Power Sector Action Planin the Philippines

March, 2017

Suggestion: Promote introduction of power generation equipment with high load following capability such as LNG power generation and pumped storage power plants for mid-merit power and to supply peaking.

Philippine Power Sector Analysis (1) Supply and Demand Outlook

0

5000

10000

15000

20000

25000

30000

35000

40000

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

MW

Capacity Addition Comitted

Existing System Peak Demand

Electricity Demand and Supply

Source) World Bank

0

100

200

300

400

500

600

700

800

900

1000

0 1000 2000 3000 4000 5000

Eletric

Power Con

sumption

(kWh pe

r Capita

)

GNI per Capita （USD)

GDP and Electric Power Consumption

(Source) World Bank

(Source)DOE

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

‐10

‐8

‐6

‐4

‐2

0

2

4

6

8

10

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

Philippine GDP Growth

Gross domestic product per capita, current prices (U.S.dollars, RHS)Gross domestic product, constant prices （percent 

change, LHS)

estimates

(Source) IMF

Along with economic growth, power supply and demand continue to increase. In order to meet future demand growth, it is necessary to ensure sufficient supply.

According to DOEʼs estimate, investment in mid-merit and peaking power supply has not increased sufficiently.

1

Philippine Power Sector Analysis (2) Electricity Tariff

In recent years, the electricity tariff in the Philippines has decreased with resource prices, but it is still the highest price in Asia.

Also, the addition of FIT allowance introduced in 2015 is a factor for the future rise.

2

(Source) Prepared by EY based on JETRO data

2015 Index (Electricity Tariff / GDP per Capita)

Suggestion: Improve power generation efficiency by rehabilitation of power generating facilities which have decreased in efficiency, thereby reducing power generation costs.

Suggestion: Improve power generation efficiency through human resource development for the purpose of improving operation technology and operation management, thereby reducing power generation costs.

(Source) METI

Difference in power generation efficiency between coal-fired power plants in Japan and the Philippines

0

0.2

0.4

0.6

0.8

1

1.2

Seou

lBe

ijing

Shanghai

Guangzhou

Singapore

Bangkok

Kuala Lumpu

rJakarta

Batam Island

Manila

Cebu

Hano

iHo

 Chi M

inh

Da Nang

Yangon

Vien

tiane

New

 Delhi

Karachi

Colombo

Mum

bai

Dhaka

Yokohama

Electrification rate per administrative district (barangay) is almost 100%. However, on a customer base, there are areas with low electrification rates. The electrification rate of Mindanao is especially low at 71%.

3

Electrification level by region, as of 2014

Philippine Power Sector Analysis (3) Electrification Rate

Suggestion: Strengthen power distribution network for areas with low electrification rates.

Suggestion: Introduce renewable energy (i.e. geothermal, wind power) in regions rich with energy resources.

・Davao

・Manila

(Source) SEC

Energized/Completed

Energized/Completed

To date To dateⅠ 3,027 3,027 100% 976,400 925,231 95%Ⅱ 2,369 2,369 100% 770,500 711,072 92%CAR 1,112 1,112 100% 379,500 332,086 88%Ⅲ 2,236 2,236 100% 1,367,300 1,316,469 96%Ⅳ-A 1,946 1,945 99% 737,900 703,457 95%Ⅳ-B 1,416 1,416 100% 622,700 511,974 82%Ⅴ 3,410 3,408 99% 1,055,200 939,946 89%Total Luzon 15,516 15,513 99% 5,909,500 5,440,235 92%Ⅵ 3,209 3,208 99% 799,200 739,353 93%Ⅶ 2,156 2,156 100% 748,100 718,246 96%Negros Island Region 1,219 1,219 100% 821,000 732,108 89%Ⅷ 4,372 4,372 100% 874,100 749,693 86%Total Visayas 10,956 10,955 99% 3,242,400 2,939,400 91%Ⅸ 1,865 1,865 100% 654,000 463,960 71%Ⅹ 1,843 1,843 100% 750,700 625,762 83%XI 896 896 100% 555,600 425,380 77%XII 1,230 1,230 100% 892,000 558,142 63%ARMM 2,447 2,441 99% 483,600 171,904 36%CARAGA 1,310 1,310 100% 593,600 549,297 93%Total Mindanao 9,591 9,585 99% 3,929,500 2,794,445 71%Total Philippines 36,063 36,053 99% 13,081,400 11,174,080 85%

Region

Barangays

Potential %

Connections

Potential %

Suggestion: Utilize imported LNG as alternative to future depleting domestic natural gas to improve balance currently dependent on imported coal.

Suggestion: Utilize domestic coal to improve energy self-sufficiency rate.

Balance between base load, mid-merit, and peaking power is required for stabilizing electricity supply and demand.

Moreover, improvement of self-sufficiency rate is necessary to enhance energy security.

