[ANALYSIS] Why coal will remain the Philippines’ main energy driver

Needless to say, it is fossil fuels that started to be the fundamental driver of social progress. It literally enabled society to meet the primary needs of its populace, including the means to provide the conditions for the people to have the ability to reach their full potential and development.  

As a matter of fact, the fossil fuel that still continues to play a dominant role in our energy systems is coal. And, whether we like it not, coal remains to be the largest driver of society’s development the world over. This situation or condition continues up to this day.  

Nevertheless, when it comes to energy consumption, the use of coal has increasingly become the least desirable. After all, coal has been singled out to be the dirtiest of the fossil fuels. When burned, coal produces a high emission of carbon dioxide (CO2).  

In this regard, coal has become a major contributor to air pollution that is “estimated to be linked to millions of premature deaths each year.” Additionally, coal is now widely considered as the major cause of global climate change. 

Coal’s long-run and short-term use perspectives

The reality on the ground shows that countries — especially in the ASEAN region — continue to use coal for its affordability. Its past and present price performance have often shown that it’s the cheapest fuel option. Likewise, coal is widely available, at the same time, easy to transport and store.  

Furthermore, coal-fired power plants continue to be reliable “baseload plants.” Baseload plants are “those power production facilities that provide continuous electricity at a constant rate to meet all or some of the demand from a given geographical area.”  

Coal-fired power plants have also remained to be the primary fuel for industrial needs such as the production of iron, steel, and cement for most countries in the world. 

Most of all, coal can be used anywhere with the appropriate infrastructure, regardless of time, weather, or location. 

Nonetheless, because of coal’s significant negative impacts toward the environment and human health, countries are called on to rapidly transition away from its use and concentrate toward the use of low-carbon sources of energy, such as nuclear and renewables.  

At the moment, advocates for the prevention of global climate change are aggressively pushing for the phaseout of coal power in the electricity mix of all countries. Moreover, coal power needs are envisioned to go down 80% by 2030. 

In response, some countries are already coal-free. But some countries, like the Philippines, have set to phase it out by 2030, 2040, or later. Yet, there are some countries like the United States, which is one of the biggest users of fossil fuels, that still have to commit to a timetable of completely eliminating the use of coal in their energy production mix.

Realities in the clean energy transition program

The current administration’s renewable energy (RE) plan is to increase the share of renewable energy in the country’s power generation mix to 35% by 2030 and 50% by 2040.  

However, this target may have to be modified considering the actual status of the country’s energy production capability, inspite of the reaffirmation of the country’s commitment to cope with the action plan of the 28th United Nations Climate Change Conference or Conference of the Parties (COP28) in November 2023 in Dubai, United Arab Emirates “to phase out fossil fuels and go 100% renewable energy.”

The main purpose of the COP28 was to limit the increase in the average temperature of the earth to 1.5 degrees Celsius above the temperature of the pre-industrial revolution period by the end of the century.

Yet, even RE developers in the country recognize that output of renewables is intermittent as, for instance, solar plants only generate electricity when there is sunlight, so that a corresponding baseload power plant must still be present when RE is added to the grid to balance the system and fill in supply requirements.

During summer this year, there were power interruptions in Luzon with the significant increase in demand exacerbated by El Niño. But this is not new. Over the last 10 years, Luzon has experienced Yellow and Red Alerts every year and has only managed to avoid them in 2018 and 2020, with the latter due to the significant drop in electricity demand resulting from the COVID-19 pandemic. 

What is peculiar about the Red Alerts this year though is that there were no Red Alerts scheduled in the morning, unlike in previous years. The Red Alerts in April and May 2024 occurred in the late afternoon and extended to midnight.

This clearly shows that solar generation has only been able to cover demand in the morning and early afternoon — and with the loss of such supply towards the later afternoon and evening, Luzon is left with large and recurring supply deficiencies. 

As quoted, Senator Chiz Escudero was right when he said during the May 14 Senate committee on energy hearing that the aggressive push for renewables does not intersect with what the country needs right now because it does not provide baseload power.  

