Urgent power supply agreements

"Pollution footprint of coal power plants is only a fraction of the daily emissions from fossil fuel-burning cars, buses, trucks, motorcycles, tricycles, etc."


The Energy Regulatory Commission held a series of public hearings on six power supply agreements awarded under the required Competitive Selection Process. The results of these hearing will be critical considering the expiration of existing power contracts this month.

Meralco’s PSAs set to expire before the year-end include Masinloc coal-fired power plant (430 MW), Therma Luzon coal plant (350 MW), and a coal facility of SMEC (430 MW). These total to a whopping 1,210 MW!

Now pending ERC approval are Meralco’s PSAs signed last September namely: PHINMA Energy Corp., a contract capacity of 200 MW with an all-in headline rate (VAT inclusive) of P4.7450/kWh and Computed all-in LCOE (VAT Inclusive) of P4.8849/kWh; San Miguel Energy Corporation for 330 MW at an all-in headline rate (VAT inclusive) of P4.6314/kWh and Computed all-in LCOE (VAT Inclusive) of P4.9299/kWh; and South Premiere Power Corporation's contract is for 670 MW and has an all-in headline rate (VAT Inclusive) of P4.6314/kWh and Computed all-in LCOE (VAT inclusive) of P4.9300/kWh. All these totaling 1,200 MW in capacity.

The CSPs were done in accordance with the Department of Energy (DOE) Circular requiring Distribution Utilities to procure power through CSPs and administered by a Third-Party Bids and Awards Committee (TPBAC) constituted pursuant to the DOE Circular.

The power utility said the prices from the PSAs are significantly lower than the average generation cost today of around P5.88/kWh (VAT inclusive). For Meralco consumers, the expected savings are around P0.28/kWh or P9.46 billion annually for 10 years.

The all-in rate of the PSAs already includes line rental and VAT and the cost of replacement power for all plant outages. There are also fines for generator companies that fail to deliver power which will be used to reduce the generation cost to consumers.

However, typical of public hearings, there were objections from some groups questioning why Meralco is replacing the expiring contracts with more coal powered plants which they call “dirty energy.” A repeating issue hitting on coal power plants’ impact on air pollution raised every time a new project is proposed.

Interestingly, data from the Environmental Management Bureau’s 2018 annual report paints a different picture. To quote: “The country’s air quality in terms of PM10 (particulate matter 10 micrometers or less in diameter) is still within the air quality guideline value of 60 µg/Ncm (micrograms per normal cubic meter). A significant 49-percent decrease in concentration was noted from 76 µg/Ncm in CY 2011 to 39 µg/Ncm in CY 2018.”

On the sources of Air Pollution, EMB reported: “The latest National Emissions Inventory by source conducted in 2015 showed that the majority (65 percent) of air pollutants came from mobile sources such as cars, motorcycles, trucks and buses. Almost 21 percent were contributed by stationary sources such as power plants and factories. The rest (14 percent) were from area sources such as construction activities, open burning of solid wastes and kaingin in the uplands.”

In the National Capital Region, the Emissions Inventory for the National Capital region in the same year reported a huge 88-percent contribution of mobile sources to air pollution in the area compared to only 10 percent from stationary sources and a mere 2 percent from area sources.

The 2018 World Economic Forum released a new Environmental Performance Index that ranked the Philippines as 82nd out of 180 countries, a health rating higher than China (120), Thailand (121), Vietnam (132), and Indonesia (133). On air pollution, the country ranked 111th in terms of Air Quality mainly due to the use of solid fuels in households.

Clearly, the pollution footprint of coal power plants is only a fraction of the daily emissions from fossil fuel-burning cars, buses, trucks, motorcycles, tricycles, etc.

Watching our carbon emissions is important but without a viable alternative to cost efficient coal plants to supply our base load demand, and an apparent aversion towards nuclear energy, the best direction would be to accelerate the building of new High Efficiency Low Emission coal plant technologies to replace our aging power plants. Laudable is the ERC’s recent approval of a Provisional Authority to Operate issued to the San Buenaventura Power Ltd., the country’s 1st HELE power plant, to supply 500 MW of baseload capacity to the Luzon grid.

Anticipated this week would be ERC’s decision on granting provisional authority to to proceed for the pending PSAs that I am hopeful will avert a possible price hike if Meralco is forced to buy expensive power supply from the Wholesale Electricity Spot Market. No, not again please.

Topics: Orlando Oxales , Energy Regulatory Commission , power supply agreements , Meralco
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