Interview

To what extent will the award of the feed-in-tariff (FIT) encourage investment in renewable energy?

PUNO: As a country, the Philippine needs to acknowledge it is not rich in fossil fuels, but in renewable energy, and promote an environment where renewables play a greater role in the energy mix. The DoE’s approach in awarding the FIT on a first-come-first-served basis was unconventional, as it generated a race to build capacity by those hoping to receive the FIT. The new regime attracts investors with the capability to push for renewable energy. Solar energy was one of the energy sources that benefitted from the FIT scheme, with interest set to rise as the cost of panels and installation decreases. Conversely, hydroelectric presents more challenges for execution, so racing for FIT allocation can pose a risk to the project’s bankability. The Philippines is also home to the world’s second-largest geothermal company, Energy Development Corporation (EDC), a subsidiary of First Gen. Geothermal plants are used as base loads, which can compete effectively against coal generation while still being more environmentally sustainable. To develop more geothermal domestically, it may be good to introduce a FIT for this technology as well. Given its vast experience, EDC is now venturing overseas to pioneer in the geothermal industry in countries like Peru, Chile and Indonesia.

How important is the adoption of natural gas for the Philippines’ long-term energy sustainability?

PUNO: First Gen is a strong supporter of the Philippine natural gas industry, principally through the construction of the 1500-MW Santa Rita and San Lorenzo natural gas-fired plants, which enabled the development of indigenous natural gas from the Malampaya field and have delivered reliable electricity supply to the Luzon grid for almost 15 years. We are now developing additional gas-fired plants, including the 97-MW Avion and 414-MW San Gabriel projects, which will be completed within two years. These show that natural gas is an alternative for power generation and is attractive due to its higher efficiency, greater operational flexibility and lower carbon emissions.

With limited supply of domestic gas from Malampaya, First Gen has conducted feasibility studies to develop our own liquefied natural gas (LNG) regasification terminal near our plants in Batangas. We hope to complete the facility in 2020 and build enough operating experience to prepare for our natural gas needs postMalampaya. The expected future LNG reliance of Asian nations will fare well for the country, as it will possibly enjoy more competitive prices.

Despite the announcement of new plants and the risk of overcapacity, power plants under construction remain limited. The usual approach for developing largescale power projects is to first get a power purchase agreement (PPA) and fuel supply to make the project bankable and determine the timing of execution. These take a long time and may result in further delays. However, with a deregulated energy law, which has allowed for the formation of the Wholesale Electricity Spot Market, it is no longer just the government entering PPAs, but individual power distribution utilities, cooperatives and industrial users.

What are the relative advantages of gas-fired plants?

PUNO: There are three segments in the daily electricity market. The base load plants operate for 24 hours and the mid-merit plants operate for 12 hours a day, while the peaking plants operate for fewer hours. The Philippine market is a relatively peaking market: for instance, the Luzon grid peaked in 2014 at 8616 MW, while the grid’s real base load was only 4900 MW, showing a swing of 3700 MW. A right technology is needed to operate during peak or mid-merit periods. Unlike coal plants which operate continuously, gas-fired plants can respond immediately to rising demand, by being able to operate during the day when demand is higher and shut down at night. Technology advances and environmental sustainability are key to gas-fired generation. The country can definitely benefit from this.