not because we hate coal (although we do, yes it is a necessary evil) but we need them to balance our energy mix. We need them both. There is too much coal already so the government must put the brakes on them and balance the mix with LNG.
In fact the government can start with Meralco’s anomalous seven (7) midnight contracts, all of which are coal. One way to get something good out of the bad situation is to require them as a compromise to convert half of those 3,551mw to LNG. That is easy to do because all the projects are controlled by MeralcoPowerGen. One of the two Global Business power projects must be changed to LNG. One of the two San Miguel 528mw projects can be LNG. Half of the 1200mw Atimonan One can be LNG. EGAT can also be required to go into LNG.They all have to be price competitive though.
Then lets watch out for fission technology. Or laser delivered power zapped from Mars. Before that lets watch-out for the violation of cartelization laws.
Meanwhile, we need both coal and LNG in our energy mix. It is not an either or question.
MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com
4 Comments
Your idea condemns our consumers to the same suffering of paying expensive power from Malampaya which if otherwise generated from coal would have been a lot cheaper. For gas to be at parity with coal, it must be supplied at the plant gate at less than $ 8 per Million Btu. Unless MSK can assure that LNG would be available at this price, generation from LNG will simply cost more
Thank you for your comments Mr. Barakuel
The current cheaper price of coal is not the end all and be all issue.
In MSK’s view the energy mix of the country must be for the purpose achieving the triple balance of power security, low power rates, and responsible environment protection.
Coal power will be really cheaper if we subject it to true competitive bidding which it is not specially in Meralco’s case where there is a sister company premium from the negotiated rates. Coal is also subject to the risks of the supply chain and it will be foolhardy for the country to totally rely on just one international fuel.
We need the balance of natural gas. Malampaya is not necessarily a market based natural gas source. The price charged to the Filipinos included the development cost and guaranteed profit to the Shell group in the country’s desire to produce indigenous energy. A market based LNG once established by the government can provide a competing fuel to coal. And it is cleaner.
Let us note that the high cost to consumers of promoting renewable energy is a direct result of the need for the country to atone for the environmental sins of coal. Without that damage we don’t need to subsidize solar and wind and etc.
The recent past reveals that the country achieved high energy security (from a high share of indigenous energy comprising of Malampaya gas, a geothermal program that made the Philippines the second biggest geothermal producer in the world, and a number of large hydropower projects. The country also achieved the highest share of renewables in the region and ranked first in Environmental Sustainability in the 2017 World Energy Council Energy Trilemma Index. But we also suffer one of the highest rates in Asia because consumers paid for energy security and environmental sustainability.
We achieved high energy security and high environmental sustainability because we had a sellers market erstwhile driven by the monopoly of government in power generation.
We also achieved high energy security and environmental sustainability at the cost of paying the highest rates in Asia which muted GDP growth because manufacturing hardy contributes what with costly power.
You seem to forget that the biggest reform under EPIRA is the transformation of the industry from a sellers market to a buyers market empowering the latter to make the purchase decision. What you espouse is to diminish that power to buy from where it is cheap. You wish to maintain the same paradigm of energy security and environmental sustainability that festered the problem of high power rates which only generators like.
BTW, if you review the supply chain of coal and gas (or LNG), you will also realize that the gas supply is exposed to more risks and bigger too (e.g., limited number of suppliers and sources, specialized loading, transporting, unloading and storage requirements, etc).
Sometimes, gas proponents like to mention that coal suffers from transport risks on account of the cases where Indonesian-flagged coal barges (5,000 tons) are prevented from transporting to the Philippines. These cases hardly represent the coal supply to the Philippines. Because requirements run in the millions of tons, power plants normally transport coal in Panamax vesssels (60,000 to 80,000) with international flags not affected by bans on Indonesian-flagged barges by the Indonesian government.