First Gen steps up call on gov’t to come up with ‘energy-mix policy’

Published November 28, 2016, 10:01 PM By Myrna M. Velasco

http://business.mb.com.ph/2016/11/28/first-gen-steps-up-call-on-govt-to-come-up-with-energy-mix-policy/

Anchoring business case on its gas portfolio, First Gen Corporation of the Lopez group has intensified call on the government to firm up an “energy mix policy” and put a cap on development milieu for specific technologies, primarily coal plants.

With fresh round of rise in coal prices, the company noted that such policy shall “shield consumers from price surges affecting specific power plant fuels.”

Coal plants are viewed to be gas-fired technologies’ nemesis, particularly in the restructured electricity market in the Philippines.  First Gen’s business model leans heavily on gas and had effectively avoided greenfield investments in coal plants.

In a statement to the media, First Gen President Francis Giles B. Puno emphasized that “prices of coal have more than doubled between January and October this year.”

He thus stressed that “such price volatility should give us reason to pause and think of other fuels we can use to protect consumers from erratic fuel price movements.”

Puno indicated that “one solution is to cap the share of specific fuels we use to generate our electricity,” and the company indicated that such can be achieved via an institutionalized fuel mix policy.

The company cited that coal’s share in the country’s power mix as of June 2016 was already at 33-percent or an equivalent 6,666 megawatts of the total 20,055MW of installed generating capacity. With additional coal installations already taking off from blueprints, that share is seen expanding even more in the immediate term.

Puno thus qualified that while “we recognize the role of coal in the mix, that kind of dominance being forecast for this single fuel source will not be good for the economy, especially now when coal prices have turned volatile.”

Using Newcastle index as reference, First Gen noted that coal commodity prices had so far surged to $108 per metric ton in October this year from a low of $49 per MT at the start of the year. Average coal prices for the month were seen hovering at $90 to $110 per metric ton, it also said.

The company provided simulations that if coal prices would be at $100 per metric ton, the average cost of coal-fired generating plants could be at R4.52 per kilowatt hour (kWh); and at $80 per MT coal, it will be at equivalent R4.11 per kWh.

“These rates would be higher than the R3.71 per kWh generation cost of First Gen’s power plants using natural gas from Malampaya,” the company said.

That as a given, Puno opined that “coal’s volatility would expose consumers, including business establishments, to drastic and unpredictable changes in their power bills.”

He added “households and businesses would find it challenging to budget and manage their expenses.” Albeit for businesses, it is seen that the opening of the power market under retail competition and open access (RCOA) could give them choices on their power service procurements.