January 22, 2018 Read More →

Investor Signal: Philippine Coal Tax


The passage of the coal tax increase in the Philippines gives a clear signal to investors that the country 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.

And it’s already happening.

Meralco PowerGen Corporation (MGen) is planning to invest in wind power projects and is looking at two projects totaling 300 megawatts (MW). Its president Rogelio Singson was quoted by recent reports as saying that “When the coal tax kicks in, that will even be more competitive.”

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.

Building new wind and solar farms costs less than continuing to run current coal or nuclear plants, according to a new report from Lazard, a leading global financial advisory and asset management firm. The levelized cost of energy for both utility-scale solar and onshore wind technologies globally are down six percent from last year. Economies of scale and technology development mean this deflationary trend shows no sign of slowing.

As a result of renewable energy cost deflation, the electricity transition taking root in countries around the world is attracting the world’s largest investors. Global electricity policy leaders such as Mexico, Chile, India, Germany, and the United Arab Emirates are seeing accelerating tariff cost reductions of up to 50 percent since the start of 2016. Overnight, a 500-MW wind tender in Gujarat, India was finalized at a record low 2.43 rupees per kilowatt-hour (kWh), equivalent to USD0.04 per kWh or PHP1.90 per kWh. Rooftop solar in the Philippines is seeing costs as low as under USD1 million per MW.

As the Philippines’ energy policy clarity and commitments build, the opportunity to replicate this technology-driven trend here is very material.

More: Coal tax: The right signal for new investments in the Philippines

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