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Carbon tax on petroleum products likely to make power more expensive, says Cusi

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Energy Secretary Alfonso Cusi on Tuesday rejected calls to impose carbon tax on fossil fuels in the Philippines, saying this will make power rates uncompetitive.

“When I assumed this position, we were short of capacity, and we were building capacity so that we would have enough to meet the demand and a sufficient reserve. And at that time in 2016, 2017, I was saying that I will source power from any source regardless and we adapted a technology-neutral policy. And up to this moment, we still want to build capacity,” Cusi said, when asked to comment on carbon tax during the “Shaping the Energy of Tomorrow” virtual forum sponsored by Siemens Energy.

“So carbon tax for us, at this moment, we are not just ready for that. We are a victim, I’ve been saying Philippines is a victim of climate change…We need support so that we can transition properly. Now, burdening our generation with carbon tax will make again the Philippines uncompetitive. We are not ready for carbon tax,” Cusi said.

Meanwhile, Cusi said that amid the COVID-19 pandemic, demand for electricity went down and the Department of Energy saw it as an opportunity to adjust its demand forecast.

“We opened our geothermal for 100-percent foreign ownership. We also increased allocation for renewable energy from 2021 to 2040. We are building capacity of 65,000 megawatts. Around 40,000 of that is RE,” the energy chief said.

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He said the Philippines aimed to energize the entire country as around 5 percent of the population still had no access to electricity.

“The giggest problem is affordability. Still, 49 percent of our power generation is coal…We are trying to develop our indigenous source to ensure our fuel and lower costs,” Cusi said.

Cusi said at present, power demand and supply “is almost at neck to neck.”

He said the government planned to participate in the power generation sector to develop additional reserves “to protect the interest of the public.”

“We are looking at  power reserves of at least 20 percent of the peak demand. With that, we can let supply and demand push prices down, but it’s quite difficult because investors will always look for PSA [power supply agreement] with distribution utilities to put up a power plant,” he said.

He said the Philippines’ energy landscape is private-sector driven and the government is studying “whether it is advisable for a developing country to give it to the private sector.”

“From 10 countries we’ve studied, Japan is the only country that is fully liberalized. In Indonesia and neighbors in ASEAN, government still has a good foothold in the power sector,” he said.

Cusi said coal remained the cheapest source of power, but the DOE issued a moratorium for new greenfield coal-fired power plants.

He said the Philippines was transitioning to natural gas with the entry of 1,200 MW of liquefied natural gas from the competitive selection process of Manila Electric Co.

The 1,200 MW was won by a natural gas power plant and that is a good sign that LNG is giving coal a good challenge and will help us,” he said.

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