Less reliance on coal in power sector seen

CEBU CITY—The electricity industry is approaching the threshold of transition into the dominance of renewable energy resources, under which there is “not much need for many new plants” especially coal-fired ones, according to the top official of First Philippine Holdings Corp.

“There are many powerful vectors” converging to change the energy industry and provide an opportunity to leapfrog and build a power industry “that’s truly for the 21st century,” said Federico R. Lopez, FPHC chair and chief executive.

Lopez was speaking at the 2nd Philippine Environment Summit held here and which wrapped up on Thursday.

FPHC’s subsidiaries and affiliates operate various electricity-generation facilities, including major assets that run on natural gas (belonging to First Gen Corp.) and geothermal power (Energy Development Corp.).

Lopez said energy companies in the Philippines face an intense price competition, with coal-fired power plants continuing to capture a sizeable portion of the market.

“Yet another challenge is the short-term perspective of a government ambivalent about climate change issues,” he said. “Despite our countrymen’s vulnerability to the effects of global warming, only token importance is given to such concerns in national public policy.”

Lopez said the increase in the excise tax on coal, under the Tax Reform for Acceleration and Inclusion (Train) law, “was a step in the right direction but will only amount to as little as one to three centavos per kwh in tariffs to coal-fired power plants.”

Even then, Lopez said the advancement of clean energy technology was going very fast such that solar, wind and battery storage have experienced significant cost reductions over the last few years.

“Coal-fired power plants can’t keep up with that kind of variability (in terms of supply from and availability of renewable energy) and may likely end up as underutilized or stranded assets in 10 years or less given the rapid pace of renewables,” he said.

“Coal is no longer cheap. It doesn’t have the flexibility needed for the inevitable penetration of renewable energy sources into our lives,” he added.

He said that even advanced coal plants have carbon emissions and pollutants double or triple that of the standard combine cycle gas turbines.

“Natural gas-fired power plants, on the other hand, are seen as indispensable technology for keeping the lights on in the transition to the all-renewable future we’re heading towards,” Lopez said.

According to Moody’s Investors Service, policy support from governments are needed to encourage investment in carbon capture and storage (CCS), considering that the use of coal was expected to remain strong globally to drive growing economies.

Moody’s said in a report that clean coal technologies were particularly essential to ensuring environmental sustainability in Asia, where developing economies are poised to drive steady growth in global coal consumption for the next two decades.

“CCS investment has not received the necessary backing in part because the United States, Europe and China are shifting the fuel mix away from coal and toward cost-competitive, often subsidized, alternative fuels,” Moody’s vice president Anna Zubets-Anderson said in a statement.

The Global CCS Institute, which is based in Australia, explained that the CCS technology involved capturing carbon dioxide produced by large industrial facilities—such as power plants—compressing it for transportation and then injecting it deep into a rock formation at a carefully selected and safe site, where it is permanently stored.

Zubets-Anderson added that, however, due to the lack of opportunities to use captured carbon dioxide in the oil fields, CCS development has not gained momentum in Asia.