This is confirmed by the ASEAN Centre for Energy’s May 2024 report. Crucial to the economic development of the ASEAN countries, including the Philippines, is reliable and cost-effective baseload supply of electricity.   

As of now, coal remains to be an important energy source in Southeast Asia. It provides sufficient energy at the lowest cost possible and serves as reliable baseload generation source that can provide stable and continuous supply of electricity.  

Under these circumstances, even as the region shifts towards a cleaner and more diversified energy mix, the International Energy Agency’s Net Zero Emission Pathway initiative for the region’s energy transition and recommended action plan for coal phaseout is seen to be overly ambitious and not tailored to Southeast Asia’s unique circumstances.  

More specifically, it is believed that the 2040 deadline for coal phaseout does not give new energy sources that will be developed in the region enough time to mature and become economically feasible for developers and, in turn, become affordable for consumers.

Also, there will be reduced availability of reliable, dispatchable energy, as RE is added to the grid. Backup and storage systems are required, and network integration needs to be considered, but none of these are sufficient capacity today and expected to be available within the next decade. 

The region’s energy security, as a result, will be weakened. It will also increase its exposure to volatile gas prices in the world market, as natural gas is the immediate coal substitute. 

More importantly, the report emphasized as well that energy transition efforts should not sacrifice energy affordability, where the drive to replace coal as an energy source must ensure that it will not lead to continuously rising electricity prices.   

Thus, as the ASEAN economies may continue to expand, electricity supply needs must stay stable and reliable, and prices must remain low to remain attractive to foreign investment. 

Eventually, the shift to RE also has repercussions on job creation and land use. As reported in the 8th ASEAN Energy Outlook publication last September, the number of jobs created in renewables may fail to compensate for massive loss of jobs in fossil fuels. This is because compared with fossil fuels, renewables have lower labor intensity. Fossil fuel power plants, particularly coal, employ a significantly larger workforce, with an average of 13,072 jobs per gigawatt (GW) in comparison to 4,602 jobs per GW for solar and wind. 

On land use requirements, the annual land requirement for wind technology when compared to the footprint for coal is approximately 18 times larger.  On the other hand, it is twice as large for solar.  

Of paramount importance, it is crucial to consider the trade-offs between land use requirements of renewables, the greenhouse gas (GHG) emissions, and degradation resulting from coal-fired plants. 

Inevitable policy direction

It is clear that as the Philippines transitions to cleaner sources of energy, the main consideration should be ensuring affordable and reliable electricity supply, consistent with the focus of other ASEAN countries.  

According to the 2022 study of the International Energy Consultants on global/regional electricity tariffs, only Singapore and the Philippines reflect the true cost of electricity in consumer bills. Both countries have no government subsidies, unlike other ASEAN countries where about half of electricity costs is subsidized by government.   

If we do not give importance to reduce the cost of electricity in the name of shifting to RE while our neighbors do, then the gap between electricity prices in the Philippines and other countries in the region may widen, with our power rates being more expensive.  

Moreover, if we continue to add RE capacity to the grid without adding dispatchable and reliable supply from baseload sources and upgrading the grid, then we may experience rotating power interruptions in the late afternoon to midnight year-round.  

And, as demand for power goes up faster than renewables can supply, the country has no alternative but to resort to the time-tested source of energy — coal. As we know, only nuclear power plants and gas-fired stations can provide electricity round the clock.  

Without doubt, clean power is the future. Renewables like solar and wind will be able to deliver in combination with batteries, too. However, battery storage at present is short-lived and tiny when compared with the energy needs of even medium-sized cities.  

Between 2023 and 2030, electricity consumption is expected to grow six times faster than total energy demand, compared with two times faster in the 2010-2023 period and 1.4 times faster in 2000-2010.     

Coal and its cousins, therefore, will remain to be the practical recourse especially when electricity demand is accelerating. – Rappler.com

(The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise.  Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity.   You may reach the writer at [email protected])