The Philippines may be facing an oversupply of power with an additional 6,260.9 megawatts of capacity coming in by 2020.
Latest data from the Energy Department showed around 4,101.375 megawatts of committed capacity for Luzon alone, 1,687.94 MW for Mindanao and 471.58 MW are committed in Visayas.
The department listed some 17,145.415 MW of indicative capacity coming in by 2021 to 2022 across the three grids, with the bulk or 11,607.505 MW of indicative power capacity located in Luzon.
Meanwhile, there are around 3,027.97 MW and 2,509.94 MW of indicative capacity lined up for Visayas and Mindanao.
“Based on our supply and demand outlook, oversupply in Mindanao is happening now and will get worse next year. For Luzon, we have amply supplies and reserves now and the low WESM (Wholesale Electricity Spot Market) prices support this. If plants that have announced and have started contracting are built, Luzon and Visayas will also have increasing oversupply,” Aboitiz Power Corp. president Antonio Moraza said.
AC Energy president John Eric Francia said it was too early to say if there would be an oversupply scenario.
“Currently the power plants under construction are just enough to serve normal demand growth. Let’s see how many power plants get to financial close in the next 12 months,” Francia said.
Phinma Energy Corp. president Francisco Viray said there would be “just enough” to meet demand in 2020.
GE Philippines chief executive officer and former energy undersecretary Emmanuel J.V. de Dios said that “with all the announcements being made of new power projects for development, it is not difficult to intuitively conclude that there could be an oversupply situation in 2020.”
“However, we all know that not all of these projects make it to financial close and even those that reach financial closing will be delayed. So while on paper there would seem to be a lot of capacity coming in, we can only conclude this with certainty once we know that all these announced projects have actually broken ground,” De Dios said.
He said the Philippines was facing a number of aging power plants whose capacity might no longer be as reliable.
“Moreover, a number of power plants have been operating for many years and are not in the best condition, thereby requiring newer and more efficient plants coming onstream. If you look at Mindanao and even Visayas, we are seeing increasing power demand which need to be addressed beyond the current crop of capacity being developed over the next few years,” de Dios said.
The bulk of the power projects being built are coal projects of which 2,720 MW are committed and 6,750 MW are indicative for Luzon.
Coal plants, however, are facing challenges with Environment Secretary Regina Lopez at the helm. A known pro-environmentalist, Lopez has publicly announced that she is anti-coal.
Coal plants are now required to get clearance not only from Environment and Energy Departments but also from the Climate Change Commission and the Office of Senator Loren Legarda when applying for environmental compliance certificate.
The new requirement adds another layer to the more than 100 permits needed to build coal-fired power plants.
“Yes (there will be oversupply), but depends on how many plants DENR will allow,” Semirara Mining and Power Corp. chairman Isidro Consunji said.
Quezon Power managing director Frank Thiel earlier said coal plants were required to obtain as many as 165 permits from pre-development to construction stage, which poses delay in construction.
“On average, take 4 to 7 years from the time you come up with a concept to the time you build,” Thiel said.
GNPower chief operating officer Ariel Punzalan said the permitting process had already been streamlined through the years but this new requirement would add another layer.
Power generators are building coal-fired power plants across the country’s three power grids as it is cheaper to build, which translates into lower cost of power to consumers.
“With a true-blooded environmentalist heading the DENR, getting an ECC for coal plants will really go through very stringent requirements,” Global Business Power Corp. president Rolando Bacani said earlier.
Bacani, however, is optimistic the construction of coal plants would continue “until such time that reliable sources of non-fossil-fired baseload plants are available and acceptable to the Filipinos, like natural gas and nuclear power plant.”
Energy Secretary Alfonso Cusi said the department was balancing the country’s energy mix and ensuring that not only baseload power plants are being built but also mid-merit and peaking plants.
Cusi said the agency was studying all options “on what source of power the country should have not only for now, not only for tomorrow but in the coming generation.”
Cusi acknowledged that gas supply from the Malampaya gas project in northwest Palawan might be depleted by 2022 to 2024 and that there was a need to replace the fuel for the three natural gas plants with a combined capacity of 2,700 MW.
“The Philippines is looking for cheap source of electricity… There are those opposed to nuclear. But we have need to study. We cannot leave any stone unturned. And many developed countries are using nuclear,” he said.
Cusi has directed the conduct of a technical audit to determine the status of the company’s operating power plants.
Senator Juan Miguel Zubiri urged the government to focus on renewable energy to address the power supply gap.
Zubiri said safety concerns on nuclear power must be addressed first, especially since the Philippines is located in the Pacific Ring of Fire.
He said renewable energy still needed incentives such as a third round of feed-in tariff, especially for solar which have received strong investor interest.
But businessman Manuel Pangilinan, chairman of Manila Electric Co., said the public must be prepared to accept the higher cost of renewable energy and urged the government to come out with a clear energy policy mix.
“We need a policy direction, what is the appropriate fuel mix for our people. And once that’s decided, businesses will build the plants, whether its a gas plant, coal plant or renewable. plant. So we just need a direction,” he said.
Pangilinan said there was a push toward clean energy but the government must quantify the cost of building renewable energy, which is more expensive.
“The seduction for renewables is there. But can you build RE to build enough renewables… and more importantly, how much would it cost. You have to address that, it’s not cheap, it’s not going to be cheaper than coal or gas,” Pangilinan said.
“Remember, there’s always a price (when)you need to protect environment,” he said.
