‘PHL needs energy transition group’

FIRST Gen Power Corp. has proposed the creation of a group that will address the country’s challenges during the transition to clean energy.

“While we share the belief that LNG [liquefied natural gas] is the best transition fuel in achieving 100 percent RE [renewable energy], it does not come without challenges, especially in the Philippines.

We must find a way to value gas for some time and increase its capability for back-up rather than continuous supply. And this means having a regulatory framework that supports making plans to have enough fuel in stock for when it is needed,” said First Gen Executive Vice President and Chief Commercial Officer Jonathan Russell during the 26thConference of the Electricity Power Supply Industry.

“Perhaps a multi-sectoral and cross-functional team from government, private sector and financial sector can be formed to champion this transition.”

The multi-sectoral group that Russell envisions will address challenges that include coal retirement; the restructuring of the local energy-based power market; and the adoption of policy and market mechanisms that encourage storage and allow long-term purchase commitments of LNG.

Russell stressed that LNG will play a crucial role in accelerating the phase-out of coal-fired power plants and in fighting adverse climate change, but this process will require close collaboration with the government and other industry stakeholders to assure the country’s smooth clean energy transition and avoid energy market volatility.

He said RE from intermittent sources, such as solar and wind, has a number of limitations that will hinder a full and immediate energy transition. Baseload RE, like geothermal is limited, site-specific, and, as such, has its own technical limitations to deal with.

Gas-fired plants can respond quickly and reliably when variable renewable sources are not available, according to Russell. “First Gen is, therefore, pioneering the development of an LNG terminal that will introduce reliable, flexible, and cost-competitive LNG to the Philippines.”

First Gen owns and operates the country’s biggest fleet of power plants that run on natural gas, the cleanest form of fossil fuel that emits just a fraction of the carbon dioxide or CO2 of coal-fired power plants. First Gen’s portfolio of power plants also runs on geothermal, wind, hydro and solar, which are all RE.

“For the country to truly benefit from LNG at the most competitive prices, while being protected from wild spot price swings, we need to be able to contract medium and long-term supply with LNG suppliers. And such contracts can be negotiated if LNG users, such as the gas-fired power plants, have predictable volumes of projected consumption over the mid-term, say 5 years, or the long-term, say 10 to 15 years, under their own offtake agreements with utilities and other customers.

“Otherwise, LNG would need to be contracted on a short-term basis, which would mean that competitive prices and availability of LNG at times when it is needed cannot be assured,” he said.

Russell also stressed that LNG’s role in the transition period will be temporary. “It should be used only for so long as it performs a positive role in displacing coal and supporting renewables,” he said. “In due course gas or LNG must also be decarbonized or phased down, and the option to utilize green hydrogen remains a possibility.”