KEY
MESSAGE
Coal-fired power plants have a significant role in meeting the country’s baseload energy requirements. However, given the current listing of the Department of Energy on committed and indicative coal-fired power plant projects—assuming they are all completed and built—the Philippines would already exceed the baseload requirement for 2030.
Philippine economic growth is expected to become even more inextricably linked to the growth of the energy sector.
One of the major stumbling blocks in the Philippines’ race towards economic growth is inadequate infrastructure. Power, which is a critical component in the production of goods and services, is one of the major types of infrastructure. Sufficient power could make business operations more efficient and consequently encourage the entry of more investors; additional investors could mean the creation of more job opportunities and an increase in production. An indication of the attainment of this increase is the rapid rise in GDP and GDP per capita.
For the Philippines to address poverty significantly, the country requires a level of economic output similar to Malaysia, which in 2012 reduced its poverty rate to 1.7% of its population by exhibiting a GDP per capita of USD 10,933 with an electric power consumption per capita of 4,345 Kwh. Juxtaposed with the Philippines, the country’s poverty rate in 2012 was 25.2% at a GDP per capita of US$2,871 and an electric power consumption per capita of 672 KWh.
If the Philippines is then to virtually minimize poverty by 2030 under the same trajectory followed by Malaysia, all things being equal, the Philippines would need to grow its GDP by an annual average of 10.13% (using current dollar rate as constant price) and increase its electric generation capacity by an annual average of 11.1%. In order to attain the needed 11.1% annual growth in electric capacity between 2014-2030, the equivalent of 417,240 Gwh or 5.4 times the current capacity of 77,261 Gwh is needed. There is an imperative to develop and harness energy sources that can rapidly fill this capacity gap—and among the sources being considered and subject to serious discussions and widespread debates are coal-fired power plants (CFPPs).
There is the argument that once the Philippines attains a certain stage of development or GDP per capita, the option to then explore opportunities to divest from coal and tap more environment-friendly energy alternatives could then be considered.
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Coal, hydro and geothermal are the dominant baseload technologies across the country; exogenous factors, however, make coal viable for covering baseload needs for the short-term and midterm period.
By 2030, the Department of Energy (DOE) estimates that the country would need 13,167 MW of additional power capacity, of which 8,548 MW are to be generated from baseload power plants. “Baseload” power plants are the facilities used to meet some or all of a country’s continuous energy demand, and produce energy at a constant rate, usually at low cost relative to other facilities available to the system. This is in contrast to “mid-merit” which follows the load and “peaking” power plants which only run when there is high demand, both are designed to supply variable energy needs.
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The common baseload technologies in the regions of Luzon, Visayas and Mindanao are coal and geothermal. DOE data show that the baseload power plants for Luzon are composed of: 1) coal; 2) natural gas; and 3) geothermal, which in 2015 constitutes 67% of the islands’ installed capacity.
Table 1. Installed and Dependable Capacity and Percent Share, by Fuel Type, in Luzon.
The common baseload technologies in the regions of Luzon, Visayas and Mindanao
The baseload plants for Visayas, on the other hand are 1) geothermal and 2) coal, making-up 67% of the islands’ installed capacity.
Table 2. Installed and Dependable Capacity and Percent Share, by Fuel Type, in Visayas.
For Mindanao, the baseload plants are: 1) hydro; 2) coal; and 3) geothermal which comprise 61% of the islands’ installed capacity.
Table 3. Installed and Dependable Capacity and Percent Share, by Fuel Type, in Mindanao.
Geothermal energy – while present in the Philippines – has limited supply since it is purely indigenous, site specific, and cannot be imported. Coal, on the other hand, has a far more steady supply since it is both indigenous and can be imported readily from countries with abundant reserves (e.g., Australia, Indonesia, Russia, US) which makes its price regime predictable and affordable.