Additional power supply capacity required by 2030

Unit（MW) Luzon Visayas Mindanao Total

Base load 4,320 1,968 2,100 8,388Mid-merit 4,800 1,500 1,500 7,800Peaking 950 150 50 1,150Total Grid 10,070 3,618 3,650 17,338

Base load：coal, geothermal, natural gas, biomass, hydraulicMid-merit：natural gas etc.Peaking：oil, solar power, wind power

(Source) DOE “Energy Programs and Investment Opportunities”(Source) DOE

Unit（MW) Existing Committed CapacityAddition

Base load 11,277 3,091 8,388Mid-merit 0 876 7,800Peaking 2,600 111 1,150

Philippine Power Sector Analysis (4) Balance of Power sources

Power generating capacity by energy source (2014)

42.78%

7.39%

24.19%

13.34%

11.83%

0.20% 0.02%0.25%

Coal

Oil

Natural Gas

Geothermal Power

Hydraulic Power

Wind Power

Solar Power

Biomass

Total power generating capacity77,260,997MWh

4

The Philippines is the third-most-vulnerable country to natural disasters in the world (World Risk Report 2016), and reducing disaster risks for power sector is necessary.

5

(Source) United Nations University

Suggestion: Japan's efforts, such as enhancing electricity distribution network, can be utilized to reduce natural disaster risks, as Japan also has valuable experience dealing with continuous natural disasters.

World Risk Report 2016: Inadequate Infrastructure Pushes Up the Risk of Disaster

Philippine Power Sector Analysis (5) Disaster Resiliency

Improve power generation efficiency by rehabilitation of existing coal-fired power plants which have decreased in efficiency, and by improving operation management, thereby reducing power generation costs.

Proposal for overcoming obstacles(1) Improve power generation efficiency by renovating existing power plants

6

Coal fired power plant X

Improve power generation efficiency, Reduce power generation cost

Select model plants which have decreasedpower generation efficiency

Apply to similar plants to improve power generation efficiency everywhere in the Philippines.

Rehabilitation of power generation equipment

Improvement of operation management

Package Proposal

Implementation of F / S

PlantOwner

Improve electrification rate with natural energy such as geothermal and wind power, mainly for island areas. Improve energy self-sufficiency rate by utilizing domestic coal.

7

Geothermal resources

Geothermal resources

Suitable for wind power

Reducing powergeneration costs

through rehabilitationof existing  hydroelectricpower plants which havedecreased in efficiency

Utilize preliminary extracted geothermal 

wells to improve electrification rates

in island areas

Introduce wind power generation facilities 

to improve electrification rates

in island areas

JICATwo-Step

Loans

Geothermal resources

Proposal for overcoming obstacles（2）Introduction of renewable energy etc. by utilizing abundant natural resources

Proposal for overcoming obstacles（2-1） Improve power generation efficiency by renovating existing power plants Improve power generation efficiency through rehabilitation of existing hydroelectric

power plants which have decreased in efficiency, and by improving operation management, thereby reducing power generation costs.

Select model plants which have decreased power generation efficiency

Hydroelectric power plant X Rehabilitation of power generation equipment

Improvement of operation management

Package Proposal

Implementation of F / S

Improve power generation efficiency Reduce power generation cost

Apply to similar plants to improve power generation efficiency everywhere in the Philippines.

Loan JICATwo-Step

Loans

PlantOwner

8

The Philippines is one of the world's foremost geothermal resource countries and geothermal power plants are located mainly in islands.

To improve electrification rate of the islands, utilize the preliminary extracted wells in existing geothermal plants

9

Geothermal resources

Geothermal resources

Geothermal resources

Introduction of geothermal power plants

Improvement of management ability

Package Proposal

Effective use of geothermal resources improves electrification rate

Geothermal Power Plant

Owner

Loan

Implementation of F / S

Proposal for overcoming obstacles（2-2）Improve electrification rate of islands by utilizing preliminary extracted wells

JICATwo-Step

Loans

Improve electrification rate by introducing wind power generation for islands with stable wind conditions and fewer typhoons

Proposal for overcoming challenges(2-3) Promoting introduction of wind power generation facilities in islands

10

Package Proposal

Introduction of wind power plants

Improvement of management ability

Suitable for wind power

Effective use of natural energy to Improve electrification rate

Business owner

Loan

Implementation of F / S

●Davao

Surigao●

Cagayan de Oro●

●Zamboanga

JICATwo-Step

Loans

Strengthen power distribution network development capacity in areas with low electrification rate, mainly in Mindanao.

Also, enhance disaster resiliency of power distribution network and reduce natural-disaster related risk.

