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AN interesting thing happened a year ago.
As 2016 waned, the Philippine Electricity Market Corporation (PEMC) announced that effective settlement prices in the Wholesale Electricity Spot Market (WESM) had been down to P2.27 per kilowatt hour (kWh) for the November billing period, which at the time was the lowest on record since January 2011 (The Manila Times, “WESM prices fall to P2.27/kWh, a 5-yr low,” December 20, 2016).
According to PEMC President Melinda L. Ocampo, this was mainly driven by new capacity additions (more supply) and colder temperature that decreased the need for airconditioning (less demand). Such new capacity additions include, for the most part, emerging renewable energy sources enabled by Republic Act 9513, or the Philippine Renewable Energy (RE) Law of 2008, signed by President Gloria Macapagal-Arroyo.
As 2017 marched on, it was announced yet again that December 2016 hit another five-year low, as spot prices recorded for the December were slightly lower than November’s.
Pivotal to this steep decrease in spot prices are the new renewable energy plants ushered in by the RE law.
Between the periods 2008 to 2016, more than 800MW of solar and 500MW of wind power were built, that’s on top of the new hydro and biomass-based generating plants that the RE law made possible. Together, they increasedthe energy supply, especially during high-demand, or “peak” periods, thus lowering the price of electricity.
Yet while WESM prices was at their lowest, coal prices hit their highest levels in the same five-year period!What explains this anomaly?
Between Juneand September 2016, Newcastle Coal Index (NEWC) indicated that coal prince increased 55 percent from $51 to $74 per metric ton. In fact, it increased further to nearly $110 per metric ton on November 4, 2016.
Furthermore, the NEWC between November 2014 and November 2016 showed a 60 percent jump in coal prices within the two-year period, resulting in expensive or at least volatile long-term electricity prices.
So, if coal prices were not responsible for the low electricity spot market prices, what would explain the positive turn of events?
Renewable energy sourcesslash the average price per unit of electricity because they have very low marginal costs as they generally do not require fuel. Moreover, one source, solar, is typically most abundant in mid-day, coinciding with peak demand, making oil plants unnecessary.
However, the sporadic availability of solar and wind resources is often used as an issue against renewable energy. Their intermittent quality, the argument goes, means they cannot be a reliable source of electricity. Thus, the argument prescribes using fossil fuel (or even nuclear) plants.
But a solution to this issue has now been found:battery energy storage systems.
In January 2017, a project in Hawaii with a 28MW solar array coupled with a 2 MW/100 MWh battery system is able to dispatch power at $0.11/kWh (Energy Storage News, “AES’ Hawaiian project pairs fiver-hour 20MW battery with 28MW of solar PV,” January 11, 2017).
Just a mere four months after, in May, a 100MW solar with battery project in Arizona was able to produce electricity at $0.045/kWh, which is cheaper than any fossil fuel (Utility Dive, “Updated: Tucson Electric signs solar + storage PPA for less than 4.5c/kWh,” May 23, 2017).
And just last month, Solar Philippines announced that it was piloting a 5MW solar-battery farm in Mindoro that would save P20 billion a year in diesel subsidies (Philippine Star, “Solar Philippines shifting focus to rural development,” September 18, 2017).
This indicates an increasing capability to produce electricity cheaply from renewable energy, and valid concerns about their variability and intermittency are now being addressed by innovative energy storage systems.
As a net fossil fuel importer and with our energy infrastructure frequently exposed to troublesome weather, our country faces energy security challenges. “Energy Independence” should thus be one of the pillars of a strong Philippine republic. And the foundation of this pillar is sustainable, cleaner, and greener sources of electricity.