May 19, 2017 — The government needs to address the current uncertainties in the power sector to ensure adequate energy supply beyond 2020.

“The decisions on these big contracts cannot be left hanging for too long because it impacts not only the sponsors’ decision but also the other industry players’ decisions,” said AC Energy President and CEO Eric Francia at this year’s BusinessWorld Economic Forum held in BGC, Taguig City.

Francia, one of the resource speakers on the topic “Fueling Future Growth”, was referring to more than 4GW of power purchase agreements awaiting approval from the Energy Regulatory Commission. “If they’re going to accept it, hopefully, accept it soon. If they’re going to reject it, reject it soon. Not having a keen decision is very bad from an industry planning and decision making standpoint,” Francia said.

The AC Energy top executive also stressed the urgency of a liquefied natural gas (LNG) policy as 3GW of the country’s energy capacity depends on natural gas. “To make an economic case for LNG without any form of support is very tough – do you leave that to the private sector? It’s been taking a long time,” he said citing the expected depletion of Malampaya’s gas supply in early to mid 2020s.

“If these two big uncertainties, the perfect storm, both unravel: 4GW gets delayed and 3GW suddenly run out of gas supply, what will happen to us? While we’re ok in the next five years, there’s a big question on years 6 to10. That’s the not so good news,” he added.

EPIRA is working

Retail Competition and Open Access (RCOA) under the Electric Power Industry Reform Act of 2001 (EPIRA) allows electricity consumers of at least 1MW to purchase electricity directly from qualified retail electricity suppliers (RES) at effectively more competitive rates. At some point, Francia said, this will eventually get to the household level. However, this is not maximized as some challenges beset the full implementation of RCOA.

“If you are a 750KW consumer, you cannot transfer even if the retail electricity supplier is cheaper because there is a temporary restraining order. While theory is good and big customers are enjoying good rates, because of some legal battles, this is not being maximized up to the broader levels,” Francia said.

Renewables and Storage

Francia believes that, with the declining cost of building renewable energy plants, particularly solar, and with storage facilities becoming cheaper, in 3-5 years, “solar-storage or wind-storage combination will be more competitive than coal and gas as we know coal and gas today, unless coal and gas evolve as well.”

However, he also thinks that obsolescence of coal and gas will not happen soon. “While it sounds good news that the dawning of the renewables revolution is upon us, don’t hold your breath, it’s going to take a long time.” For instance, Francia noted that, to displace 1,000MW of coal plants, it would require 5,000MW of solar or 5,000 hectares of solar build up.

Francia also urged government leaders to exercise political will to erase the said uncertainties. “There are challenges in the private sector, intense competition, oversupply potential, and so forth, but at the end of the day, because we have a strong structural framework in the power sector, and strong private sector proponents with very strong balance sheets, the customers definitely will win.”

Photo: Eric Francia talks about the regulatory challenges that bring uncertainties to the power sector at the BusinessWorld Economic Forum held on May 19, 2017 at Shangri-La The Fort. With him in the panel are (L-R) AboitizPower President & COO Antonio Moraza and Maynilad President & CEO Ramoncito Fernandez, with BusinessWorld Editor-in-Chief Roby Alampay as moderator.