World Bank models accelerated transition for the Philippines: The World Bank’s Philippines Economic Update argues that the country would benefit from a more ambitious transition of the power sector to renewables but that this would require financial support. The Philippines currently has about 11,000 MW of operating coal plants, with a further 2640 MW which are under construction or could proceed. The current government commitment is to cap coal capacity by 2025 and generation by 2030. The World Bank proposes an accelerated decarbonization scenario in which less than 3000 MW of coal capacity would still operate by 2040. The current government policy would result in about 14,000 MW of coal capacity remaining online in 2040. The report estimates the losses due to stranded assets would be about US$10 billion, with coal capacity reduced from 2028. The Philippines currently imports about 80 per cent of its coal. Under an accelerated transition scenario, the cost of air pollution damage would decline by about 32 per cent or US$4.7 billion a year.
the country would benefit from a more ambitious transition of the power sector to renewables but that this would require financial support
Energy sector needs net-zero transition fast, says World Bank
MANILA, Philippines — The Philippine energy sector will have to grow rapidly to support the country’s ambition of ending poverty and becoming a prosperous middle-class society by 2040, the World Bank said.
With final energy demand in the Philippines seen tripling between 2020 and 2040, the World Bank in its latest report said the country’s energy sector needs to overcome the dual challenges of meeting fast-growing demand and transforming its fossil-fuel-based infrastructure while keeping the energy supply secure, reliable, and affordable.
The World Bank believes that the country would benefit from an energy transition toward low- and zero-carbon alternatives.
It said a clean energy transition would enhance the country’s energy security by substantially increasing the use of indigenous and renewable energy resources while reducing its reliance on imported fossil fuels.
The World Bank report indicated that a cleaner energy future is expected to be more affordable, given the global trends of declining costs related to deploying and integrating solar and wind power.
Further, it said reducing fossil fuel consumption, particularly by electrifying urban transport and reducing the use of coal in power generation, would improve public health.
“Given that an increasing number of multinational firms are setting their own net-zero targets and examining their supply chains to achieve their climate commitments, greening the power supply through an energy transition would help the Philippines stay competitive and attract foreign investments,” the World Bank said.
Feng Liu, World Bank’s senior energy specialist and infrastructure program leader for the Philippines, said the country’s energy sector is heavily dependent on imports and also has among the highest energy prices in the region.
On the brighter side, however, he said the Philippines is not saddled with explicit energy subsidies like in some countries in the region.
Other advantages of the Philippine energy sector are the abundance of renewable energy resources, as well as its private sector driven development.
“But the underlying message is if the Philippines is going for the accelerated decarbonization in the power sector, it really needs international help, including the share of the cost burdens of that incremental cost we mentioned before,” Liu said.
“So without that, if purely thinking from a national interest, it is very difficult for the Philippines to go for this higher carbon emissions reduction. We really need the international community to come in, to work with the government, not just providing technical assistance, but also providing real financial assistance, “ he said.
To build a solid foundation for the country’s energy transition and accelerate such shift, the World Bank has recommended for the increase in the implementation of utility-scale solar and wind power projects to bring variable renewable energy sources to a tipping point in power generation, as well as pursuit of the LNG-to-power program to secure reliable power supply and increase the system flexibility.
The World Bank also recommended the improvement of power system planning to better guide energy transition investment decisions, as well as the establishment of a framework for addressing the early retirement of coal-fired power plants and ensuring a just energy transition.
Phillipines: Accelerated decarbonization to leave $10b worth of stranded coal plants
The World Bank said Thursday an accelerated decarbonization scenario would leave the Philippines with $10 bilion worth of stranded coal-fired power plants.
“The accelerated decarbonization scenario will have a tremendous impact on the power system technology mix. What this tells us is if the Philippines is aspiring to reach carbon neutrality by mid-century, it really has to ramp up renewable energy investment dramatically and at the same time start to phase down coal-fired power around 2030,” said WB senior energy specialist and infrastructure program leader for the Philippines Feng Liu.
This is because coal still accounted for about 43 percent of the country’s installed capacity as of 2021, based on Department of Energy records.
The WB’s Philippines Economic Report said phasing down coal-fired power would result in substantial stranded assets. It said less than three gigawatts (3,000 MW) of coal-fired power plants would be in operation by 2040 under the ADS, compared to about 14 GW under the current power scenario.
“The present value of the financial losses due to stranded CFPPs is about $10 billion under the ADS. Current CFPPs (11 GW in 2020) in the Philippines are relatively young, most of them having been commissioned no early than 2010,” the report said.
It said the coal power plant phase-down would take place from 2028 to 2040 under the ADS, requiring effective solutions to address the financial cost of the stranded assets of privately owned CFPPs.
The WB said the Philippines should conduct a better assessment of the economic, social and financial risks of stranded assets, not only for coal but also for natural gas infrastructure, as it pursues an accelerated decarbonized pathway.
“While the Philippines has limited domestic production of coal, coal mines as well as the existing 30 or so CFPPs will need to be gradually retired to achieve the net-zero goal,” it said.
The report said CFPPs directly employ few people but more people indirectly rely on them for livelihood including across the supply chain and service sector, resulting in the larger community being potentially adversely impacted by their closing.
“While RE production will result in employment opportunities, labor market misalignments will likely arise [e.g., temporary job losses from closing CFPPs],” it said.
The WB said labor gains from RE might not happen in parallel as RE jobs would be created in different areas of the country, and existing labor force might not move with the new jobs.
The report said pursuing ADS could benefit both the Philippines and the global community if there is a cost-sharing mechanism “to defuse the national burden of elevated costs while capturing the additional global benefit of reduced GHG emissions.”
It said the ADS system cost of $125.4 billion is only 6 percent higher than CPS of $133 billion covering the period 2022 to 2040.
“While reduced local environmental damage do not have a market-based monetary value, reduced global environmental damages could be monetized through the sale of carbon credits,” the report said.
“Therefore, there is potential that the cost of stranded assets due to the early retirement of CFPPs could at least be partially addressed through international purchases of carbon credits. If local and global environmental benefits are included, the ADS would have a net advantage over the CPS,” the WB said.