Cusi and Lopez: Finding the right energy mix

Rebalancing energy mix

Going back to the energy mix, both chiefs should understand that specifically, it’s about optimizing the energy mix in terms of the composite levelized cost of electricity (LCOE), reliability, source diversity and environmental impact. 

Cusi said they’ve met with USAID for a discussion on formulating the ideal fuel mix and reserve requirements. Unfortunately the USAID is not an organization suitably staffed to handle other country’s energy mix problems. They help the poorest countries installing roof-mounted solar PVs for schools and homes with battery storage for extended services during nighttime or daytime with inadequate solar radiation. 

Our energy mix problem is national and regional (Luzon, the Visayas and Mindanao), and not in small specific or remote areas. It involves years of constantly rebalancing by retiring some and adding new sources. It calls for technical competence devoid of political taint. With lack of technical capability at the DOE, Cusi has to engage the services of U.S.-based power plant consultants. 

A balanced mix has to be the attainable optimum and not only based on sources abundantly available in each region. For instance, Mindanao, too dependent on hydros and land-based oil with barge diesels to bailout the hydros during the dry season, has recently been adding a lot of coal capacities. In anticipation of the depletion of the Malampaya gas fields, an imported liquefied natural gas (LNG) terminal is being built by First Gen in Batangas to feed their CCGTs. 

So why is the DOE not looking into more CCGTs, especially in the Visayas and Mindanao, now that the price of imported LNG is competitively priced as Cheniere Energy is getting set to export LNG to Europe and Asia. 

An LNG terminal is a business on its own, just like the coal mines are, in supplying the coal plants. Installing LNG terminals in Mindanao and the Visayas with captive CCGT plants are low-risk investments that the DOE should provide loan guarantees for.

DOE Secretary Cusi said based on a study performed in 2015 by IHS, a U.S.-based think tank, 42.59% in coal, 24.9% in gas,13.3% in hydro, 12.7% in geothermal and 6.3% in oil, is a balanced mix for the total installed capacity of 18,765 MW. Without knowing the evaluation criteria and details used by the IHS, it’s difficult to understand with that balance why the Philippines has the highest electricity rate in the Southeast Asian region and has been suffering from persistent blackouts and brownouts for decades?

For a lower composite cost, more natural gas should be added. It’s the most efficient of the fossil fuel sources with lower LCOE and half the GHG emissions from coal. For instance, an advanced combined-cycle gas turbine (CCGT) plant in Europe similar to First Gen’s San Gabriel Unit 1, ran a record efficiency of greater than 60% compared to around 40% for the advanced or clean-coal technology plants being built in Mindanao. 

Coal should be limited, if possible, to the already committed new units and the existing coal capacity gradually reduced through retirement of aging and inefficient units. 

Oil is no longer considered as one of the new electricity generating technologies and depending on the size and age, should be kept for emergency situations and possibly as baseload backups for some intermittent renewables on the grid. 

Except for geothermal and biomass, intermittent renewables such as hydro, solar and wind connected to the grid, will incur the additional cost of baseload backup power in the event the energy sources become unavailable. With the DOE’s original goal of 30% in intermittent renewables, the composite cost will rise due to their low capacity factors.

Of the non-intermittent renewables, geothermal would be the best choice but limited by the available heat source underneath the ground. Biomass fuels are more expensive than the other fossil fuels, due to the additional costs of raw material gathering, transport and processing.

Although renewables use free-cost energy sources, equipment to harness the energy and the facility that converts it into usable form, have to be built and maintained over the service life of the plant. Those expenditures have to be factored in. Due to the high initial costs, government subsidies often come into play, never cost-free but rather on the backs of the taxpayers, so this must be considered in optimizing the mix.

Availability and source diversity go hand in hand in providing a 24/7 reliable power to support the optimum mix. The existing coal, gas, oil, geothermal, hydro and other renewable sources available in each region will play significant roles in the rebalancing process. 

Without the benefit of nuclear power plants that other countries have, the DOE should aggressively pursue a mix starting with 45% gas, 25% coal, 15% geothermal, 7% hydro, 7% non-hydro (solar and wind) and 1% oil (mainly for emergency backups).

In the event of loss of intermittent renewables, the nominal 15% reserve margins should be able to stabilize the entire power system on the grid. A continuous rebalancing process based on new commercially available plant capacities and retirement of aging and ailing plants, must take place until an optimum mix is reached.

It’s high time for Cusi to roll up the sleeves and get serious in finding that right energy mix. –


Rolly Calalang holds a BSME from UP Diliman and a BSEE from FEU Manila. He has extensive experience in the power industry in the U.S. and China.