Session timeout

Sorry, your session timed out after a long time of inactivity. Please click OK and Sign In again.


OK

Interview with author and energy journalist Myrna M Velasco

We got in touch with Myrna to discuss coal dominance, its clean tech pathway and new market challenges.




Coal Plants

Philippine coal plants: stepping up to clean technology deployments
By Myrna M. Velasco

For ages, the energy sector has always been regarded as slow-to-innovate and conspicuously old-fashioned when it comes to technology deployments.

But with technology innovation ‘disruptions’ now overwhelming various industries, signals are looming that the mammoth world of energy has also been keeping pace. At least to many energy players, this time it needs to be different.

Coal plants, in particular, were among those seen most sluggish on the tech modernization genre.  But since ‘clean energy future’ has become a major policy issue triggered by global climate change risks, industry players and movers have been prompted into embracing higher efficiency, low emissions (HELE) technologies in power project installations.

The Philippines so far is similarly stepping up to the challenge – that while its older fleets of coal plants are still very much in operations, the new projects are at least on their grips toward cleaner coal technologies, such as the deployment of super critical (SC) and ultra super critical (USC) boilers.

In various power plant commercial inaugurations that he graced, President Rodrigo R. Duterte consistently called on the energy companies “to gear up and enforce upgrades on technology deployments on the country’s wide array of aging and inefficiency-stricken coal fired power fleets.”


Coal dominance in the energy mix

For the Philippines and the rest of Asia, while cleaner alternatives such as renewables are consistently being pushed into development terrains, the stark reality is that coal will continue its dominance in the energy mix – especially so since affordability of power rates in these countries remains a politically toxic contagion.

A recent study by the Paris-based International Energy Agency (IEA) portended that up to 100-gigawatts of new coal-fired plants will be added into Southeast Asia’s energy capacity by year 2040 – primarily for countries like Indonesia, Vietnam and the Philippines; with required capacity ramp-up driven by their expanding economies and growing population. In fact, it is worth noting that the electricity consumption habits of many Asian nations have been fast resembling those of more developed counterpart-economies.

And on the bigger Asian domain, superpower China and India will still very much be in for coal as a technology choice in their power mix in the short- to medium-term horizons.  The coping mechanisms, including technology deployment measures that the Asian countries will adopt to secure their energy supply, will likewise be largely influenced by these two giant economies, according to studies.

Philippine Energy Secretary Alfonso G. Cusi sounded off that fossil fuels, primarily coal “will continue to get the lion’s share in the country’s total energy mix” – a platform that energy planners have also been pushing in the energy development blueprint onward to year 2040 when capacity is targeted ramped up to 43,765MW from installed capacity of 22,730MW in 2017.

Last year’s coal share in the Philippine power mix was at 35.41%, but in the 2040 planning milieu of the Department of Energy (DOE), coal technology’s fraction in the pie will even climb higher to 41.6%. “It is the ideal energy mix targeted by the government as part of its inclusive economic growth agenda,” Mr Cusi said.

In fact, Philippine power capacity additions of 835MW last year had been manifestly dominated by coal with 75% share or around 630MW; while the rest are solar at 127MW; oil-based facilities at 77MW; and hydropower at very marginal 1.0MW.

The energy chief explained that while alternatives are on the table, the cost-competitiveness and operational reliability facets of coal facilities for baseload generation were highly considered. “Because of the Duterte administration’s infrastructure build-up trajectory, we need cheaper cost of electricity and at the same time, they should be able to provide power on massive scale round-the-clock,” he said.

The 400MW Pagbilao-3 coal fired plant in Quezon province (south of Manila) has been one of this year’s coal capacity addition for the Philippines. According to the project developer-firms (Aboitiz Power Corporation and Japanese joint venture TeaM Energy Philipines), that US$1.0 billion power project had been their response to government’s investment call for affordable electricity while at the same adhering to stringent environmental standards set forth under the Philippine Clean Air Act and global emission standards.

“Pagbilao-3 is a merchant plant that provides reliable, cost effective electricity to the Luzon grid. It is a coal-fired facility that is equipped with a flue-gas desulfurizer and is designed to ensure compliance with all pertinent environmental rules and regulations,” TeaM Energy Chief Executive John V. Alcordo said.

