We Don’t Have to Follow China’s Example

Beijing aims to boost coal production. Photo c/o China Dialogue

China is reportedly promoting coal-fired power in an attempt to revive its economy. News reports say that Beijing is planning to boost coal production by 3000 million tonnes this year or equivalent to a 7% increase of the 4.1 billion tonnes output recorded in 2021.

A recently released report also showed that China accounted for 52% of the newly constructed coal-fired plants constructed in 20 countries in 2021. Last year, China’s coal production broke records as miners ramped up their outputs upon the encouragement of the state. In total, China, the world’s largest coal consumer, and producer mined an all-time high of 4.07 billion tonnes in 2021. That’s 4.7% of the recorded output in 2020.

Likewise, China has already ordered its top coal-producing province, Shanxi, to guarantee thermal coal supplies to several industrial hubs located in coastal areas. Miners in the province have been told to ensure coal supply of as much as 47.7 million tonnes to be used by seven provinces between May and December. Coal miners of Shanxi will be allowed to sell their outputs above the existing price caps.

Business news magazine, Caixin reported that cabinet officials approved plans last April 20 to expand coal production in the hope that coal can help Beijing ensure energy security. At the same time, the ruling party wants more coal power plants to keep the economy moving. Slow economic growth, power shortages, and Russia’s recent attack on Ukraine compelled Beijing leaders to demand more coal-fired power.

Many are alarmed at China’s recent move towards more thermal coal. As the top consumer and producer of coal, experts say that global trends are largely affected by Beijing’s moves.

Hopefully, the Philippines won’t find itself on the same path as China. There have been major events that threatened our power supply. The first is Indonesia’s temporary ban on coal imports while the second is the tension between Russia and Ukraine.

On the local renewable energy front, there has been major progress in recent years. In 2020, the government has already placed a moratorium on new coal plants. A few weeks ago, President Rodrigo Duterte also signed into law Republic Act 11646 which promotes the use of microgrids in unserved and underserved areas. This law can help pave the way for greater use of renewables.

These developments are encouraging but the government needs to do more to ensure a swifter shift to renewables. 

A study by the Department of Energy (DOE) and World bank released recently showed that the Philippines has the potential to install up to 21 gigawatts of offshore wind power by 2040, which can account for 21 percent of the power supply. 

The same report, however, stressed that there are monumental challenges to overcome in getting a large wind industry off the ground. These challenges include foreign ownership restrictions, limited local supply chain, and lack of a transmission network.

There’s nothing new about the challenges cited by the report as they have been hampering the growth of the renewable energy sector for many years.

Take the case of the foreign ownership rule. The DOE and World Bank report noted that “Removing this restriction (foreign ownership) will allow the use of lower-cost international financing and, therefore, help reduce the cost of energy.”

There have been many calls to scrap the 60-40% rule so renewable energy can easily flourish in the Philippines. These calls have been falling on deaf ears and continue to be ignored.

What we should do is take a closer look at how we interpret the foreign ownership provision in our constitution. I am particularly keen on what Former Energy Secretary Atty. Raphael Lotilla said in an energy forum last October.

Atty. Lotilla said that we should only apply the 40% cap on foreign ownership to finite sources since the constitution pertains to “potential energy.” Wind along with solar power should not be subjected to the 40 percent foreign ownership cap since both wind and solar are easily convertible to power, and hence should not be treated as potential power.

As for the challenge of having a limited local supply chain and lack of transmission, we can easily rectify that. As I have said in previous posts, the central distribution power model is no longer apt for the times. Instead, we should be embracing a new design philosophy, which is to put up as many distributed energy resources.

The RA 11646 only allows microgrid system providers to provide integrated power generation and distribution services to underserved and unserved areas. These microgrid system providers are also required to get waivers from existing distribution utilities.

What the government should do is empower local government units, including barangays by allowing them to have their own power franchises and work with a private concessionaire to develop and build their microgrids. This is the best way to move away from the traditional power distribution model, boost disaster resilience, and help affordable and reliable energy supply for the Philippines.

The government has been saying that it is working hard to achieve its goal of increasing renewables’ share in the power mix to 35% and 50% by 2030 and 2040, respectively. However, data shows that fossil fuels accounted for 79% of the country’s power generation mix in 2020.

If the government is indeed serious about having more renewables in the energy mix, then it should put its money where its mouth is. It can start by lifting the foreign ownership rule and setting up more DERs in the country. Neither should our government emulate China’s moves of welcoming more coal to secure its energy supply. The answer does not lie in more centrally-based power plants but inDistributed Energy Resources (DERs)using indigenous and sustainable energy.

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