Unfortunate But Not Hopeless

While other countries in the world are slowly shifting to cleaner forms of energy, the Philippines seems to be moving in the opposite direction.

The recent BMI Research of the Fitch Group noted that coal-fired power plants would dominate new energy infrastructure in the next 10 years. “Growth in the Philippines power infrastructure sector over the next 10 years will be driven by investment in coal-fired generating capacity as companies and the government build a slew of new power plants to support growing electricity demand,” according to the report.

Based on the group’s research, there is roughly 7,300 Megawatts (MW) capacity that is either under, approved or already for construction. Of these, 90 percent are coal-fired energy plants. Even the Visayas and Mindanao regions, which by the way have more renewable energy sources particularly, hydro and geothermal in their power mix, will be recipients of the future coal plants.

The report pointed out that the there is a price to pay for the country’s continued reliance on coal-fired plants.

One of the significant consequences is that the Philippines will have to keep fuel imports steady in the next five to 10 years when these power stations become operational.

“As the share of electricity generated from thermal — and especially coal — sources grows from 73% in 2017 to 77% in 2026, the Philippines will have to increase imports of fuels to feed newly built coal-fired power plants.”

There are various reasons why this report bothers me.

For one, we are lagging behind in our commitments to provide cleaner forms of energy given the amount that would be generated in the coming years from coal plants. While the rest of the world is moving away from coal, we are still stuck and depending heavily on this form of energy.

Again, I stress that I have no issues with coal plants per se, having built some of them during my time as Napocor chief. But the world and its needs have changed, and we need to get our energy from cleaner sources. Other countries are making drastic changes. China alone, the world’s biggest consumer of coal is shifting to RE by pouring some $361 billion worth of RE investments by 2020. Its government has also canceled roughly 150 coal projects from September last year to March this year.

Unfortunately, we are heading towards the opposite direction largely because our government regulations are not supportive of the growth of the RE sector. For one, we still have limited participation from foreign investors in the energy infrastructure, and as such, limited funds flow to build more RE plants.

Our regulatory environment is far from friendly for both consumers and RE producers, too.

For one, our regulators use an incorrect valuation for the beta by taking the value from the point of view of the generator than of the consumers for our floating Power Sales Agreements or PSAs. Unfortunately, our PSAs have pass through costs, which means power consumers pay end up paying for higher energy prices when the peso falls against the dollar and when coal and oil prices surge in the global market because of the value of the beta, which has a positive value.

As I have said previously, this is incorrect as the the consumers are the ones who are shouldering the cost of foreign exchange fluctuation as well as the fuel risks. Hence, the beta in our tariff setting should be a negative one to reflect the risks borne by consumers for both the foreign currency adjustments and world prices of oil and coal.

Plus, I have discussed in an old blog post, our regulators place an arbitrary value on the beta when it comes to cost recovery in our tariff setting. For example, a geothermal plant and coal-fired power plant will have the same beta value. This is faulty because the developer of a geothermal power plant takes more risks given the exploration cost than the coal-fired power plant developer. The incorrect application of the core concept of the capital asset portfolio model is detrimental to the development of renewables.



Coal-fired plants must be a thing of the past. Renewable Energy is the future. 


Again, at the risk of sounding like a parrot, our energy planner belongs to the school of thought that coal-plants are cheaper the RE ones. These planners only look at the upfront cost of building power plants rather than scrutinize the risks that consumers shoulder when relying significantly on fossil fuels.

I have repeatedly pointed out that traditional sources of energy are not necessarily cheaper as we could end up paying more given our heavy dependence on imported coal. Even the above report of BMI stressed that we are importing 70 percent of our coal needs from neighbors. So, what happens when coal prices increase? What happens if importation becomes more expensive due to various factors? We have been in this situation before where our power rates have increased because getting coal abroad has become difficult.

Sadly, it is the Filipinos who are screwed with such flawed thinking as the ordinary Pinoy consumer pays for these upward price adjustments. We do, after all, have the pass-on provisions where customers pay for price fluctuation.

We have been suffering from high power rates for several decades now. And as I have been discussing in quite some posts, the key to solving high electricity prices is to one, have more renewable energy in our mix and second to have fixed-price contracts for our PSAs.

