TORONTO – Long term power supply agreements (PSAs) may thrive as the ‘gold standard’ in securing the confidence of investors if the Philippines will ultimately decide on integrating nuclear power as a strategic component of its future energy mix, according to the Energy Regulatory Commission.

In an exclusive interview during the week-long Philippine Nuclear Energy Mission to Canada,, ERC Chairperson Monalisa C. Dimalanta indicated that an eye-opener to the country’s regulatory agency is the need for long-term power supply deals to underpin nuclear power projects – and these are contracts that will likely stretch through 30-40 years or even longer.

Beyond that, she noted that an option could be a capacity bidding similar to the green energy auction (GEA) being done for renewables; wherein a floor price shall be set then an added feature akin to contract for differences (CfDs) that can be settled via the spot market, may be integrated.

A CfD, in particular, is a legally binding agreement stipulating that the buyer or capacity off-taker will agree to pay the seller (in this case the nuclear power developer) the cost difference between the current value of the asset vis-à-vis the value reckoned at the enforcement of the contract.

Given huge upfront costs for nuclear power projects, Dimalanta admitted that the crafting of the PPAs as well as the cost recoveries for investors remain as major perplexing puzzle that the Philippine regulators have yet to untangle.

Sifting through Canada’s experience in developing its nuclear development supply chain and managing the production life cycle of this technology in meeting their energy needs, the ERC chief acknowledged that the difficult part will be spreading the cost recoveries through decades, so that the eventual pass-on of charges won’t come too punishing in the pockets of consumers.

Part of the Philippine delegation’s learning from Canada, Dimalanta said, is “for them not trying too hard to recover costs within just the span of 20 or 25 years – there’s a need to spread cost recovery for a longer period, given that the life cycle of nuclear could go as long as 80 to more than 100 years.”

To date, Canada’s electricity supply drawn from nuclear power yields levelized cost of electricity (LCOE) ranging from 8.0 to 10 cents per kilowatt hour (kWh) – but their power producers like Bruce Power, Ontario Power Generation and New Brunswick Power are already in this business for more than 60 years.

The Philippine delegation at the mock-up CANDU (Canada Deuterium Uranium) reactor at the Darlington Nuclear Energy Complex in Ontario.

After 30 years in operation, the Ontario Power Generation in particular is now pursuing refurbishment phase on the four units of its 3,512-megawatt Darlington Nuclear Generating Station – with one unit already completed since 2020.

“We were able to discuss LCOE; and their approach makes sense -- that for any nuclear power plant, you don’t try to recover all the costs in 20 years, not even 25 years - it extends to 75 up to 100 years. In the case of the Darlington nuclear power facility, for example, it’s already on its second production life cycle, so the cost of its generation already reaches the more affordable level of 8-9 cents per kWh,” she stated.

Realistic approach in calculating the LCOE for nuclear

The LCOE calculations provided by nuclear power generators in Canada are just up to waste management and storage phase; because the disposal of spent or used fuel has separate fees being remitted to the State-underpinned Nuclear Waste Management Organization (NWMO) and such would be calculated on per fuel-bundle basis.

As emphasized by NWMO, used nuclear fuel or the fuel already irradiated in CANDU reactors in various nuclear power stations in Canada are still safely managed at licensed facilities for interim storage – primarily at project sites in Ontario, Quebec, New Brunswick; as well as the sites sanctioned by the Atomic Energy of Canada at Manitoba and Chalk River Laboratories in Ontario province.

As of last year, Canada’s inventory of used nuclear fuel bundles had been more than 3.2 million – and separate fees will be paid by the nuclear power producers in the final waste disposal process to be done at the designated deep geological repository to be constructed more than 500 meters below ground, and this is a facility that will have multiple-barrier system so it can safely contain and isolate used nuclear fuel.

All things considered, Dimalanta qualified that at this stage, tariff-setting is still an esoteric concept for Philippine regulators but the lessons learned from counterparts in various parts of the world – including from the Canada mission, will eventually guide them in regulating the foreseeable nuclear development renaissance in the country.

She further sounded off that in pushing for long-term PPAs, the critical concern to be balanced will be the banks or lenders’ bid for shorter timeframe of loan repayments; with her noting that in other jurisdictions, including Canada – the initial ‘funding sweetener’ is often shouldered by government.

“Whatever will optimize the funding from the private sector is I think what we will go for…not because we are being stubborn, but because we have to be realistic also with what government can really do or provide,” she stressed.

Dimalanta highlighted that in the case of the Philippines, the market is more complicated because aside from its private sector-driven peculiarity, sovereign guarantees or even State financing will be an almost impossible business proposition for the government to consider.

With that limitation, the ERC chief opined that “there must be a way to defer certain costs of generation,” hence, backloading of certain items in the project-sponsors’ cost recoveries “will likely merit a second look.”

Dimalanta conveyed “I don’t think private sector alone can backstop such intergenerational type of project… there is a need for government involvement because only government can assure you the continuity for the entire life cycle of the project, but certainly sovereign guarantee or government funding will already be out of the question.”

She expounded that the crucial play for government in the entire development chain of nuclear power industry in the Philippines will be on other concerns, such as extending firm support to the private investors in terms of siting; as well as laying down the framework on capacity contracting – similar to what is happening now in the renewable energy (RE) development space.

“Maybe we can work on some form of government involvement or the government can identify the site or provide the site to the project; or some other form of benefit or incentive like a different licensing procedure knowing that this is going to be a 50-year, 75-year project,” the ERC chief asserted.

This early, Dimalanta also noted that what is being thought out seriously is on the entity which will serve as off-taker (capacity buyer) of the electricity to be generated from future nuclear power facilities – if it will be prudent to just strategically position it as a pure private sector decision to procure; or if there will be some form of intervention from the government in the award of PSAs or contracts.

“If it’s a large scale nuclear project, we need to work out early our program for nuclear – in particular, which entity will be the offtaker? Will it be one DU (distribution utility) like Meralco (Manila Electric Company) – because this is going to be a strategic asset; or do we auction it so there will be several offtaker-DUs? Or do we let the entire system benefit from that strategic asset by coming up with another auction system for its generated capacity…frankly, we still have many questions to answer in framing the rate regulatory framework for nuclear,” she pointed out.