2020 Working Paper (2020-09)

Working Paper No. 2020-09
COVID-19, Coal, and the Energy Transition in the Philippines
Majah-Leah V. Ravago and James A. Roumasset

Abstract 
The lockdown associated with COVID-19 caused a sizeable downward shock to electricity demand in the Philippines. Although coal is usually classified as a “baseload” fuel, it ironically bore the brunt of adjustment in the generation mix. The resulting upward pressure on retail prices was offset by force majeure contract provisions that allowed distribution utilities to pay lower fixed charges on their power purchase agreements. Coal generators thus suffered the double whammy of lower sales at lower rates. While existing coal plants will contribute to affordability during the recovery, plants in the planning stage may be reevaluated in light of the falling cost of wind and solar power and the low costs of dealing with intermittency when the percentage of intermittent generation is low. The Department of Energy’s “technology neutral” policy towards the generation mix is sound so long as least cost is interpreted to include the social costs of pollution. Some changes in renewable energy policy are indicated.

Keywords: COVID-19, Electricity industry, Energy transition, Philippines