First Gen explains position on fuel mix

/ 12:12 AM January 20, 2017

I would like to thank Conrad Banal III for his piece on the issue of fuel mix (“Put your stinking cap on,” Business, 1/5/17). While his views do not necessarily agree with ours at First Gen, we welcome a healthy public discourse about energy policy and the role of low carbon and renewable source of power.

Just to clarify some points that Banal raised in the column, First Gen president Francis Giles Puno’s recent public statements on the need for a fuel mix policy simply point out his view that overdependence on a single source of fuel for our power needs makes us vulnerable to volatility in commodity prices.


For example, if 70 percent of our power supply comes from coal (or, for that matter, natural gas), a sharp increase in coal (or natural gas) prices would lead to a corresponding sharp increase in electricity prices. But if the country had a more balanced fuel mix—say, 30-percent coal, 30-percent natural gas, and 30-percent renewable—volatility in the price of one form of energy would have a less severe effect on power prices. A fuel mix policy, therefore, can be a way of avoiding wild swings in electricity rates.

That’s an idea that has been espoused by policymakers for decades. That position is not incompatible with Energy Secretary Alfonso Cusi’s recent statement that he would prefer a fuel mix policy based on the use of power rather than on the source of power. Secretary Cusi’s position is indifferent to the source of power (whether coal or natural gas or geothermal) but focuses instead on whether the power generated is base load, mid merit, or peaking. This is a practical and realistic way of looking at the power mix, and we at First Gen support this view.


But we would still argue that, given that framework, it would still be beneficial for the country to factor in the source of fuel, as well as whether it is baseload, mid merit, or peaking.

In fact, one of the reasons First Gen has chosen to invest in natural gas plants is that these plants hold the advantage of operational flexibility: Depending on the need, they can ramp operations up or down—from baseload to mid merit to peaking—far more quickly and efficiently than a coal, geothermal or hydro plant could. The flexibility gains added importance in stabilizing our power grid and avoiding outages, as the grid gets additional capacity—as mandated by law—from clean yet intermittent renewable energy sources, such as solar and wind.

And, of course, equally important for us at First Gen, natural gas plants produce just a fraction of the pollutants and greenhouse gases that coal plants do.  But that’s another subject altogether.

We hope this letter helps explain our position on the matter.


JEROME H. CAINGLET, vice president and head Business Development and Natural Gas Group First Gen Corporation

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