THE Philippines’ power shortfall should ease in the coming years as more power projects that are in the pipeline are commissioned.
This was the analysis made by Business Monitor International Ltd. (BMI), a unit of Fitch Group.
In its study, BMI said the country remains severely exposed to power supply shortages given the lack of installed generating capacity which is needed to meet surging power demand.
“We expect annual average growth rates in electricity consumption of 4.9 percent between 2015 and 2024, driven by improving electrification rates and robust GDP growth,” said BMI.
It said new coal capacity will dominate owing to its low cost and widespread availability, but it expects steady growth in non-hydro renewables capacity, although this will be limited by the government’s capped feed-in tariff (FIT) program.
BMI noted that the growth in power capacity has not kept pace with economic growth, narrowing the supply/demand margin and resulting in outages when existing capacity is derated unexpectedly.
It cited the Mindanao region which suffered widespread power shortages in late October when electricity output from the Pulangi and Agus hydropower plants dropped. This was primarily due to low water levels, in part due to the effects of the El Niño phenomenon.
It also noted the Philippines’ underperformance in terms of the Asian region’s quality of electricity supply.
“We believe that the power supply situation will improve over the coming years in the Philippines as the robust power project pipeline is gradually commissioned,” it added.
BMI said the robust project pipeline will support the country’s capacity forecasts.
“We have seen a notable strengthening of the project pipeline over 2015, consisting of coal-fired, non-hydro renewables, hydropower and gas-fired power projects,” it said.
Under Philippine Energy Plan (PEP) 2012-2030, it is estimated that an additional 29,329 megawatts (MW) of installed generation capacity will be needed by 2030.
BMI believes that coal dominates the project pipeline, accounting for over 55 percent of the total capacity, “supporting our forecasts of coal-fired electricity generation to grow by an annual average of 6 percent between 2015 and 2024.”
The government announced in August 2015 that the Department of Energy (DOE) plans to boost coal-fired power capacity by over 25 percent over the next three years.
“We believe that the cheap cost and widespread availability of coal underpins the country’s shift towards greater utilization of the fuel, a trend we have previously highlighted in the wider Asia region,” said BMI.
It said gas-fired power plants make up the remainder of the thermal power capacity in the pipeline but they are considerably less when compared to coal.
Gas currently plays an important role in the Philippines’ electricity mix, accounting for over 30 percent.
However, gas consumption in the Philippines is currently constrained by declining output from the Malampaya gas field and a lack of any gas import infrastructure.
“We believe this is set to change with the looming start-up of liquefied natural gas (LNG) imports in 2016, and there are a number of gas-fired power projects in the pipeline which are expected to use the LNG as feedstock,” it said.
BMI also expects to see steady growth in non-hydro renewables capacity across its 10-year forecast period, with installed renewables capacity totaling nearly 4 gigawatts (GW) by 2024.
“We have previously noted in our analysis that the regulatory environment for renewable energy in the Philippines is relatively strong, and the sector stands out as one of the bright spots in the Asean region,” said BMI.