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Philippines declares no new coal plants — but lets approved projects through

  • The Philippines’ energy department says it will issue a moratorium on new coal-fired power plants, but will allow projects that have already been approved to be built.
  • Coal accounts for nearly half of the Philippines’ energy mix, and is expected to increase to 53% by 2030, when the 22 proposed plants that have already been approved come online.
  • No new coal power plants have been built in the country since 2017, amid massive community pushback, excess energy supply, and a Supreme Court ruling that voids power supply agreements.
  • Despite the new moratorium, the Philippines is continuing to exploit its coal resources: days after the announcement, it opened the bidding to mine two new coal blocks in the country’s south.

MANILA — The Philippines’ energy department has declared a moratorium on new coal-fired power plants, following a reassessment of the country’s energy system. But while the ban halts applications for new plants, it will not extend to previously approved projects that are already in the pipeline.

Energy Secretary Alfonso Cusi, who has been criticized for not pursuing carbon-free power generation more aggressively, announced the department’s planned coal plant moratorium at a ministerial conference on renewable energy in Singapore on Oct. 27.

“While we have initially embraced a technology-neutral policy, our periodic assessment of our country’s energy requirements is paving the way for innovative adaptations in our policy direction,” Cusi said, adding the move will help the Philippines shift to a “more flexible power supply mix … flexible enough to accommodate the entry of new, cleaner, and indigenous technological innovations.”

The coal-fired Quezon Power Plant in Mauban, Quezon. The 511MW power plant was commissioned in 2000 and is owned and operated by Quezon Power (Philippines), Limited Co. Image by Lawrence Ruiz (Epi Fabonan III) via Wikimedia Commons (CC BY-SA 4.0)

The department has not yet identified the proposed power plants that would be affected by the moratorium, but the ban could “result in the cancellation of over 13.79-GW of new coal plants” and herald a transition to renewable energy, a network of local and regional anti-coal groups said in a press release.

“The decision of the Philippine Department of Energy [DOE] to cease its endorsement of new coal-fired power plants is an admission of what we have long been saying about coal: that it is environmentally destructive, incompatible with climate goals, and unable to power our economy sustainably and reliably,” said Gerry Arances, executive director of the Center for Energy, Ecology, and Development (CEED), a Philippine think tank.

In the Philippines, as in many other countries, coal is seen as a baseload energy resource, sufficiently cost-effective at providing a constant stream of power to meet the minimum demand for electricity throughout the day. It accounted for 44.5% of the country’s total energy mix in 2015. There are 28 coal-fired power plants currently operating throughout the Philippines, with total installed capacity of 9.88 gigawatts.

Twenty-two proposed plants have been approved by the energy department; adding them into the energy mix would increase coal’s share to 53% by 2030. Critics say this runs counter to the Philippines’ decarbonization commitments under the Paris Agreement. Allowing these plants to come online “forces the country to be locked into long-term fossil fuel contracts,” Greenpeace Philippines said in a report released in September.

A coal-fired power plant in Bataan. Image by Global Witness

The energy department’s latest announcement, though lauded by anti-coal groups, lawmakers and others, makes clear that these plants that have been greenlit by the department will continue to be built, and that the ban only applies to proposed projects that have not yet been assessed and approved by the department.

The department also says coal projects that have acquired environmental compliance certificates and other permits from local governments in the areas where they’re based will not be included in the ban.

“The significance of DOE’s announcement will be ultimately judged by what the moratorium actually covers,” said Lidy Nacpil from the Asian People’s Movement on Debt and Development (APMDD). “The DOE must enforce a moratorium on all coal power developments, including all coal power projects in the pipeline. This should be followed by a total-coal-exit policy for the Philippines to adopt soonest.”

Coal growth on hold

The ban comes at a time when construction of new coal power plants has effectively been put on hold in the Philippines, largely due to massive community resistance, excess capacity blocked by a rigid and fixed distribution system, and a Supreme Court ruling voiding power supply deals.

“No new coal plant has been constructed in the Philippines since 2017,” Arances told Mongabay, “meaning no coal plant has started development. If you look at the reason, it’s the resistance of communities that made constructing coal plants challenging — that has been the trend.”

On the southern island of Mindanao, Ian Rivera of the Philippine Movement for Climate Justice (PMCJ) pointed to an excess supply triggering a “very, very slow-moving market.” This has hindered the construction of new plants, leading the government to “attract investments just to trigger investments in the energy market.”

