AT a press conference on Monday, Energy Secretary Sharon Garin said the Department of Energy (DOE) was looking at ways to manage the electricity generation mix to mitigate an expected rise in power rates next month due to the fuel crisis caused by the war in the Middle East. Last week, Energy Regulatory Commission (ERC) Chairman Nino Juan forecast that electricity rates could go up by P2 to P4 per kilowatt-hour (kWh) in April if the war goes on — which certainly seems likely, at least for the next few weeks — and because electricity demand starts to increase with the onset of the dry season.
The problem, as Garin explained, is in the fuel mix the Philippines uses to generate most of its power, which (measured in terawatt-hours, according to the 2023–2050 Philippine Energy Plan) is currently about 60 percent coal, about 16 percent liquified natural gas (LNG), about 22 percent renewable energy (RE), and about 2 percent oil-based, i.e., diesel and bunker oil. The most immediate problem is the oil-based generation capacity, which fortunately makes up the smallest share of the generation mix, but unfortunately is used mainly for small plants in areas disconnected from the main grid. Some supply substitution may be possible in areas where there is a connection to the grid, but that is not going to be the case generally, so the increase in generation costs for many parts of the country is going to be severe. And many of these areas are also the least economically capable of absorbing a sudden large increase in power costs, so the situation could become dire in the next few weeks.
The second-biggest problem, although Garin did not get into it in depth, is the large amount of coal that we use, most of it imported. As my column on Sunday (March 15) explained, coal is obviously not impacted by the war, but its price is rising due to it being the most obvious substitute fuel for LNG and oil. Countries that have both coal and LNG generation, and have sufficient coal capacity to do so, are shifting more of the demand to the coal-fired plants due to LNG being bottled up in the Persian Gulf due to the war and the closure of the Strait of Hormuz. Qatar is a major exporter of LNG — that’s where most of the Philippines’ imported LNG comes from — and at the moment, it not only cannot ship LNG out, it is also experiencing a drop in production due to being targeted by Iranian missiles and drones.
With regard to LNG supply and prices, Garin noted that importation needs to be controlled (which implies a shift to more reliance on coal for the time being), “but we have the Malampaya gas plant so that shields us from the price impact.” This caught my attention, because the DOE has consistently overestimated the significance of the Malampaya supply, particularly since the discovery of an additional pocket of gas in the Malampaya field back in January. With the severe threat of higher fuel and electricity prices hanging over everyone’s heads, now is not the time to be giving the public false expectations. Of course, there is a proper way to figure out if that is what is actually happening.
Based on the latest data I could find, Malampaya’s current output averages about 201 million cubic feet (mcf) per day; there are sources that give figures between 260 and 429 mcf per day, but the lower one seems to be the most accurate. That amount equates to 4,188 metric tons of LNG. The country’s biggest gas power plant, the 1200-megawatt (MW) Ilijan plant in Batangas, uses 3,072 metric tons of gas per day at full capacity, or about 2.56 metric tons of gas per megawatt. Since the total installed capacity of natural gas generation in the country is about 3,732 MW, and if we assume that all the gas plants use fuel at about the same rate, that means the total LNG requirement (if all the gas plants are operating fully) is about 9,554 metric tons per day. Malampaya is thus only supplying about 44 percent of the gas required, with the rest needing to be imported.
Once the new gas well east of the existing Malampaya platform enters production, that will bump up the share of “indigenous” gas to about 57 percent, so that will help. However, that assumes there is no more new gas generation capacity added, which there will be, although not in the very near future. In addition, it is important to keep in mind that the new gas supply will not be available until perhaps November or December this year at best — it takes time to switch from an exploratory well to a production well — and that the original Malampaya field is dwindling. Thus, by the time the new well comes online, it might not actually amount to an additional supply, but would just help to extend the current level of output.
So, no, Malampaya absolutely does not “shield us from the price impact” of the war on LNG prices, and it is misleading to suggest that it does. Malampaya does reduce the Philippines’ import requirement, so it is indeed an advantage in that respect, but the unavoidable fact remains that we do need to import a substantial proportion of our LNG requirements, and will continue to do so for the foreseeable future.
Going back to ERC Chairman Juan’s forecast of a P2-P4 per kWh rate increase in April, we should take that seriously, and pencil it in to our respective household budgets. Not only is the ERC’s math surely correct, but his saying it is a signal that the range of rate increase requests from distributors is what the ERC would likely approve. There are some mitigating factors that may keep rate increases from going much beyond that, such as the input of much lower-priced RE generation during high-demand daytime periods (provided we have good weather for a while), but we are definitely not going to escape this current crisis unscathed.
ben.kritz@manilatimes.net
Bluesky: @benkritz.bsky.social
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