Yellow Pad

My two previous pieces (BW, July 16 and July 23, 2018) discussed four flaws in the DoE’s current power development plan that led it to overestimate the country’s 2040 baseload requirements by more than 100%.

Another BW piece disputed my conclusion and claimed that there is no baseload bloat. I urge all readers to check for themselves the DoE planning flaws where the bulk of the bloat is coming from: ignoring declining solar and wind prices and assuming that baseloads will retain until 2040 their 70% share in the electricity mix; applying the 70% on total supply instead of peak demand only; and raising reserve requirements from two of the largest generating units on the grid to more than twenty.

My piece suggested that future DoE plans should focus on more flexible plants, that can be shut down once a day and whose output can be easily ramped up or down, rather than baseload plants which must run 24/7 to stay efficient. The overestimate means that the country can in fact afford to gradually decrease its fleet of fossil-based baseload plants, as the electricity sector’s contribution to the international effort to deal with climate change.

Having suffered through typhoon Yolanda and other recent extreme weather events, Filipinos feel in their gut what global warming and climate change mean. Thus, the Philippine government made an international commitment to do its share in greenhouse gas (GHG) reduction. This commitment in the Paris climate treaty reads as follows:

“The Philippines intends to undertake GHG (CO2e) emissions reduction of about 70% by 2030 relative to its business-as-usual (BAU) scenario of 2000-2030. Reduction of CO2e emissions will come from energy, transport, waste, forestry and industry sectors. The mitigation contribution is conditioned on the extent of financial resources, including technology development & transfer, and capacity building, that will be made available to the Philippines.”

The treaty was signed by President Duterte and ratified by the Philippine Senate in April 2017. This makes the treaty “part of the laws of the land.”

This piece quantifies what a 70% reduction of the BAU scenario means for the electricity sector, in terms of gigawatt-hours (GWh) of generation from fossil-based power plants, which are the sector’s main source of GHG emissions.

“Business-as-usual” scenario: 182,007 GWh

The Philippines generated 25,865 GWh of electricity from fossil-fueled power plants in the year 2000. By 2007, this had increased to 40,774 GWh, an average annual growth rate (AAGR) of 6.72%. The Renewable Energy Act was passed in 2008, so we will use the 2000-2007 AAGR as the BAU growth rate. Assuming that fossil-based generation continued at this same BAU rate until 2030, we get a projected BAU scenario by 2030 of 182,007 GWh. This is what we committed to reduce by 70%, to attain a “low-carbon scenario.”

“Low carbon scenario”: 64,280 GWh by 2022, 54.602 GWh by 2030

Reducing by 70% means retaining 30%. In effect, we committed to generate by 2030 no more than 30% of 182,007 GWh, or 54,602 GWh, of fossil-based electricity. We will call this ceiling the “low-carbon scenario.”

Our fossil-based generation at the end of 2017 was 71,181 GWh. Bringing this down to 54,602 GWh by 2030 means an actual reduction over 13 years of 23.3% from the 2017 level, or an average reduction of 2.02% per year.

The useful life of coal plants is 25 years, before they need to be rehabilitated. This means that if we let coal plants operate until the end of their useful life, without rehabilitating or replacing them, 1/25 or 4% of them will be retired each year. Our Paris commitment requires us to retire fossil-fueled power plants at the rate of 2% a year. This is half their natural attrition rate, leaving enough room for flexibility.

To get a sense of what our Paris commitment means specifically for the Duterte administration, the 2% annual reduction means around 64,280 GWh of fossil-based generation by 2022. This was our level of fossil-based generation in mid-2016, when President Duterte started his six-year term.

Thus, if the Duterte administration, by the end of its term, brings down our fossil-based generation to the same level as when it assumed office, we can meet our Paris commitment.

What about our growing electricity requirements?

We definitely do not want to sacrifice national development and our power needs for the sake of meeting our Paris commitment. So, the real question is: if we took the low-carbon path and reduced our fossil-based generation by 2% per year, can renewable energy (RE) and energy efficiency cover the balance?

The next piece will show that as of 2017, enough RE projects have already been approved by the DoE to cover the balance, with a few years to spare.

Thus, with the right policies, we can meet our growing electricity requirements and our Paris commitment too.

[Erratum: in the first two pieces of this series, I cited the Philippine Energy Plan 2016-2040 as source. The correct source is the Power Development Plan 2016-2040, which is part of the PEP.]


Roberto Verzola is a senior fellow of Action for Economic Reforms. He is currently president of the nonprofit Center for Renewable Energy and Sustainable Technology (CREST). The German foundation Friedrich Ebert Stiftung published in 2017 his book Crossing Over: The Energy Transition to Renewable Electricity (second edition, PDF is online).