COAL TO TOP 55% OF PH POWER MIX BY 2027 COAL TO TOP 55% OF PH POWER MIX BY 2027

Despite its higher excise tax under the new tax reform law, as well as initiatives to promote the use of renewable energy (RE), coal will dominate the Philippines’ energy mix in the next 10 years, a BMI Research study found.

“[T]he share of coal [is]actually increasing over our 10-year forecast period—from just under 50 percent in 2017 to over 55 percent by 2027,” Fitch-owned BMI said.

The gradual commissioning of coal plants in the pipeline would boost this increase, it added.

BMI noted some efforts to diversify the country’s power mix toward cleaner fuels, like natural gas and RE, as part of its commitment to cut 70 percent of its carbon emissions by 2030 under the United Nations Paris Agreement that took effect in November 2016.

“[H]owever, the country has released few details on how they intend to reach its target, particularly given the dominance of coal in the project pipeline,” the company said.

Citing its Key Projects Database, BMI said “54 percent of all the power projects under development are coal projects.”

Latest Department of Energy (DoE) data show it only endorsed Orion Pacific Prime Energy Inc.’s 1,000-megawatt (MW) coal-fired power plant in Barangay Awasan, Tagkawayan town, Quezon province.

The study came more than a month after President Rodrigo Duterte signed Republic Act 10963, or the Tax Reform for Acceleration and Inclusion Law (Train) Act. It took effect New Year’s Day.

Under the new law, the coal excise tax was raised from P10 per metric ton (MT) to P50 this year, P100 in 2019, and P150 in 2020.

The new tax aims to reduce the country’s dependence on fossil fuels and slash power rates by removing price volatility from importing coal and leveling the playing field from generating costs across all sources.

The Philippines imports about 75 percent of its coal supply from Indonesia and Australia, BMI said.

While the study questions the effectiveness of this move to lower electricity rates, it said it could help incentivize investment in the domestic energy sources, namely RE, over the longer run as it becomes more competitive against coal.

Meanwhile, RE is expected to contribute about 20 percent to the total power generation mix in 2020, decreasing to 16 percent in 2027.

Total non-hydro renewables capacity is projected to reach just under 5.4 gigawatts (GW) by 2020, about 50 percent higher than the 3.56 GW installed in 2016, mainly boosted by the wind and solar sectors.

Capacity additions post-2020, however, will be limited, and there is a noticeable absence of new projects, meaning RE’s share would dwindle as thermal sources expand.

Although BMI said the gas-fired project pipeline strengthened recently, its share is only 10 percent, and the use of gas will be capped by regulatory and infrastructural headwinds to liquefied natural gas (LNG) projects and competition from cheap coal.

The depletion of domestic gas supplies is a significant concern, as the Malampaya gas field off Palawan province will be nearly depleted by the end of the firm’s 10-year forecast period.

“This, combined with the lack of any significant new upstream gas projects in the pipeline, has led the Philippines to seek LNG imports for the first time,” BMI said.

Reference:

Lagareon, J. S. (February 1, 2018). Coal to top 55% of PH power mix by 2027. The Manila Times.

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