By Myrna M. Velasco
Published: August 20, 2013
Petilla
BRUSSELS/MANILA – Gas holds on to prospects of reaching ‘golden age’ in the energy mix. However, it is in a tightrope walk versus coal.
For energy markets – whether in Europe, Asia or elsewhere – the battle lines have been drawn.
One camp is advocating “green energy” which ropes in renewables, with the support of feed-in-tariffs (FITs), and the considerably cleaner gas. The rival group, on one hand, leans on solutions from conventional technology, primarily coal-fired facilities.
To some extent for the Philippines, it already became a ‘national ritual’ to demonize coal projects. The former energy chief and now Cabinet Secretary Rene Almendras unwittingly earned the “coalmendras tag” for being perceived as an “unrepentant defender” of coal projects – a label also being passed on harshly to his successor Carlos Jericho Petilla.
At least for this country, coal remains the ‘preferred solution’ to its lingering energy supply dilemmas, especially in Mindanao. But the story is not much different in other power markets –as even the developed world still acknowledges high dependency on coal-fired generation.
The big question: what’s the place of gas or other technologies like RE then in the global energy space? And this might also engender a sobering thought: when is environmental advocacy genuine and will this become inextricably blurred if purported investments in clean energy are generally driven by desire to corner subsidies?
The truth still is, while we have big ambitions for ‘low carbon’ energy sector, we need a diversified portfolio and some technologies have specific functions in an efficiently-operated power system.
Energy with a ‘human face’
Reality check – when it comes to our energy needs, we’re already catching up on lost time as investments were expected to have flowed years back.
Certainly, no one would easily admit that the fixation on debates on technology options is misguided. Yet, it might be easier for all parties to understand if we put “human face” to the country’s current energy needs.
Since we are gearing up for near-term solutions, what would be the choices: what technology is most proven and appropriate; and how much is the consumer willing to pay for that electricity?
There are other underlying concerns that go with these, such as: how to promote industry competitiveness of a certain country so its economic future can be secured and jobs can be created?
At the other end of the spectrum, power project developers should not also be given free rein to fry this planet because of their energy technology preferences. Utmost, they must ‘clean their acts’ for the sake of environmental preservation for this and the next generation.
Yet again, how come that despite its ‘dirty tag’, coal can’t still be trounced and be simply replaced with gas or other fuels in the prevailing mix?
Realistically, gas can be built on the same scale as coal, but Mr. Brendan Devlin, energy market advisor to the European Commission, explained that even in bigger markets like Europe, “there has been a failure of the gas industry to address the issue of price.”
Meaning, since it is a more expensive option than coal, there’s a need to explain to consumers why they would need to pay higher for such alternative. And since some markets, the Philippines included, are gearing up for inclusive economic growth, a ‘green energy policy’ will be worth little if more expensive electricity will stifle a country’s competitiveness.
Globally, Mr. Devlin noted that there has been a concerted attack against the coal industry, but it remains a fact that “the technology is competitive”; and while environmentalists may reject the idea, coal projects are also strictly working within the limits of emissions prescribed by various policies and standards – especially with the deployment of the more advanced clean coal technologies.
Currently, he enthused that LNG prices are no longer seen on a global scale, but more of regionalized pricing – with the shale gas discovery in the United States leading the way. Of the three perceived ‘regional markets’, the North American jurisdiction (Canada included) has been the one which was able to considerably bring down its gas prices.
Mr. Keisuke Sadamori, director for energy markets and security of the International Energy Agency (IEA), proffered yet another silver lining for gas. Given the flexible generation of gas, it can be lined up as back-up for the ‘on-and-off’ nature of electricity generation of renewables, he said.
One practical reminder though is there has to be a scale in the deployment of gas to complement variable RE resources. In smaller markets, policymakers have to be in deeper thought as to which technology is suitable for its back-up power.
“Gas itself will need a flexible infrastructure and efficient spot markets as demand fluctuation will be influenced by sunshine and wind. For gas to make its contribution, we need a well-functioning market that could provide a meaningful price signal,” Mr. Sadamori said.
Pipeline labyrinth
Back in the Philippines, the long-planned expansion of its gas market is being hurdled by one major infrastructure bottleneck – a pipeline that shall transport the gas from a blueprinted storage and re-gas terminal to an anchor load which is a power plant or aggregate of industrial users. The operation of the pipeline is another policy gridlock that must be resolved.
Foremost in the line-up of projects being proposed by government would be the construction of a 105-kilometer Batangas-Manila (BatMan) pipeline. This has been in the drawing board for almost two decades, but until now, it remains a “pipe dream”. Industry watchers reckoned that its implementation had not moved a notch because of the lack of regulatory framework that shall support the gas industry’s expansion.
A factor that was also acknowledged by Mr. Petilla to be impeding capital flows for the sector. His call for the conduct of a new feasibility study that will synchronize all of the proposed gas investments in what he envisions as a “Master Plan for the Philippine Gas Industry,” will hopefully address that. The study is due for completion next year.
Enthusiastic investors are not lacking, and they have consistently prodded government to finally lay down clear rules for investments in the sector.
The local subsidiary of Royal Dutch Shell has been among the keen parties wanting to put up a floating storage and re-gasification unit (FSRU) facility in Batangas. But it has also been waiting for the BatMan pipeline before its proposed project can take off from the drawing board.
Other companies have been batting for integrated facility developments, such as the First Gen’s $2.3 billion proposed investments for re-gas facility and power plants as anchor loads; and the same goes with the plan of the power generation arm of Manila Electric Company (Meralco) in its Atimonan LNG project. Another eager investor is Petroleum National Brunei/Brune LNG Corporation which has been seeking joint venture deal with the state-run Philippine National Oil Company. source
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