Independent power producers (IPPs) in the country are asking for a permanent zero tariff on all types of coal imports from non-ASEAN countries to diversify sources of coal outside of Indonesia and ensure energy security in the country.
In a presentation during the public hearing conducted by the Tariff Commission on a petition by the Foundation for Economic Freedom (FEF) to extend Executive Order 171, which temporarily eliminates the seven percent most favored nation (MFN) import tariff rate on coal but is set to expire on Dec. 31 this year.
Atty. Anne Estorco Montelibano, president of the Philippine Independent Power Producers Association (PIPPA), a professional organization of IPPs, working to provide adequate, reliable, and affordable supply of electricity, said the country’s dependence on Indonesian coal poses significant risks on the supply of fuel for coal-fired power plants, still the most reliable sources of power.
“The political and regulatory uncertainties within Indonesia poses an ongoing risk for the export ban recurring,” said Montelibano. Thus, the need to explore other supply sources in lieu of increasing worldwide coal prices is critical. Longer zero tariff on coal imports from non-ASEAN countries would ensure stability of supply and prices.
The power generation industry imports 20 million metric tons based on 2019 data. Indonesia accounts for 99.14 percent of local coal supply and a small percentage from Australia. The industry is looking at diversifying sources to include Russia, Colombia, and South Africa, but which are slapped with seven percent import tariff. Coal imports from Australia and Vietnam are already at zero percent.
Another reason cited was to ensure Philippine energy security considering that coal-powered plants still account 57.9 percent of the country’s total power supply mix in 2019 and at even higher 58.2 percent share in 2020 or 101.8 TWh (terrawatthours). Of total coal imports, 88.45 percent are used by the power industry.
As the economy recovers from the pandemic, Montelibano stressed the need to ensure reliable coal supply and coal-fired plants are still the most reliable power source as they run 24 hours by seven.
She also cited that the cost of no electricity is very expensive and it affects the country’s economic growth.
PIPPA estimated that for every five hours of brownout means losing 500 mw that correspond to P556 million in economic loss or value of loss load. The value of loss load is computed as GDP over electricity sales.
Any increase in fuel or coal prices would be felt by consumers and industries as well, said Montelibano. PIPPA estimates that for every $100 increase per metric ton of coal would roughly translate to P1.7 per kilowatt hour increase on fuel cost.
Longer imposition of zero tariff on coal also assures power producers of competitive pricing as they can contract supply for a longer period.