Power producer First Gen Corp. seeks a closer collaboration with the government and other industry stakeholders to assure the country’s smooth transition to clean energy and avoid energy market volatility.
First Gen executive vice president and chief commercial officer Jonathan Russell called for the creation of a multi-sectoral and cross-functional team from government, private sector and financial sector to champion the transition during the 26th Conference of the Electricity Power Supply Industry.
Russell thanked the government for joining other countries in signing the “Global Coal to Clean Power Transition Statement at the Glasgow Climate Change Conference 26.
The statement noted that coal power generation is the single biggest cause of global temperature increases. It also recognized the imperative to urgently scale up the deployment of clean power to accelerate the energy transition.
The multi-sectoral group that Russell envisions will address challenges that include coal retirement; the restructuring of the local energy-based power market; and the adoption of policy and market mechanisms that encourage storage and allow long-term purchase commitments of LNG.
“For the country to truly benefit from LNG at the most competitive prices, while being protected from wild spot price swings, we need to be able to contract medium and long-term supply with LNG suppliers,” Russell said.
He said such contracts could be negotiated if LNG users, such as the gas-fired power plants, have predictable volumes of projected consumption over the mid-term (five years) or the long-term (10 to 15 years) under their own offtake agreements with utilities and other customers.
“Otherwise, LNG would need to be contracted on a short-term basis, which would mean that competitive prices and availability of LNG at times when it is needed cannot be assured,”he said.
Russell said LNG’s role in the transition period would be temporary.
“It [LNG] should be used only for so long as it performs a positive role in displacing coal and supporting renewables. In due course gas or LNG must also be decarbonized or phased down, and the option to utilize green hydrogen remains a possibility,” he said.
Russell said LNG would play a crucial role in accelerating the phase-out of coal-fired power plants and in fighting adverse climate change, but this process would need an industry coordination.
“As clearly stated in the IPCC [United Nations Intergovernmental Panel on Climate Change] Report, and as portended by the heightened levels of unprecedented natural calamities all over the world, there really is no doubt that if we do not effect drastic changes to address climate change today, its effects will soon become irreversible,”Russell said.
“The need to prioritize decarbonization in response to the IPCC’s code red for humanity is clear, and we know that a 100 percent renewable energy future is necessary for our very survival,” Russell said.
The First Gen official, however, said “renewable energy [RE] from intermittent sources such as solar and wind has a number of limitations that will hinder a full and immediate energy transition.”
He said “baseload RE like geothermal is limited, site-specific, and, as such, has its own technical limitations to deal with”.
“Gas-fired plants can respond quickly and reliably when variable renewable sources are not available, allowing the lights to stay on,” Russell said.
He said First Gen is pioneering the development of an LNG terminal that will introduce reliable, flexible and cost-competitive LNG to the Philippines.
First Gen owns and operates the country’s biggest fleet of power plants that run on natural gas. Its portfolio of power plants also runs on geothermal, wind, hydro and sola, which are all RE.
“While we share the belief that LNG is the best transition fuel in achieving 100 percent RE, it does not come without challenges, especially in the Philippines,” Russell said.
“We must find a way to value gas for some time and increase its capability for back-up rather than continuous supply. And this means having a regulatory framework that supports making plans to have enough fuel in stock for when it is needed,” he said.