Earlier this month, Philippines-based Energy Development Corporation (EDC), said that with the lack of government incentives for geothermal development, it requires the company to focus on the efficiency of its geothermal plants.
Efficiently-run geothermal geothermal plants would still commercially viable despite the lack of incentives on the horizon, so EDC in a stakeholder meeting on 8 May 2017.
The administration of the current government has indicated that it does not favor a 3rd round of renewable energy Feed-in-Tariffs (FIT), preferring instead to focus on keeping prices down for consumers and industry.
With 1,169 MW of geothermal power generation capacity, EDC is the largest geothermal player in the Philippines and one of the largest one in the world.
“I don’t think the absence of incentives means it’s the end, but we really need to do things differently in geothermal,” said EDC president and chief operating officer Richard Tantoco at the firm’s annual stockholders’ meeting on Monday, May 8.
He noted that the most critical point is reducing operational costs, which EDC has been doing for the past few years.
“Maintenance used to cost P50 million. We’re now able to do the same activity for less than P5 million, and we really need to push the envelope in terms of redoing the cost base of geothermal,” he said.
But EDC has not given up hope that incentives will eventually be offered, especially in the current global environment that is so focused on climate change. (READ: Duterte signs Paris climate deal)
“Incentives would be particularly useful in the front end, when a firm is drilling to look for geothermal sources and facing a 50% success rate,” Tantoco said.
With international examples on how incentives in Latin America and Europe have helped to spur development through funds for drilling and help projects qualify for debt financing and some coverage in case of unsuccessful drilling campaigns, the Philippines is lagging behind.
“We need things like that to help spur development. We need to work with the agencies to provide these incentives as right now they’re driven to help reduce carbon emissions but our posture in the Philippines has not stayed 100% glued to that vision,” Tantoco explained in an article in Rappler.
So the company will focus on efficiency efforts for its geothermal plants. The strategy on focusing on efficiency, already resulted in an increase in net income despite a drop of revenues during the year before. Lower operating expenses have been a key element that attributed to these results.
The company plans major rehabilitation work for its 122.5 MW Tongonan plant in Leyte, which will have one unit down for 110 days to change turbines and cooling systems. EDC also plans to upgrade its 125-MW Upper Mahiao geothermal plant, also located in Leyte, for a shorter period.
Tantoco noted that following the upgrades, the Tongonan plant will have increased its output by 10 MW, combined with 9% less steam consumption. This will bring down overall costs and make it less susceptible to week-long outages.