Banks and other lending institutions are reportedly asking the Department of Energy (DOE) for a categorical definition and conclusive policy framework that shall serve as anchor to prospective financing of ‘transition coal’ projects that are still being allowed by the government for commercial developments to address a threatening power crisis for the country.

The banks, according to well-entrenched industry sources, had sounded off this policy proposition to Energy Secretary Raphael P.M. Lotilla during a Knowledge Exchange Forum on Financing the Philippine Energy Transition Program that was recently convened by the Bangko Sentral ng Pilipinas.

A source from a leading Philippine bank has affirmed that “the DoE is amenable to the proposal, so we are waiting for their action on this - especially on how they will define ‘transition coal’ in the array of projects currently being advanced by power plant developers.”

At this stage, it was conveyed that the expectation of banks is for ‘transition coal’ to have shorter operating life cycle of just 25 years – instead of the typical 40-year life for this technology.

Sources stated that if the proposed ‘transition coal’ is prudently defined, “then the banks would have specific gauge on how to package financing for these projects.”

Absent that, they noted that it would be extremely difficult or even impossible to fund these new coal plant installations given intensifying pressure hurled against the technology, as the whole world gets even more aggressive with decarbonization and net zero goals.

As emphasized by another source from the lending community, shortened operating life for coal plants may entail higher financing costs “because there is a need to factor in cash flow on the 15 years that the plant will be placed on advanced retirement or decommissioning.”

Sources added that heftier project financing would also result in higher rates to be paid for by consumers, and that too has to be managed by relevant government agencies, primarily the energy department.

Essentially for countries that are still saddled with ‘energy security’ conundrum, their usual pivot is toward gradual phasedown; and not just a simple ‘turn-off-the-switch’ scenario for coal plants; owing it to the fact that these are the facilities they depended upon for decades in meeting their energy needs and in fueling their economic growths – and the Philippines is similarly situated in that terrain.

With the State’s recurring foul-up on ensuring sufficient and reliable power supply for the country, Filipino ratepayers are being left with no choice but to miserably re-embrace coal just to keep the lights on.

The relentless precarious power supply dilemma of the Philippines is generally perceived as a major failure of the Electric Power Industry Reform Act (EPIRA), because the consumers’ expectations of energy security as well as cheaper rates had never materialized; while ironically making the power plant developers immensely richer within the span of more than two decades.

New amendments to the EPIRA are being lodged in Congress, but it remains to be seen if favorable developments will finally shift to the consumers’ benefit or the forthcoming policy tweaks may just come off  as another installment of empty promises when it comes to the sphere of energy security and rates affordability.