On Oct. 13, residents and anti-coal groups submitted an appeal letter against KEPCO Philippines’ Sual 2 power station. Image courtesy of Save Sual Movement

A fixed electrification distribution system, limited to major grids in the country’s three main island groups, as well as fixed decades-long power supply contracts have delayed the industry’s growth. In turn, this has restricted investment in renewable energy, despite the passage of the Renewable Energy Act in 2008, which calls for prioritizing renewables over fossil fuels.

In 2019, a landmark Supreme Court ruling voided all power supply agreements submitted on or after June 30, 2015. In the ruling — which stemmed from a climate action suit filed against the World Bank’s International Finance Corporation and its local client, the Rizal Commercial Banking Corporation — the court said the energy department had failed to conduct transparent bidding and retail competition.

The DOE’s reassessment of power supply deals immediately halted the construction of coal plants. Even if plants get built, without a power supply agreement to secure distribution channels, they can’t get connected to the grid, leaving them as stranded assets.

Coal’s last bastion

Last month, various countries and international banks declared pledges to shift away from coal, with the IFC revealing its new green equity approach, birthed from an internal investigation brought on by PMCJ’s case with the Supreme Court.

Global trends in power generation have also been geared toward decarbonization, and with China and South Korea moving away from coal, Southeast Asia is fast becoming one of the last remaining battlegrounds for the fossil fuel.

A report by the Economist Intelligence Unit (EIU) released late last month points to a global investment trend shifting from upstream oil and gas toward renewables. In Southeast Asia, particularly in Indonesia, Malaysia and the Philippines, the goal to increase the share of renewables in the energy mix remains “an ambitious target,” as these countries “have renewable on paper, but growth in solar and wind development has been slow,” the report says.

Activists and youth climate strikers march on Mendiola in 2019 amid a deluge to call for climate action. Image courtesy of Greenpeace Philippines

Despite the limitations of the new ban, the Philippine coal moratorium remains symbolic in heralding the country’s, and the region’s, transition away from fossil fuels, Greenpeace Philippines said. It added that the ban sends a “strong signal to coal investors as well as financial institutions that fossil fuels are a losing proposition.”

“In this sense, the announcement is important as part of the momentum to galvanize climate action in the region,” said Nacpil from the APMDD, adding that it synchronizes with various countries’ pledges to shift from coal. But the moratorium is temporary, she said, and “can be revoked or lifted anytime”  or “until the next baseload capacity additions are needed.”

The moratorium’s lifespan will be tested once President Rodrigo Duterte’s term ends in mid-2022, or when major coal and natural gas power plants are decommissioned on the main island of Luzon by 2024.

Full foreign ownership in geothermal

Despite the coal moratorium, environmental groups have expressed unease about another DOE declaration: to open up the geothermal energy field to full foreign ownership.

In his speech in Singapore, Energy Secretary Cusi said his department will allow full foreign ownership of large-scale geothermal projects with an initial capital investment of $50 million. These projects will also be eligible for the 25-year permits normally issued to large-scale mining companies.

Philippine law currently prohibits full foreign ownership in public utilities such as energy and water. This has, however, been consistently contested and debated in Congress. Representatives from the lower house have prioritized passing a bill to allow 100% foreign ownership of public utilities, a top priority despite the COVID-19 pandemic.

Most coal plants in the country are financed by local banks and run by local power players, but planned large-scale hydropower and nuclear have been included in business deals with China and Russia.

The Tiwi geothermal field, with Mount Malinao, a forested stratovolcano in the background, in Albay, Philippines. The Philippines has seven geothermal fields producing 12% of the country’s energy. Image by Chris Newhall/U.S. Geological Survey via Wikimedia Commons (Public Domain)

Cusi said that as of 2019, the Philippines had the highest share of renewables in its energy mix among Southeast Asian countries, at around 30%. Much of this comes from large-scale hydropower and geothermal plants.

“I am determined to accelerate the development of our country’s indigenous resources,” Cusi said, adding his department is “also pushing for the transition from fossil fuel-based technology utilization to cleaner energy sources.”

With foreign investors now effectively shut out of coal power generation as a result of the new moratorium, they can still get into coal exploration. Three days after announcing the plant moratorium, the DOE opened the bidding for two coal blocks in Zamboanga Sibugay, a province in the southern Mindanao region. Both blocks are regarded as “a milestone in the upstream coal development sector.”

“Despite the COVID-19 pandemic, the DOE is committed to tap potential energy exploration so the country could further attain its energy security and sustainability,” Cusi said in a statement dated Oct. 30. “We are pursuing to harness all our indigenous energy sources as we continue to usher economic progress amidst adversities.”

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Banner image of the 450-megawatt coal-fired power plant in Limay, Bataan, Philippines. Image courtesy of Global Witness.

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