In addition, CFPPs could be practically built anywhere in the country especially in places with available water. Coal could also be easily transported. Natural gas, meanwhile, is so far only available in Luzon with its main source Malampaya expected to run out by 2022. Liquefied natural gas technologies and frameworks are still to be developed.
The other technology for baseload power is nuclear, which the Philippines has long-ago discarded as an energy alternative in 1986 due to safety concerns. The Fukushima incident and Chernobyl catastrophe have raised alarm over the negative effects of nuclear power despite advances in technologies to manage its risks.
Renewable energy sources like solar thermal, photovoltaic, ocean and wind energy, on the other hand, based on current research and development indicate very promising prospects for reliable and continuous power within the next two to four decades. At present, however, these need more development before they can significantly substitute CFPPs as baseload power sources.
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Coal is a least cost technology, particularly for the baseload.
The economic cost-effectivity of coal-fired power plants is compared in the table below (EGC 2010) with other mainstream power technologies using a common global reference called Levelized Cost of Electricity (LCOE). This study has been updated in 2015 and compared with the previous study and it shows that among the established and emerging baseload technologies, coal still remains the cheapest technology option from a purely economic perspective, not accounting for the cost of its impacts.
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Median Case Specifications for the Different Fuel Types.
* 10% discount rate
Source: IEA, from a study “Projected Costs of Generating Electricity, 2010”
It argues that CFPPs are the country’s dominant power technology because economically, it is widely available and easy to build. However, this particular characteristic only holds true for as long as coal services baseload energy requirements and serves as an uninterrupted energy source. CFPPs become less competitive once oriented to service mid-merit and peaking requirements as this would entail the need to switch the CFPP “on” or “off” to meet variable demands, incurring operators costs and losses.
A 2011 study by World Bank contended that the above LCOEs as explicit cost of these technologies and did not consider the external costs of
coal (i.e., health impacts, water pollution, climate pollution). The study posits that if these were included, CFPPs would unequivocally be one of the most expensive forms of electricity generation.
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Total Additional Capacity Needed for 2030 vs. CFPP Development Trends
Coal-fired power plants are seemingly poised to secure and exceed the country’s baseload energy requirements; hence other considerations have to be factored towards projecting the proper programming of CFPP programs.
Data from DOE would show, however, that the additional power capacity required to supply the country’s baseload appear on track to being met. The figures below show that committed and indicative CFPPs between 2012-2030 have the potential to deliver rated capacity of 11,992 MW, assuming that all are completed and built. This is more than enough to supply the whole country’s additional energy needs of 13,167 MW, of which 11,400 MW is open for private investments. This will also exceed baseload capacity needs of 8,400 MW as indicated in the 2012-2030 Philippine Energy Plan (PEP) targets.
It is important to highlight that coal, as mentioned earlier, is not economically feasible if used beyond baseload power generation, thus, it would appear that there could be an oversupply of coal power plants relative to the Philippine Energy Plan.
This inevitably raises several questions on the implication of such regime on the future of the Philippine energy sector. One possible scenario is that “too much” investments in coal-fired power plants could lock in the economy to a particular energy source, stifling the development of energy alternatives and burdening future generations with managing the impacts or “externalities” of that particular energy source. Another scenario could be that increased investment towards coal-fired power plants compels government and industry to ensure the uptake of cleaner and more efficient technologies that manage environmental, health and social impacts better, hence ensure competitiveness.
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Source: Adapted from World Bank data
The additional capacity of 13,167 MW being developed under the Philippine Energy Plan is intended to augment the country’s current capacity of 18,603 MW—placing the total energy capacity of the Philippines at 31,770 MW by 2030.
The potential for renewable energy to provide baseload power in Australia by Stewart Needham (http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp0809/09rp09#_Toc318812465)
EGC, 2015
The Social Cost of Coal: Implications for the World Bank Samuel Grausz October 2011
indicative"- FS only; committed = FS + financing, necessary permits and clearances of various agencies and concerned local government and already have financial closing