BUILDING RE. Institute for Energy Economics and Financial Analysis research lead for gas and liquefied natural gas (LNG) Asia Sam Reynolds. Reynolds said building more renewables capacity will make the Philippines less dependent on expensive and volatile costs of fuel like LNG. (Courtesy of IEEFA)
MANILA – Building more renewable energy (RE) technologies across the country will help the Philippines lessen its dependence on imported fuel, like liquefied natural gas (LNG), which are more expensive and more exposed to volatile global prices, an expert from the Institute for Energy Economics and Financial Analysis (IEEFA) said.
Based on the comments of IEEFA research lead for gas and LNG Asia Sam Reynolds in the Global LNG Outlook 2024-2028 released Thursday, RE is a more popular choice in the Philippines compared to LNG infrastructure.
Reynolds said while LNG-to-power projects grapple with regulatory hurdles, current policies of the Philippine government advance the rapid deployment of RE projects.
He said this could reduce the long-term need for more LNG in the country.
“The growth of renewable energy is likely to limit the role for LNG in baseload power generation,” Reynolds told the Philippine News Agency in an email Friday.
The country’s first LNG terminal began its operation only in April 2023.
There are plans to build at least 12 LNG terminals and 35 gas-fired power plants in the country. All projects will rely on imported LNG.
However, Reynolds noted that the cost of imported LNG is relatively high compared to other sources of energy, even in a scenario where there is an oversupply of LNG in the global market.
At the current cost, he said a single LNG-fired power plant at base load capacity will be paying PHP46 billion (USD825 million) per year.
Even with the improving supply as more LNG supply from Qatar and the United States will come, Reynolds said “LNG will continue to be an expensive option compared to alternatives like wind and solar, or domestic gas resources.”
“For example, even if Asian LNG prices fall from USD12/million British thermal units currently to under USD10/MMBtu, the fuel costs for a single LNG-fired power plant in one year would still be nearly PHP39 billion (USD688 million) per year,” he added.
This cost will be passed down through the supply chain and will be paid for by consumers, Reynolds said.
He said from April 2023 to February 2024 alone, the country paid USD600 million, or over PHP30 billion, for 12 shipments in less than a year.
“The implication is that as the Philippines builds more LNG infrastructure in the country, the economy will be increasingly exposed to expensive and volatile global commodity prices. It’s worth noting that these prices are also heavily dependent on the currency exchange rate. Since global LNG costs are priced in US dollars, and depreciation of the Philippine peso could also drive the price of power in the country higher,” Reynolds said.
RE growth
Reynolds said the Philippines still has “significant room” for growth in terms of the RE sector.
“In 2022, the share of wind and solar in the country’s energy mix was 2.6 percent. But international consensus and experience have repeatedly shown that countries can regularly integrate over 20 percent of wind and solar with only minor adjustments to grid operations,” he said.
He said building a portfolio of various RE technologies that generate power at various times throughout the day and ensuring that these capacities will be connected to the grid will reduce the country’s importation of LNG needed for power generation.
“In other words, as more renewable energy is brought online in the coming years, the less need there will be for new proposed LNG-fired power plants,” Reynolds said.
Data from the Department of Energy showed that as of January 2024, the agency has awarded 1,282 RE contracts with an equivalent potential capacity of 130.3 gigawatts.
By 2030, the government targets RE share to the energy mix at 35 percent and at 50 percent by 2040. (PNA)
