Fitch unit: Risks on energy sector expansion as demand outpaced supply

MANILA, Philippines — The local power sector’s prospects remain mixed as energy supply remained unable to keep up with demand, despite the national government’s push for energy security, so says a unit of Fitch Solutions.

In an emailed commentary on Tuesday, BMI, a Fitch Solutions company, made the case for this since Luzon grappled with supply woes in May that threatened blackouts across the major island.

“Downside risks remain from the market's transmission and distribution network, as it grapples with expanding in tandem with the rapidly growing power sector,” the commentary read. 

BMI highlighted the tripping of a transmission line, connected to the 618-megawatt coal-fired Masinloc power plant. The malfunction left the Luzon Grid on red alert from 2-4 p.m. and 7-8 p.m. last month.

The energy department said that this signified that the on-grid power demand outpaced the available supply. 

“Downside risks remain from the market's transmission and distribution network, as it grapples with expanding in tandem with the rapidly growing power sector,” BMI added. 

As it is, reports spotlighted widespread bullishness on the country’s energy sector as it looks to transition to renewables in its energy mix. These reports also highlighted policy recommendations to the national government to accelerate this shift, as the move could prove costly at times. 

For context, the Philippines is looking to boost renewables in its current energy mix, which it hopes will hit 35% share by 2030.

The report of the Fitch Solutions unit saw a silver lining, as the Marcos Jr. administration extended the operation of the Malampaya gas field. The move bolstered the case for the state’s move towards energy security, according to BMI. 

The Fitch Solutions unit pointed out that if Malampaya is depleted, domestic natural gas production will force the country to rely heavily on imported energy. This will leave the country vulnerable to price swings in the international market.

“We expect gas-fired power generation to remain a key technology in the Philippines' power mix, contributing about 19% to the mix over the coming 10 years, behind coal's 58% and slightly ahead of non-hydropower renewables' 15%,” the BMI added. — Ramon Royandoyan