2013-02-22 14:02:09 - Recently published research from Business Monitor International, "Philippines Power Report Q1 2013", is now available at Fast Market Research
BMI View: Regulatory concerns continue to slow the development of the Philippines' power sector; the current framework gives international firms little incentives to invest. The gap between supply and demand is very narrow, new capacity is slow to come online, and independent power producers are forced to deal only with distribution utilities (customers have to purchase electricity from them), creating a distribution monopoly. Key growth areas are renewable sources of energy, with feed-in-tariffs approved for the first time in July 2012, and there are many coal-fired power plants in the pipeline. Over the longer term, we expect generation and consumption to grow modestly, as the country experiences economic and population growth. We expect a substantial rise in gas production in
the Philippines, and we predict that its share of total electricity production will increase from an estimated 37.7% in 2012 to 44.7% by 2021.
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We forecast electricity generation in the Philippines will grow by 4.0% in 2012 compared to 2011 to reach 69.2 terawatt hours (TWh). Electricity generated by gas-fired power stations will be responsible for the majority of this growth, and natural gas will outperform the market as a whole, climbing by 7% in 2012 compared to 2011. Oil-fired power stations will see their contribution to electricity generation decline slightly, by 0.11% in 2012. Hydroelectric power continues to represent 15.2% of total electricity generation, but a lack of rain has seen them operating at below capacity.
Between 2012 and 2021, we forecast growth in electricity generation to average 4.3% per annum, underpinned by similar increases in electricity consumption. We expect to see the share of natural gas in total electricity generation increase from 37.7% in 2012 to 44.7% in 2021, as the country seeks to exploit its natural gas reserves and lower electricity generation costs. However, we highlight that the country's power situation will remain tenuous for the foreseeable future, due to the numerous challenges standing in the way of private investment. The government's Philippine Energy Plan 2012-2030 - due to be launched in December 2012 --- will outline power sector investment plans, and may encourage investors with a clear energy strategy for the country.
Key trends and developments in the Philippines' electricity market:
* The Department of Energy plans to launch its Philippine Energy Plan 2012-2013 in December 2012. The government has implied that this will contain measures to increase the production of fossil fuels, and will encourage private sector involvement to promote energy efficiency.
* Numerous plans for coal-fired power plants have been announced in recent months. These include Ayala's plans to develop a coal-fired plant in Iloilo province with the US-based Brown Group of Companies; Manila Electric Company's plans for two 600MW coal-fired power plants; and a third coal-fired power plant at Toledo City, to be developed by Global Business Power Corp.
* The Department of Energy decided to postpone the tender of 40-50 mini hydroelectric power plant sites in November 2012; the tender will now be launched in mid-2013.
Thanks partly to the forecast steady rise in net power generation, which falls slightly short of the underlying demand trend, we do not expect the Philippines to develop a significant power supply shortfall during our 10-year forecast period, with some scope for a limited generation surplus. We note, however, that in order to avoid any shortages or an import requirement, investment commitments need to be met in full. We expect better technology and more efficient distribution lines to result in an overall trend of lower transmission and distribution losses (from an estimated 12.3% in 2012 down to 10.5% in 2021). We do in fact see potential for exports in the long-run.
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