Power-sector players still await clear-cut policy on energy mix

By Lenie Lectura – November 11, 2016

from Business Mirror

MORE than a hundred days since the assumption of the new administration, industry players in the power sector are still waiting for the government to issue a policy on energy mix to guide investors craft long-term investment plans.

“One hundred days, I think, are not enough to initially make an assessment on how things are shaping up. There are many key issues in this industry,” AC Energy Corp. President John Eric T. Francia said.

Still, he noted that most of the major power players await a clear-cut government policy on energy mix. “I know the energy mix seems like an old issue, but that’s important,”  Francia said. “We need that.”

The way to go about it is for the government to “start with an aspiration where energy mix is headed five to 10 years.”

“Clarify your goal, but more important, know how to get to that goal,” Francia added. “The policy has to spell out how do we get there. Specifics are as much as important as the numbers in the mix.”

AC Energy is prepared to double its commitment in the power sector to nearly P80 billion through expansion of existing assets, acquisitions or partnerships, and greenfield projects to achieve its goal of building a capacity of 2,000 megawatts (MW) by 2020.

The Department of Energy (DOE) was previously working on a 30-30-30 mix, which would come from coal, natural gas and renewable-energy sources. The remaining 10 percent could come from diesel- or oil-fired power plants. It also preferred to have this legislated.

Still in the works

But with a new administration, the proposed energy mix is yet to take off.

Instead, the DOE, under its new secretary, opted to tap the United States Agency for International Development (USAID) to assist the agency in crafting an ideal energy-mix policy.

Energy Secretary Alfonso G. Cusi has recently met with members of the USAID’s Building Low Emission Alternatives to Develop Economic Resilience and Sustainability. Among those discussed include the formulation of an optimal energy mix and the country’s local reserve requirements.

The study will focus on the energy requirements for economic-growth trends; load-consumption profiles for energy consumers; emerging-energy technologies and local industry readiness; transmission configurations; and network development.

The team will also look into the availability of indigenous energy for ensuring stable pricing to lessen dependence on energy that is dependent on international market prices.

“Our main concern now is to increase the availability of quality, reliable, secure and affordable supply. We are also looking at establishing an ‘army of reserves’ so that when there is lack of supply, we have something to rely on,” Cusi said.

The DOE, he added, would want to be certain on the decisions that will be made in order to entice more investments.

Options

The Manila Electric Co. (Meralco), the country’s largest distribution firm, has tapped a third party to conduct a study related to the proposed energy mix.

“We’re doing our own study. We have engaged a foreign consultant so that at least we can have a view. Once the policy is issued then, hopefully we are also ready with our views. We hope the power sector would be consulted by the government,” Meralco Chairman Manuel V. Pangilinan said.

Meralco, through Meralco Power Generation, is involved in power-generation business.

When asked of his initial assessment on the new administration’s first 100 days, Pangilinan noted that private-sector interest to build more power plants is “very keen”.

“So, I think, it’s a question of getting it moving,” he said. “Currently, there’s a surplus, so there is market pressure on prices to go down. Then you create a more vibrant WESM [Wholesale Electricity Spot Market]. Market exists because there’s surpluses. If there’s no surplus, there’s really no market.”

Pangilinan added he remains “absolutely positive” in the current administration.

He previously said an energy mix would be the private sector’s takeoff point in relation to future power projects. “We need to know that mix, so we will know where to move. Should we turn to coal plants…should we turn to gas plants?”

Anxious

First Gen Corp. of the Lopez group, meanwhile, said it would continue to draw up investment plans amid the absence of an energy-mix policy from the government.

First Gen Corp. President Francis Giles Puno, however, could not stress enough the importance of this policy to both the private sector and the government.

“We would like a pronouncement on the development of a fuel mix. Having said that, this does not stop us from planning our investment, particularly in gas, even if the energy mix is not out yet,” Puno said.

First Gen, the largest Philippine operator of gas-fired power plants in the country, owns and operates 19 power plants with 2,959-MW capacity, accounting for 23 percent of the country’s gross power generation.

The Lopez-led firm is also firming up a plan to build a $1-billion liquefied petroleum gas (LPG) terminal in Batangas.

Clear mix 

Puno said the company awaits a more detailed discussion with the government in connection with plans to jump-start the LNG sector in the country.

The government recognizes the need to consult with power-industry players over a clear energy-mix policy, according to Finance Secretary Carlos C. Dominguez III.

“There has to be an energy-mix policy, but at the moment we will proceed with what we have already in the pipeline so we will not stop everything,” he said.

Senate Energy Committee Chairman Sherwin T. Gatchalian, meanwhile, stressed the need to strengthen the energy sector.

“Starting with the planning stage, we should also institutionalize the system, make sure we have a valid and reliable long-term forecasting,” he said.

Latest data from the DOE showed that the Philippines’s total installed generating capacity grew by 4.6 percent from 17,944 MW in 2014 to 18,765 MW in 2015, equivalent to an 821-MW increase.

Coal-fired power plants constitute the largest share in the installed and dependable capacity last year at 32 percent and 34 percent, respectively.

Among renewable energy, hydro sources’ share remained the highest at 19 percent, the majority of which comes from the Mindanao grid.

With the feed-in tariff incentives and continued support of the DOE and energy agencies and stakeholders, variable renewable energy, such as wind and solar, grew by 50.9 percent, or a 144-MW increase, and 616.0 percent (142-MW increase), respectively, in 2014 and 2015.