Mr Cusi adds that “although other technologies offer some options, gas is still seen more expensive for baseload capacity, but ideal in the mid-merit space. At the same, our Malampaya field is also running out of gas in the next few years. And for other technologies like RE, their reliability and sustainability continue to be a major concern; while nuclear has yet to win over social acceptability issues.”
 
While qualifying that the Philippines still has relatively low contribution to global carbon emissions, “we must use whatever energy resources are available and affordable for power generation, since the country is still on its path to industrialization,” Mr Cusi averred.

Danel C. Aboitiz, president and chief operating officer of the Coal Business Group of Aboitiz Power, contended that while there are other probable sources of baseload capacity for the Philippines energy sector, indigenous sources like geothermal are now relatively tapped out; while hydro could best serve the power system’s peaking needs – beyond the fact that they also have concerns on cyclical availability; while the impounding hydros just often thrive on opportunistic investment terrains. 
“Consequently, what has just been left is coal. I really cannot see a medium-term energy future without coal,” he reckoned.


The environment and coal’s clean tech pathway

Frank Thiel, managing director of Quezon Power (Philippines) Ltd. Co. which is now developing the second Thai-led coal fired power project in the country (the 500MW San Buenaventura power station) concurred with assumptions that coal plant installations will continue to fuel Asian region’s growth.

“This trend is likely to continue for several more years. Japan has installed several coal-fired plants in the last few years, as has Korea – both countries have plans to continue with further coal plant installations, with Japan talking about a dozen more coal-fired facilities,” he said.

And across the Philippines, aside from the San Buenaventura power plant project, other coal-fired fleets are either shovel-ready, at construction phases or are already nearing commercial operations.

 For San Buenaventura Power Ltd. Co. (SBPL), Mr Thiel conveyed that they opted to use the latest technology, in terms of lower emissions and higher efficiencies. Another planned coal-fired power facility, the Atimonan One Energy project of the power investment arm of Manila Electric Company (Meralco), is being cast as the first facility to be equipped with ultra-super critical technology -- although its implementation still hangs on the long-awaited regulatory approval of its power supply agreement.

“We were looking for advanced technologies that could reduce overall emissions and increase efficiency. We should be able to make use of our existing infrastructure to keep cost down and be able to offer more competitive rates to the consumers as a result. The key here also is having community support,” he stressed.

On the intensifying climate change discourse, Mr Aboitiz acknowledged that coal-fired plants “seem to be suffering from bad reputation.” But as an industry trying to explain ‘technology knowledge gap’ to a base of constituencies, it is paramount to dissect public concerns on the facet of protecting the environment relative to pollution; and the other, being the more disquieting issue of climate change or greenhouse gas emissions.

In the Aboitiz group’s coal-fired power plant developments, he indicated that all pollution control measures – like the ones addressing coal ash, dust particles and sulfur emissions, are best addressed by the technology installations they have in their facilities. “So one thing is pollution control, if you look at the modern coal plants, the resulting emissions are very well below the caps imposed by our laws,” he said.

Nevertheless, Mr Aboitiz admitted that on the dimension of heat-trapping carbon dioxide (CO2) emissions – which science claims to have been warming surface temperatures and causing water levels to rise, “we have not yet hurdled that,” hence, he opined that it is very important for players in the sector to monitor research and development initiatives that could possibly bring to commercial fruition the propounded CO2-containing technologies such as carbon capture and storage (CCS); carbon capture, utilization and storage (CCUS),  integrated gasification combined cycle (IGCC) and integrated gasification fuel cell cycle (IGFC) technologies.

And if it is any form of affirmation on the environmental hegemony of the entire Philippine energy sector, in the 2017 Trilemma Index Report of the World Energy Council (WEC), the country got the highest ranking when it comes to environmental sustainability – beating everyone in the 125 nations that had been surveyed. On the whole though, the WEC report pointed out that the Philippines still struggles on energy security and equity due to recurring predicaments of power scarcity and consumer complaints of high electricity rates.

For the San Buenaventura power project, Mr Thiel emphasized that “the plant is super critical – it is a high pressure, high temperature facility which translates to higher efficiency. Effectively, we’ll be getting the same amount of megawatts but burning less coal, therefore, we will be having less emissions.”

Advancements in the information technology sphere – or the so-called “internet of things” hype or the digitalization trends have also been blowing away the mind of many energy project developers.

