Is coal still king? Pressure mounts on lifting of moratorium on coal-fired plants

The call to lift the moratorium on new coal-fired power plants in the Philippines has intensified recently. Proponents argue that coal is the most affordable and reliable power source, and refer to a recent study by the Asean Centre for Energy and Germany’s decision to extend the life of some nuclear and lignite plants. They also cite frequent power shortages in recent months to justify this contention, when in fact, these outages were actually caused by coal plant breakdowns.

For decades, the Philippines has relied heavily on coal, which contributes nearly 60 percent of the power generation mix. In 2021, the country imported 87 percent of its coal and 98 percent of its crude oil. Diesel-powered plants also play a significant role, especially in off-grid areas and during peak demand on the main grid. But heavy reliance on fossil fuels poses substantial economic and environmental burden. Dependence on imports also makes the Philippines vulnerable to global market fluctuations, supply disruptions, and price volatility.

The social costs, including environmental and health impacts, are often overlooked. The burning of coal and oil releases huge amounts of greenhouse gases, a major factor in global warming. Yet despite its low carbon footprint, the Philippines is one of the most vulnerable countries to climate change-induced threats.

With a power sector dominated by coal plants, the country has the second-highest electricity rate and the third lowest per capita supply in Asean. Coal plants, designed for stable operation, have to ramp up and down to meet variable demand, accelerating wear and tear. The cycling leads to frequent breakdowns, higher maintenance costs, and reliability issues. Many coal plants exceed outage limits set by the Energy Regulatory Commission (ERC); even newer plants register frequent forced outages. Yet consumers bear the high replacement costs from the spot market, while penalties on power producers are minimal.

The moratorium on new coal plants must be maintained, as current coal capacities already surpass the country’s demand. Adding more baseload plants will only exacerbate the problem. The country urgently needs more reliable power, and both solar and wind plants can be constructed more quickly and cost-effectively than new coal plants.

President Marcos highlighted energy security, sustainability, and affordability in his recent State of the Nation Address. He presented plans to increase the supply of renewable and indigenous energy sources. The President also underscored the need to modernize the Philippine energy sector and strengthen grid resilience. To achieve developed nation status, the Philippines must rapidly bolster its power capacity while reducing its dependence on imported fuels. Case in point: Achieving the industrialized level of Thailand would require tripling the country’s installed power capacity now.

In the Philippines, the levelized costs of electricity from solar and onshore wind are already lower than coal and fossil gas. Renewables provide power during peak demand, have minimal outages, and are more resilient to typhoons and calamities. Renewable energy sources, such as solar and wind, are abundant throughout the country. Although their capital costs are high, their operating costs are minimal once installed. Distributed generation, which places power sources like rooftop solar near demand centers, can stabilize the grid and reduce transmission costs.

Balancing energy security, equity, and sustainability is crucial to providing a higher quality of life to our people. Policy changes are needed to modernize the Philippine grid through distributed generation, microgrids, and smart grids. The ERC should enforce stricter penalties for coal plant outages and promote renewable energy integration. Encouraging investments in flexible power technologies, such as storage and smart grid systems, will improve reliability even from intermittent sources. Energy conservation and efficiency must likewise be accorded attractive incentives and integrated in new buildings and infrastructures.

Investing in indigenous sources, renewable energy, and flexible power technologies will propel the country toward its AmBisyon Natin 2040 vision of clean air, green jobs, and sustainable growth. Delivering affordable, reliable, and secure power will ensure that no Filipino will be left behind.

Pedro H. Maniego Jr.

senior policy advisor,

Institute for Climate and Sustainable Cities