On June 20, Raissa Robles wrote for the South China Morning Post an article headlined: “Blackouts, ballooning bills hammer Filipinos as energy crisis grips the Philippines.”
In response, Energy Secretary Raphael Lotilla attributed the power crisis to surging demand driven by an intense heat wave in April implying that the energy crisis would be short-lived.
Well, the heat wave has gone, and the rains have come. And yet we still have an energy crisis.
This is so because the cause of the crisis is not the surging demand driven by the heat wave but by the misguided energy policy adopted by our Energy Secretary.
The accompanying table shows the sources of the Philippine power supply. The table also shows the sources of supply, the amount in terawatt-hours and the percentage contribution.
In April of 2024, coal accounted for 63.34% of our supply, with natural gas at 16.45% and renewables (biomass, geothermal, hydro, solar and wind) accounting for 18.29%. Solar accounted for 3.80% and wind for 0.63%.
Alfonso Cusi, Energy Secretary under President Rodrigo Duterte adopted a Power Supply Plan which called for the transition from coal to renewables with natural gas as a bridge power source. Under the Cusi Plan, the contribution of coal would be reduced to 25% (from 63%), the share of natural gas would increase to 40% (from 16%), and renewables would increase to 35% (from 18%).
When Secretary Lotilla took office, he revised this plan and accelerated the transition to renewable energy. He increased the share of renewable energy from 35% to 50% and decreased the share of natural gas to 25% from 40%. Most significantly, he increased the share of wind power from 1.41% under Cusi to 17.11% (or from the current 0.78 terawatt hours or TWh in 2024, to 49 TWh in 2040, an increase of 63 times in 16 years).
This drastic revision of the Cusi Plan has several consequences.
For one, this disrupts the private sector plans for their natural gas power plants. The Lotilla Plan calls for transferring the 15% earmarked for natural gas plants to wind power plants.
As background, the natural gas power plants in the Philippines previously sourced their fuel, natural gas, from Malampaya. This is very convenient as the gas is merely piped from the gas site to the power plants. But now that Malampaya is depleting, these power plants will now have to import natural gas. Importing natural gas is a complicated process. If imported from Qatar, the natural gas must be converted to liquid through a freezing process. The liquefied natural gas (LNG) is then loaded onto special ships and transported to the Philippines. Upon arrival the LNG must be converted back to gas through a gasification process.
In sum, existing and prospective natural gas power plant operators need to have access to or own a gasification plant. Thus Aboitiz Power and San Miguel Power, who both operate natural gas plants, plan to create, in partnership with Meralco, the largest gasification plant in the Philippines. With the Lotilla Plan to reduce the share of natural gas as a source of power supply, the gasification plant risks being underutilized.
Additionally, the elimination of the natural gas power plants under the Cusi plan will greatly discourage efforts to extend the life of the Malampaya gas field as well as efforts to explore and develop new gas fields in the Philippines.
Another point and most importantly, natural gas has been planned as a bridging plant from coal to renewables or as a contingent plant in case the solar and wind power sources do not produce as expected and on time. The Lotilla Plan, by reducing the share of natural gas, increases the risk of an energy crisis and is thus misguided.
The ASEAN Center of Energy recently released a report entitled, “Assessment of the Role of Coal in the ASEAN Energy Transition and Coal Phase-Out.” The report notes that the 2040 phase-out faces significant challenges. The report cites the experience of Germany which took over 20 years and approximately $1 trillion for its energy transition. The report explains that the installed capacity of the renewable sources does not match the quantity or quality of the dispatchable energy from fossil fuel.
To elaborate, a coal plant with a rated capacity of 100 megawatts (MW) can realistically deliver 80 MW or an 80% utilization rate. On the other hand, a solar power plant with a capacity of 100 MW can only deliver 20 MW or a 20% utilization rate. The solar plant cannot operate at night and during rainy or cloudy days. Thus, to replace a 100-MW coal plant we need a 400-MW solar plant.
Not only that, the coal plant operates 24/7. To put the coal plant and the solar plant on a comparable basis, a battery plant must be included so that the solar plus battery plant can also operate 24/7. Presently, the cost of battery power is not low enough to replace coal. Thus, the resort to natural gas as we wait for the cost of battery power to decline to the point where it makes solar/battery power competitive with coal.
By the way, the claim that the cost of solar and wind power has declined is irrelevant to us the consumer. Under the feed-in tariff provisions, the providers of solar and wind power are guaranteed a fixed price for the next 20 years. Whatever savings are realized from the decline in the cost of solar and wind power goes to the power providers and not the consumers.
Moreover, under the Renewable Energy Act, renewable energy must be dispatched to the grid ahead of fossil fuel power. Logically, cheap and reliable energy such as that from fossil fuel is dispatched first; after this source is exhausted only then should expensive and unreliable energy as renewable energy presently is, be dispatched. This policy results in higher costs and highly unreliable power for consumers.
This probably explains why only the Philippines and Vietnam among all the countries in Southeast Asia are enthusiastic about wind and solar power as shown in the table.
However, the Philippine’s enthusiasm is so far reflected only in intention rather than in action as only a small portion of the proposed wind and solar plants are under construction.
An analyst has noted that the only area where the renewable companies are ahead of schedule are in their IPOs (Initial Public Offerings). Lately the stock prices of the renewable power companies have not performed as well as the fossil fuel power companies, indicating the judgment of the market that the prospects of the renewable power companies are not as bright as its proponents proclaim.
A possible reason for the pessimism is that the auction prices won by the renewable power companies in the bidding conducted by the Department of Energy are much lower than the prices awarded by Meralco to the fossil fuel companies.
There is therefore a risk that the proposed wind power plants which are supposed to be constructed in lieu of the natural gas power plants may not be constructed in time or not even at all, resulting in power shortages or at least higher power costs.
We argue that our present misguided energy policy be reverted to the Cusi Plan.
This happens when our Secretary of Energy abandons his job of assuring cheap reliable power and takes over the job of our Secretary of Environment and Natural Resources of dealing with climate change.
Dr. Victor S. Limlingan is a retired professor of the AIM and a fellow of the Foundation for Economic Freedom. He is presently chairman of the Cristina Research Foundation, a public policy adviser of Regina Capital Development Corp., and a member of the Philippine Stock Exchange.