With these flourishing trends in the sector, “big data” accumulated from power plant operations or even in grid and distribution network systems could set traction for predictive analysis as to how energy can be stored, saved or efficiently used; and will aid power facilities too in achieving more reliable operations as well as minimized downtimes or forced outages.

“We know that digitalization of plants will raise efficiencies; or cause high reliability – to this extent, we can see that and can also ascertain the potential benefits. We certainly want to try it, but it’s still early days,” Mr Thiel said.

Aside from the EGCO Group for Quezon Power and San Buenaventura facilities, the Aboitiz group is another company that is continually exploring digitalization as value-added feature of its power facilities.

Challenges

For power project developers, challenges always tread on the wavering lines of sensitive issues touching on the environment, technology application, economics and socio-political concerns.

For the San Buenaventura plant, which is due to be commercially on-line September 15 next year, Mr Thiel relayed that the challenges were almost as tough when they first built their first Quezon power plant back in the 1990s.

In this new facility, their engineering, procurement and construction (EPC) contractor led by South Korean firm Daelim Industrial Co. Ltd. had to hurdle the acid test of very compact installation footprint of a power plant – as the allocated site for the project was just 10 hectares. Daelim draws support from Japanese firm Mitsubishi Hitachi Power Systems as the technology supplier to the project.

“We told the EPC guys, we only have a limited amount of land. And we went to the world looking at power stations -- trying to find a power plant which had a footprint of the available land that we have – we went to South Korea, Japan, Australia, the US and Canada – and we found two plants in Canada that have very compact footprint that we deemed will also fit our site, “ Mr Thiel relayed.

It is also well known that the biggest headache of many power project developers in the Philippines is securing power supply agreements (PSA); and equally grueling will be getting them approved eventually by the Energy Regulatory Commission (ERC), the industry regulator.

“It took us 14 months to negotiate for our PSA – we’ve had very long nights and very long days working on it. And Meralco, (the capacity off-taker), they brought in their heavy guns from each department and the group of guys at Meralco that they call the “Math Club’ because their skills are super bright and they’re really wizards when it comes to formulas – so we negotiated depending on the type of questions that we had – such as on issues about payments, technical operations parameters and so on,” Mr Thiel said.

On the use of a new technology for the plant – the super critical boiler, this also warranted massive explanation to all affected stakeholders, including the industry regulators and policymakers. “The concept of ‘super critical’ in the technology actually ignited some fears, because if you say critical, to some it could mean that something bad might happen, so we have to do a lot of education and explaining on that,” he revealed.

The other hurdles for the sponsor-firm had been dealing with indigenous peoples, the “Dumagat tribe” which was straddled by the plant site; and yet another harsh twist came when the project was slapped with two cease and desist orders (CDO) by a local court because of a legal suit lodged by the host community. That alone technically stopped work at the site for 15 days.

Weather conditions at the plant’s Mauban site had not also been favorable for some time, hence, it took time for the EPC contractors to lay the plant’s foundation. Later on, the company also needed to address transmission uprating concerns for the eventual wheeling of its capacity to the grid. Altogether, these stumbling blocks pushed backed the plant’s commercial operations by three months.

Next phases in San Buenaventura project’s to-do-list will be underwriting contracts for coal supply; construction completion as well as advancements of works on testing and commissioning of the power plant.

Mauban Mayor Fernando Llamas, the local government head of the town hosting both the Quezon and San Buenaventura plants, admitted that they had to seek judicial intervention because of “contractual issues” that local sub-contractors had encountered. But he admitted the matter has already been resolved “and it’s not a fault of the project developer, but their contractors.”

“We’ve always been supportive of the San Buenaventura power plant development, but I also need to protect the welfare of our people, because these affected sub-contractors are from Mauban. But when we had our discussion with SBPL, they had addressed that concern immediately and we were able to provide safety nets so this problem will not recur,” the local government chief executive said.

With this municipality now hosting its second power plant, Mr Llamas noted that he is expecting local and business taxes to roughly double from PhP346 million plus currently once the San Buenaventura plant comes on commercial stream.

Given heftier flow of taxes and expanding economic opportunities, the locality now looks forward to the concretization of its vision of cityhood in the next five years, with Mr Llamas imparting that they do not have any regrets welcoming such type of power project developments in their community – and had instead considered them their “partner to economic progress.”

 
If you enjoyed Myrna's article and would like to hear more from her make sure you join us at this year's Emerging Asian Coal Markets.

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

Related Insights