December 05, 2023
The Philippine power sector set-up is unique compared to other countries, most especially in Southeast Asia. It is market driven and privately-owned, with the regulator’s role limited to ensuring the competitive environment for the sector. Accordingly, decisions by private businesses to retire coal-fired power plants and shift to full renewable energy are also purely market-driven and based on the economics of which projects will provide the most return to investors.
The Philippines is also one of the few countries in Southeast Asia which does not subsidize its power sector. Unlike other countries which are energy-source rich and use export revenues to subsidize their power sector, the Philippines only relies on cross-subsidy to provide support to its marginalized consumers as well as for renewable energy incentives. Therefore, the costs of transition, as well as the need for greater investment infrastructure, will be fully borne by our already overburdened electricity consumers if we will not find strategic ways to shift the burden.
In line with its Energy Transition Program, the Philippine government is encouraging a voluntary early and orderly decommissioning or repurposing of existing coal-fired power plants, while securing a stable supply and addressing the climate emergency by ramping up our renewable energy target of 50 percent share by 2040.
The Philippine Department of Energy, therefore, strongly applauds ACEN in pioneering the voluntary retirement of its 246 megawatts (MW) South Luzon Thermal Coal-Fired Power Plant. This is consistent with our view that it must be voluntary and must make business sense in a power sector like the Philippines that is privately-owned, market driven and un-subsidized. ACEN has our full support for this initiative, and we will explore ways to facilitate this program through access to climate financing.
We also encourage every effort to incentivize the business owners and institutions that will participate in similar undertakings and work towards energy transition. The Asian Development Bank and ACEN’s Energy Transition Mechanism concept, which leverages public and private investments with the aim of retiring coal power assets on an earlier schedule, is a laudable mechanism.
But we must also emphasize that our energy transition is beyond coal retirement. It also entails expanding our people’s access to electricity in remote islands, building a smart and green grid and improving the distribution systems, putting up more energy storage systems, and making energy affordable for all.
In all of these, adequate and timely access to climate financing is crucial for the Philippines to equitably and effectively pursue its energy transition. ###