The reintroduction of nuclear power in the Philippines may displace coal-fired power plants, according to the latest commentary of Fitch Solutions Country Risk & Industry Research, a product of Fitch Solutions Group Ltd. UK.
“Nuclear power will offer an effective solution to meet the country’s rising power demands over the coming decade, particularly as coal-fired power—which Philippines has largely turned to—comes under increasing environmental oppositions,” Fitch Solutions said.
“Should nuclear be successfully introduced in the power mix, coal-fired power will face the highest risk of being displaced,” it said.
Fitch Solutions said if nuclear power was reintroduced, coal would likely be the first generation type to face cuts because the increasing structural risks and public opposition.
It said the government remained committed to coal power generation, despite increasing opposition on the ground while the domestic financial sector showed no signs of moving away from coal.
“We stress that coal remains the cheaper and more reliable option to meet with the country’s power demand surge, particularly as resources in the Malampaya gas field deplete with limited scope for exploration success and infrastructural headwinds to LNG import capacity. Renewables have also faced many headwinds in development, and we do not expect a substantial ramp up in this regard,” it said.
Fitch Solutions said the Philippines’ power mix was expected to remain dominated by coal over the coming decade, with the share of coal-fired power increasing from an estimated 54.6 percent of total generation in 2019 to 60.2 percent by 2029.
Fitch Solutions said this view was made on the assumption that no nuclear capacity would come online in the country over the coming decade because of high capital costs, safety considerations and long lead times.
It said it would revise its forecast if it saw concrete project developments going forward.
“We see increasing upside risk to our forecasts for Philippine’s nuclear sector given the increasing traction in the sector of late, although we are yet to include any nuclear capacity over the coming decade. President Rodrigo Duterte has issued an executive order to formally study the feasibility of introducing nuclear energy into the Philippines’ power mix, and has formed an inter-agency panel to conduct the study,” it said.
Fitch said the Department of Energy was working closely with the International Atomic Energy Agency on the country’s nuclear power infrastructure development.
The department announced plans to draft a national nuclear program as it moves forward with the legislative processes and a national decision toward nuclear power, in line with the international legal instruments and IAEA safety standards and security guidance.
Congress is looking at the establishment of an independent regulatory body and drafted legislation to address nuclear safety and security issues under a pending bill.
Fitch Solutions said nuclear power could offer an effective solution to meet the country’s rising power demands over the coming decade “due to its high capacity factors as a baseload resource.”
“We expect a surge in the Philippines’ power demand over the coming years, driven by strong macroeconomic and demographic growth, and government’s goals to achieve a 100 percent electrification rate by 2022 under the Total Electrification Program. We forecast power consumption growth to increase by an annual average of 4.6 percent between 2020 and 2029, despite the near-term headwinds brought on by the COVID-19 pandemic,” it said.