Power and renewables

Sun and wind key to energy security for Luzon

Introducing large volumes of solar and wind is a fundamental change for a conventional power system.

Sun and wind for Luzon

DWINDLING DOMESTIC GAS supplies deepen concerns about energy security in the Philippines, which already struggles with unreliable electricity supply. At current rates, the declining deep-water Malampaya gas field in the South China Sea will reportedly run dry by 2025, possibly earlier.

Malampaya is critical for prosperity on Luzon island, which consumes almost three-quarters of electricity in the Philippines.

In 2015 according to the Department of Energy nearly a third of Luzon’s electricity came from gas, fuelling three power plants with a combined capacity of 2,700 MW, a fifth of the island’s generating capacity.

Dependence on Malampaya poses two risks for Luzon.

One, crippling power shortages should calamity, either natural or man-made, strike.

Two, time may be insufficient to exploit all possible options to make up for Malampaya’s decline. Minimizing risks raises two questions. One, where will energy come from? Two, what will alternatives cost come 2025, if not earlier?

More gas from Philippine waters is much discussed.

However, development faces political, technical, and financial challenges likely taking years to resolve.

Realistically, to offset Malampaya’s decline new offshore fields must be tapped by the early 2020s. That is unlikely. After discovery, a hunt often taking years, it took a further nine years for gas to flow from Malampaya to power plants. A gap looms as Malampaya fades and possibility of new fields coming online.

One way to plug the looming supply gap is to imports liquefied natural gas. Supplies on the global market are abundant, at a price. Even if costs turn out lower than domestic gas the bill for new import terminals, floating or fixed, will find its way into electricity prices. Still, one thing is all but certain: imports of liquefied gas will cost less than blackouts.

Either way, looking ahead will gas cost less than alternatives in 2025?

Thermal coal might be cheaper, depending on the quality and viability of local or overseas production as global demand ebbs. In any case, fossil fuels, in fact any resource, will struggle to undercut solar and wind.

Costs are tumbling.
Between 2010 and 2015, the International Renewable Energy Agency (IRENA) estimates solar-modules dropped 80%, while solar power plants fell 29%-65%.

In the US, the Lawrence Berkeley National Laboratory reports average costs continued sliding in 2015 with solar down to 5 c/kWh and onshore wind 2 c/kWh, comfortably beating IRENA forecasts for the global average in 2025. The Netherlands latest offshore wind project winning bid was 8 c/kWh. The UK expects offshore wind to match natural gas by 2020.

Costs will continue falling because innovation processes similar to those driving down microchip prices for six decades apply to solar and wind.

Furthermore, development costs fall because of learning-by-doing and slicker supply chains as the industry scales, the pace of which is strongly influenced by policy and regulation. Large projects are often take a year to build, even months for solar, which means more electricity faster and quicker returns for investors.

For costs to fall sooner rather than later in the Philippines policy could adapt worldwide experience to accelerate scaling up of solar and wind. Vanguard territories, like California, Chile, Germany, Hawaii and South Australia, have pioneered policy pathways to scale up and lower costs, using tools such as incentive tariffs and increasingly auctions while simplifying regulation and permitting.

Refining policy could lead to gigawatts of solar and wind in the Philippines by 2025 suggests the experience of vanguard territories. Indonesia, for example, aims to add 5 GW of solar between now and 2019, while India targets 100 -GW solar and 60-GW wind by 2022.

Developing a systematic and integrated policy framework to ramp up solar and wind, like India and Indonesia, will benefit energy security in three ways. One, increase supply security for Luzon by reducing dependence on Malampaya. Two, ease demand for gas thereby conserving Malampaya, potentially beyond 2025. Three, minimize burdensome fuel imports, such as liquefied gas.

The speed at which energy security improves and system resilience increases is down to policy. The technology is proven, globally discerning investors are hungry for projects. Turning that into opportunity depends on policy to entice investment and concurrently tackle technical issues. 

Introducing large volumes of solar and wind is a fundamental change for a conventional power system. It is manageable by taking a comprehensive long-term approach, sequencing solar and wind development with power-system upgrades.

Exploiting complementary output peaks of widely dispersed solar and wind is an effective way to smooth variation in output. Another option to maintain stability and maximize value is to reserve flexible and finite hydro and gas to supply electricity when solar and wind dips. Batteries, at substations and as consumer appliances, are also going to play a major role soaking up solar and wind electricity to later fill dips.

In short, a systematic approach to solar and wind increases the value of remaining gas supplies, enhances resilience and strengthens energy security through energy independence, a comfort to households and investors alike. Furthermore, ramping up solar and wind creates tens of thousands of jobs.

Taking a broader view, we can see that the solution to the electricity challenges facing Luzon no longer lies only beneath the sea but increasingly in the sky. Grasping the opportunity is a matter of taking a system view developing policy to leverage powerful trends in new technologies. The sooner that is done the sooner investment will flow and supply prospects strengthen to underpin future prosperity and well-being.

This article has been published on the website of Business World online first and republished on our website with permission.

David Fullbrook is Senior Consultant Strategy and Policy at DNV GL Energy’s Clean Technology Centre in Singapore.