Proposal for overcoming challenges(3) Improve electrification rate and reduction of natural disaster risk through enhancement of electricity distribution network

11

Grant Aidfrom Japan*

The Government of the Philippines

Grant of maintenance  equipment for distribution networks

Quality control of equipment,Human Resource Development 

for Disaster resiliency

Grant of equipment for utility pole construction

Improvement of electrification rate reduces natural disaster risks

The National Electrification Administration（NEA）

Package Proposal

Implementation of F / S

Electric Cooperatives (EC)

*JICA Two-Step Loan is another possible option

Malampaya gas field is responsible for 1/3 of power supply in Luzon Island, but production volume is expected to decline from around 2024.

Introduce LNG base and utilize imported LNG to improve energy balance.

Proposal for overcoming obstacles(4) Improvement of energy balance through introduction of LNG terminal

12

Submarine gas pipeline

Luzon Island Manila

Malampayagas field

Gas-fired power plant

Package Proposal

Introduction of LNG base

Providing operation management technology, 

Support for demand development

Financial support by Japan

Government organizations of the Philippines

Improvement of energy balance, Improvement of electrification rate

Introduction of satellite base

Implementation of F / S

Private Companies

(Source) Malampaya HP

Wind power generation in Calaga area· Introduction of the first Japanese wind power generator in the Philippines.

· Expected to be the first wind power generation project in Mindanao.

· There are no power plants in Caraga area including Butuan City, and electricity is supplied from Irrigan City, which is far away. High costs due to long distance transmission and power transmission loss are problems.

Agus Hydroelectric Power Plants· Operated by National Power Corporation (NPC).· Account for 70% of hydroelectric power generation in Mindanao. (Hydroelectric power generation is responsible for 30% of power supply in Mindanao.)

· Power generation efficiency will be improved by rehabilitation of the oldest power plant, No. 6.

Power Sector Action plan in Mindanao

●Davao

Surigao●

●Cagayan de Oro

●Zamboanga

Improve power generation efficiency of main power supply which occupies 20 % of total power demand in Mindanao

Introduction of the first wind power generator in Mindanao

Enhancement of electricity distribution network project in Bangsamoro area (Grant aid)· Providing maintenance equipment for distribution network (work vehicles, utility poles, distribution lines, ground wires and pillar transformers) to Electric cooperatives (EC) in Conflict-Affected Areas in Mindanao (Bangsamoro area), stabilizing the power supply in the area.

· To be implemented from April 2017.

Improvement of electrification rate forareas with extremely low electrification rate (36%)

13

Japanʼs proposed solutions

14

１．Improve generation efficiency and Stabilize Power supply / demand Rehabilitation of existing low-efficiency coal-fired power plants Human resource development aimed at improving operational technology and operational

management Introduction of LNG power plants and pumped storage power plants for mid-merit and peaking

power supply Improvement of disaster resiliency of power distribution network

２．Improve Energy Security and Self-sufficiency Rate Promoting introduction of LNG terminal Effectively utilizing clean coal technology with domestically produced coal Promote introduction of renewable energy such as geothermal and wind power

３．Improve Electrification Rate Enhancement of electricity distribution network in areas with low electrification rates Effectively utilize domestically produced coal with clean coal technology (Re-listed) Introduction of storage batteries to maintain the stability of transmission networks with the increase

of renewable energy

Some of the measures which will solve the problems are: introducing following power plants, transmission & distribution systems and energy facilities, utilizing technology, and capacity building etc.

Japan is prepared to provide different forms of assistance by utilizing technology and know-how to solve problems facing the power sector in the Philippines.

[Financial scheme (tentative)]

・ Overview of the Project(1) Two-step loans: Preferential Terms could be applied to the Yen Loan. Funds pass through financial

institutions before the end-beneficiaries (e.g. IPP operators) receive them. Eligible subprojects are to be discussed with JICA during Appraisal Mission.

(2) Technical Cooperation could follow.

15

JICATechnical

Cooperation

JICATwo-Step

LoansBusiness owner

Loan

16

Action 1 Diagnosis of selected Model Plants (Starting from April, 2017) Experts from Japanese companies will visit power plants selected as Model Plants, diagnose issues in power generating efficiency, and propose a plan for rehabilitation in terms of high quality infrastructure (e.g. Life Cycle Cost), supported by METI subsidies.

Action 2 Rehabilitation of Model Plants (from 2018)JICA could support the implementation of rehabilitation of model plants through a two step loan scheme.

Action 3 Applying practice of ʻhigh quality infrastructureʼ to plants in addition to Model Plants (from 2019)JICA could support the rehabilitation of those plants, in addition to Model plants, complying with standards of high quality infrastructure through two step loan scheme.

Action 4 Institutionalizing ʻhigh quality infrastructureʼ among all IPPs (Until 2021)Application of ʻGuideline of high quality infrastructureʼ to all newly built and/or rehabilitated plants by all IPPs during approval procedure by ERC (Electric Regulation Committee).

Introduction of high quality power plants to the Philippines nationwide.

An Example of standards of high quality infrastructure

（Source）APEC Guideline for Quality Electric Power Infrastructure

17