First Gen urges govt to formulate energy mix policy

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LOPEZ-LED First Gen Corporation (First Gen) urged the government to come up with an energy mix policy in order to shield consumers from price surges affecting specific power plant fuels.

The country’s leading clean and renewable energy company aired the call Monday, saying that prices of coal – the dominant fuel for Philippine power plants — have turned volatile this year.

“Prices of coal have more than doubled between January and October this year. Such price volatility should give us reason to pause and think of other fuels we can use to protect consumers from erratic fuel price movements.
One solution is to cap the share of specific fuels we use to generate our electricity,” First Gen President and COO Francis Giles Puno said.

Data from the Department of Energy (DOE) showed that, as of June 2016, coal-fired power plants accounted for 33 percent or 6,666 megawatts out of the country’s 20,055-MW total generating capacity.

But coal’s share in the mix is expected to drastically expand in the coming years.

Think tank Institute for Climate and Sustainable Cities (ICSC) notes that there are 4,600 MW of committed and another 6,900 MW of indicative coal-fired power plants in the pipeline in the Philippines also as of June 2016.
With all those coal projects lined up, the country’s dependence on coal would increase to as much as 80 percent by 2030, according to global analytics firm IHS.

“We recognize the role of coal in the mix, but that kind of dominance being forecast for this single fuel source will not be good for the economy, especially now when coal prices have turned volatile,” Puno pointed out.

Coal prices, based on the benchmark Newcastle, traded as low as $49 per metric ton at the start of 2016, but surged as high as $108 in late October. So far this month, coal prices have hovered between $90 to over $110 per metric ton (MT).

“Coal’s volatility would expose consumers, including business establishments, to drastic and unpredictable changes in their power bills,” the First Gen official stressed.

He added that while coal has staged a rally this year, other energy sources, including natural gas from Malampaya, remain stable if not cheaper than coal.

“If the share in the mix of other power plant fuels such as natural gas is clear, they can help absorb price shocks from coal for the benefit of consumers,” Puno said.

Natural gas from Malampaya provides the fuel for First Gen’s 1,000-MW Santa Rita and 500-MW San Lorenzo combined-cycle power plants located at the First Gen Clean Energy Complex in Batangas City. Both plants hold long-term contracts to sell their output to Manila Electric Company (Meralco).

Based on First Gen’s simulations, the average generation cost of coal-fired power plants in the country would be P4.52 per kilowatt-hour if coal prices stay at $100 per MT. At $80 per MT, the average generation cost of coal-fired power plants would be P4.11 per kWh.

These are higher than the P3.71 per kWh generation cost of First Gen’s power plants using natural gas from Malampaya.

Even at $60 per MT for coal and $43 per barrel for crude, the average generation cost of gas plants would still be competitive at P3.71 per kWh.

First Gen’s power plants are run by clean and renewable energy sources such as natural gas, geothermal, hydro, wind and solar, and have a combined capacity of up to 3,470 MW.

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