Rise of coal tax can lead to more RE investments

Rise of coal tax can lead to more RE investments

The rise of coal excise tax brought about by the new tax reform law has opened opportunities for companies to invest in renewable energy projects, an analyst said.

In a report posted by InterAksyon, Sara Jane Ahmed of the Institute for Energy Economics and Financial Analysis said that the coal tax gives investors a signal that the Philippines is leading the ASEAN transition to clean energy.

“This is important as it gives new policy impetus for the private sector to invest in abundant yet underdeveloped wind resources,” Ahmed said in her column.

Under the TRAIN Law, the excise tax on coal will be P50 per metric ton in 2018, P100 in 2019, and P150 in 2020 – lower than the initial Senate version proposal of “100-200-300” hike scheme.

With this, electricity prices are seen to rise by eight centavos per kilowatt-hour following the effect of TRAIN. This means that a typical household consuming 200 kwh may pay P16.16 more on their power bills beginning February.

“Natural gas, solar, wind, run of river hydro, geothermal, and biogas are attractive, viable domestic options that can be combined to create a cheaper, more diverse, and secure energy system in this country,” Ahmed said.

Citing a report from Lazard, a financial advisory and asset management firm, Ahmed said that creating new wind and solar farm costs less than continuously running current coal plants.

She added that the cost of power for both utility-scale solar and onshore wind technologies went down six percent globally from last year.

Ahmed cited the 300-megawatt wind power project that the Meralco PowerGen Corporation is looking to invest in.

“The public and private sector in the Philippines can take this a step further by replacing the 10,000 gigawatts (GW) in coal projects currently in the pipeline with other options such as geothermal, natural gas, solar, wind, hydro, and biomass through a technology-neutral least-cost procurement,” Ahmed stressed.

However, National Electrification Administration administrator Edgardo Masongsong said in a report that while higher coal tax will promote the development of RE projects, “this may cost the electricity consumers more.”

Data from the Department of Energy says that coal accounted for a 37 percent share in the country’s dependable capacity from January to June 2017.

Ahmed pointed this reliance on coal, particularly imported ones, as one of the main causes of the country’s high power price.

“The country must move faster in order to avoid locking in a multibillion-dollar portfolio of stranded coal assets that would eventually be borne by its people,” she stressed.