May 20, 2024

The Department of Energy is drafting a circular that will mandate distribution utilities (DUs) in the Luzon grid to source a percentage of their demand from natural gas power generation facilities.

The department circular (DC) aims to develop the natural gas-fired power plants in the Luzon grid to support the country’s transition to clean energy.

 “Transitioning to clean energy to achieve the country’s energy security goals would also require a transition fuel capable of providing baseload generation that would fill in the gap when existing coal-fired power plants start to retire,” DOE said in a statement.

The DOE has identified natural gas as a sustainable transition fuel.

 “With the eventual reduction of capacity from coal-fired power plant, natural gas will be the immediate option for the DUs either as baseload, midrange, and peaking requirement because of its flexibility, and with much less harm to (the) environment,” it added.

The draft circular said the DOE will determine the mandated minimum percentage that DUs are required to source from natural gas-fired power plants.

The agency is also responsible to monitor the inventory of available capacity from natural gas power generation facilities as well as design the mechanism, processes, protocols and requirements for the procurement of capacity from the power plants, which may include, but are not limited to, auction and power market.

The draft policy also requires DUs to prepare and submit their distribution development plan (DDP) and power supply procurement plan integrating the mandated percentage of power supply sourced from natural gas power plants.

“The DUs shall source their mandated natural gas requirements through auction, wholesale electricity spot market, or competitive selection process (CSP),” the draft DC read.

But a section of the DC allows DUs to be exempted from the conduct of CSP should the procurement of power supply be done through auction.

“With the Malampaya gas depleting and the cost of imported liquefied natural as (LNG) slightly higher than the indigenous Malampaya, the draft policy is espousing a gas aggregation scheme in order for the DUs within the Luzon grid to benefit relatively from a relatively lower price of blended imported LNG and natural gas from Malampaya,” the DOE said.

It said imported LNG is only transitory and the country should pursue exploration of indigenous natural gas resources and push for renewable energy (RE) projects.

“Natural gas, therefore, is seen as a suitable transition fuel by which the private sector investments in this technology will be facilitated as a way to enable the viability of large RE capacity additions and ensure the reliability and security of the power system,” DOE added. – PNA