Green energy without subsidy

Orlando Oxales, Fellow of the Stratbase ADR Institute and Lead Convenor of CitizenWatch Philippines

Economic development, especially if it were to be inclusive, requires conscientious planning in which time is of the essence.

Coming out of the summer months, the series of yellow, and even some disquieting red alerts in the Luzon grid over April and May ought to call attention to a problem that requires immediate attention. Supply issues continue to hound the domestic power industry, an important engine that can make or break an unfolding economic takeoff.

Expand that situation to the six-year period between 2012 and 2018, for instance, and you get an even more dire picture, with the Luzon grid seeing demand consistently outpace capacity. If nothing is done to arrest this worrying trend, it can have enormous repercussions in the context of the administration’s much-vaunted economic development agenda. No economy had prospered without stable, adequate, and affordable power.

Add the issue of climate change into the mix and the situation becomes even more complex. While clean renewable energy is inarguably the way forward if the fate of the planet were to be considered, it is similarly clear that on the ground there is a need to balance ecological awareness with reliability, and cost to consumers, especially with the fast growing demand.

Meralco recently announced that it is embarking on a significant expansion of its plants to invest in renewable energy projects over the coming years. The shift to renewables is “inexorable,” said its new president and CEO lawyer Ray Espinosa, and so the power giant has vowed to invest in 1,000 megawatts (MW) of renewable energy projects in the next five to seven years.

“Meralco is committed to developing large-scale renewable energy projects that can deliver competitive energy for our customers, without any requirement for subsidy or support, while keeping environmental stewardship and sustainability as top priorities in our business,” Espinosa added.

MGEN Renewable Energy Inc. (MGreen), the newly set up subsidiary of Meralco’s generation arm MGEN, will serve as the platform for this strategic push to develop primarily solar, wind, and run-of-river hydro projects. Espinosa said part of the impetus was “the significant reduction in the development cost [of the projects], particularly for large-scale solar and wind over the past years.”

This allows MGreen to pursue a model that takes costly government subsidies out of the equation while delivering competitive electricity for its customers. The broad potential of the shift did not go unnoticed, and Murang Kuryente Party-list said Meralco’s profile as the biggest distribution utility in the country, not to mention its power-generation projects, puts it “in a position to change the energy mix of the Philippines on its own.”

Even so, MGEN president Rogelio Singson said the push toward renewables is meant to complement so-called baseload power sources that guarantees round-the-clock supply.

“Our argument is we need baseload plant from cheapest source, which is coal, but using ‘high efficiency, low emission’ [Hele] to be able to decommission the old and inefficient coal plants, which are on extended life,” Singson added.

Coal currently accounts for more than a third of the country’s available capacity. Of the 4,835 MW of new capacity committed by power generation firms from 2019 to 2023, some 81 percent, or 3,950 MW, will come from coal plants. Gas lags behind at 650 MW or 13.4 percent, with the rest coming from other renewable sources.

Elsewhere, the key reform necessary to further reinvigorate the power sector is still cutting the bureaucratic red tape, which will facilitate the building of much-needed power plants. Even so, Department of Energy Assistant Secretary Redentor Delola said the combined committed capacity from various projects “will cover our demand for next year until 2021.”

Meanwhile, the multibillion Mindanao-Visayas Interconnection Project will connect us with the Mindanao grid by 2020. With a unified national grid, power transmission services in the country will be more reliable, and the sharing of local energy resources will translate to fewer power interruptions nationwide, according to the National Grid Corporation of the Philippines.

The situation thus appears to be under control for now but in the very short term. But since the power industry is capital- and time-intensive, we can never be too prepared. AC Energy Inc. president Eric Francia said he predicts “a huge uncertainty” beyond 2022 when it comes to gas, LNG, and the future of new plants, due to persistent issues of openness and transparency in the market.

In this regard, Meralco’s entry in renewables can be a game-changer, and it is only through a strategically balanced mix of power sources and enough plants that we can cross that tightrope between growth and environmental stewardship.



This article was originally published in Manila Standard.

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