PHL needs a clear energy transition plan

By BusinessMirror Editorial December 24, 2020
https://businessmirror.com.ph/2020/12/24/phl-needs-a-clear-energy-transition-plan/

Recent reports on vaccines working effectively make us optimistic about the Philippine economic forecast in 2021. Effective vaccines will help ignite faster economic recovery. Government has said that gross domestic product growth would recover and expand in 2021 by 6.5 percent to 7.5 percent. Global financial giant Morgan Stanley is more bullish about the Philippines’s strong econo­mic rebound next year against a backdrop of low inflation and the government’s infrastructure development push. In a recent report, Morgan Stanley hiked its 2021 GDP growth forecast for the Philippines to 13.5 percent from 13.1 percent.

Predictions that the Philippines can come out of the Covid-19 crisis with enhanced economic competitiveness are most welcome. However, historical data has shown that when the Philippines experienced fast economic growth, that expansion was directly proportional to electricity consumption. Thus, a sustained GDP growth entails rising demand in electricity.

Here’s the good news: Amid the pandemic, power rates have been on a downward trend as Meralco announced another reduction in consumers’ electricity bills, pushing rates to their lowest in three years. Meralco recently said that customers will have a net rate reduction of P1.3870 per kWh, equivalent to a bill reduction of more than P277 for a 200-kWh household. The lower power rates were partly attributed to Meralco’s new Power Supply Agreements, secured after a transparent competitive selection process last year. The new PSAs resulted in additional power supply and capacity to the grid, while leading to lower electricity prices for consumers.

Now the bad news: Despite the downward power rates trend, the current campaign for renewable energy (RE) as an immediate alternative source to produce baseload capacity may backfire on consumers in the short-term. That’s because the country’s power grid is not yet suited to handle 100-percent renewable energy. If the economy has to grow next year as projected, more baseload power is needed.

Here’s the tricky part: Power generation companies running natural gas power plants also claim that natural gas is a cleaner power source compared with coal, which is cheaper. This is untrue, according to National Energy Technology Laboratory in the US. While natural gas emits 50 percent less carbon dioxide, it doesn’t mean it’s zero CO2, NETL said. CO2 is not only the harmful emission generated by natural gas development. It also generates methane, which, according to NETL, is a very powerful greenhouse gas. In the first two decades after its release, methane is 84 times more potent than carbon dioxide.

No one disagrees with the use of renewable energy. However, at its technological infancy, RE is neither cheap nor reliable. With the exception of hydroelectric plants, RE is still an expensive and unreliable option for a country emerging from Covid devastation. By the sheer volume of our rising power demand based on our 2021 economic growth forecast, we need cheap and reliable sources of power that can provide us with a stable baseload generating capacity. That will insulate us from shortages and prevent speculators from playing the wholesale electricity spot market every time reserves become thin.

The Philippines, which is highly vulnerable to the impacts of climate change, can help in the global efforts to avert climate crisis by adopting a comprehensive energy transition plan. The government must do this with the power consumers in mind. We need strong action, which will ensure that Filipinos will be paying less to keep their lights on.

It’s encouraging to know that Meralco, the country’s largest utility distribution company, supports the zero-carbon emission global plan. Meralco PowerGen, the power generation arm of Meralco, said it supports DOE’s energy mix plan to ensure the country’s energy security. The company is focusing on sustaining energy for the country’s future through the implementation of an energy transition plan.

MGen President and CEO Rogelio Singson said that contrary to widespread belief that the company is purely focusing on building coal-fired power plants, the company is now into an energy transition plan, which will allow them to introduce RE sources to generate additional power supply. Singson said: “We will develop more renewable projects and, at the same time, be conscious of our need to generate lowest cost electricity to reach the farthest communities in the country.”