Our best bet to lower power prices is to have more RE in our energy mix. RE will be a cheaper alternative as many experts have stressed that the prices of RE technologies will continue to fall.

Regrettably, it seems unlikely that our country will shift to more cleaner form of energy soon. Understandably, moving to cleaner energy will not happen over night.

In the meantime, we must find ways to mitigate the consequences of relying heavily on coal-fired plants. I stand firm on my position that we need a greater share of renewables. But we must, at the very least, consider having fixed-priced contracts where we use a risk-free rate, the negative beta as I have mentioned above in the discount rate in computing for the tariff (reasons for this are in an in-depth discussion in my previous post.)

RE sources are in the best to position to give out these fixed-priced contracts, which do not pass-on the costs to consumers. These contracts will not burden consumers by making them pay for price fluctuation of coal importation costs since there are no import costs of raw materials in RE production.

Yes, we do need more infrastructure, particularly more power plants as our economy develops. But we must also pay attention to the welfare of ordinary Filipinos as we build for our future. Heavy reliance on coal-fired plants will be detrimental to our families as they shell out more money to pay their electric bills. I implore our energy planners to map out and scrutinize all options available as we try to meet our increasing demands for energy.



The Key to Sustainable Energy: Energy Storage Solutions

One of the biggest criticism on renewable energy is its inability to act as a baseload plant. With the exception of geothermal energy, renewable energy sources such as wind and solar cannot provide power 24/7 and have variable outputs, thus making the task of balancing the supply and demand a tedious one.

This is why we need additional technology to store the energy sourced from renewables. Gladly, scientists discovered energy storage technologies for RE. They have been available for some time now, but with the rise of renewables, their importance is now being emphasized

There are different kinds of technologies for energy storage. The most mature and common energy storage is the pumped hydropower where two reservoirs with different elevation are used to store excess power. Water is pumped to the reservoir with a higher elevation when there is excess hydropower supply. Stored energy is drawn when needed by releasing the stored water into the reservoir with the lower height with the help of turbines.

In the Philippines, the Kalayaan Pump Storage is one such type of storage.  Originally designed for the Bataan Nuclear Power plant, the National Power Corporation in the 1990s expanded the capacity to 600 MW to precisely act as a pump storage. In its design, however, it was not contemplated to store renewable energy. This facility provides ancillary services to the system to regulate voltage and frequency.

There are also other storage technologies available, as well.

For example, thermal storage is used by solar plants where the heat from the sun is stored in molten salts, water or other liquid.  Another storage technology is the compressed air energy storage that compresses air and stored in underground caverns. The compressed air is then drawn from their storage and a combustion turbine is used to fire the air with the help of natural gas to produce power.

At Emerging Power Inc or EPI, we use the multi-hour flywheel battery storage. We are in partnership with California-based company, Amber Kinetics for our power storage needs in our solar power plant. The flywheels serve as the reservoir of significant volume of kinetic energy with the high-speed steel rotors. The fly-wheel batteries have been around for some time, but we chose Amber Kinetics’ technology since it can store and release power for hours unlike other similar technology that works only for some minutes. The pilot model is currently installed in the Subic solar farm.


Flywheel technology by Amber Kinetics at the JSI Subic Solar farm


Recently, the World Economic Forum named battery storage as one of the Top Ten Emerging Technologies of 2016, the advances in technologies that can help improve lives and industries significantly and help protect the environment.  This list includes technologies that have been available for some time but have reached a tipping point, or where the development in such technology is significant and advantageous to many.

Battery storage solutions after all, are on the rise, too. Zinc, aluminum and sodium batteries are being employed to service small areas. For example, Fluidic Energy, a start-up company that specializes in making batteries using air and zinc has already signed a deal with the Indonesian government to help power-up some 500 remote villages using solar power in the country. The firm will provide air batteries that can store as much as 250-megawatt hours of energy. Fluidic Energy, has earlier inked an agreement with the government of Madagascar to help 100 remote villages put up a mini-grid with the aid of their zinc-air batteries.

As we push for more use of RE, we also need to find a way to store harnessed power from renewables and its integration to grids more feasible. And fortunately, various organizations including governments are now heavily involved in research work to find more power storage solutions that will pave the way for a cheaper, greener and cleaner energy consumption.