Industry

San Miguel Corp's Promise: 800MW Power Plant Using Renewable Energy Sources By March 2020

SMC Chief Ramon Ang's latest vow is only the latest in a string of broken promises since 2017.
IMAGE WIKIMEDIA COMMONS
ILLUSTRATOR Roland Mae Tanglao
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One of the country’s largest and oldest conglomerates is dead serious about its resolve to add more greens to its menu of power plants. 

Considered a laggard in an industry where the biggest and most influential players have pledged to reduce the impact of climate change through aggressive investments in renewable energy sources, San Miguel Corporation (SMC) has continued to invest in fossil-based energy sources. 

Ramon Ang, San Miguel’s president and chief operating officer, has been quoted in the media way back in 2017 about his intention to join the renewables bandwagon. The capacities and timelines of the supposed environmentally friendly projects have changed dizzyingly — from 10,000 megawatts (MW) in the next 10 years, to 1,200 megawatts by 2024, to 1,000 megawatts by 2020. 

None has materialized. 

Ang’s newest promise: “Nine months from now, in March 2020, I will invite you when I will switch on [the power plant using renewables].”

“We should be able to launch at least 800MW [by then],” he added when reporters pressed him about it after San Miguel's 2019 annual stockholders meeting.

He wouldn’t provide more details, citing the possibility that competitors may beat him to it. Previously, he said his team has been studying a combination of solar, wind, tidal energy, and hydro sources. Projects like these usually take several years before they commence commercial operations, or even start construction due to a long list of required permits from national and local governments, as well as the challenging sourcing of parts.  

Ang is adamant. “They said we’re all talk. Watch me. Believe me. It’s going to happen. I will do it in March 2020.” 

Coal-dependent

San Miguel, a placid beer and food conglomerate for over a century, was among the Philippine companies that took the big leap into the capital-intensive and profitable world of power plants in the past 10 to 15 years. 

The family conglomerates of Aboitiz, Lopez, and eventually Ayala, Gokongwei, Sy and other clans who dominate Forbes magazine's list of richest Filipinos added the power industry in their business portfolio to take advantage of a new law. In 2001, the passing of the Electric Power Industry Reform Act, or EPIRA, unleashed an economic opportunity for deep-pocketed private companies to acquire state-owned power plants and build new ones. 

San Miguel, through now wholly-owned subsidiary SMC Global Power, joined the fray in 2009 when its US$1 billion winning bid gave it the right to administer and sell the power produced by the privatized Sual Power Plant in Pangasinan province. 

With about 1,300 megawatt capacity sourced from coal, Sual immidiately put San Miguel on the map as among the industry’s big boys. With a combined capacity of about 4,200MW as of 2018, San Miguel is one of the largest power players in the Philippines with an overall market share of about 20 percent.

San Miguel acquired hydro plants (345MW-capacity San Roque and 218MW-capacity Angat), as well as the 1,200MW Iligan natural gas-fired plant. But coal looms large. Aside from Sual, it also acquired the 1,000MW Masinloc coal power plant and built the new 600MW plant in Limay, Bataan and 300MW plant in Davao. Coal is the source of three-fourths of energy produced or administered by San Miguel.

As San Miguel was building its coal-heavy power plant portfolio, its competitors were slamming coal.

Pure or mix?

Lopez-led First Philippine Holdings (FPH) was among the most passionate and among the loudest in calling for policies that prioritize indigenous and more environmentally-friendly energy sources. In 2016, the Lopez group firmed up its position and declared it will never do coal. 

“Coal-fired power plants are the easiest to develop and their fuel supply the simplest to procure. Every competitor and new entrant is seeking to build more coal-fired power plants in a vicious race to the bottom,” FPH chair Federico Lopez had said then.

"Coal’s days are numbered,” he warned at this year's FPH stockholders meeting, citing reports that coal-fired plants have falling utilization and capacity factors. "This is alarming for a technology whose economics only makes sense when run at baseload rates of 70 to 80 percent. The implication is that many coal plants today are being run sub-optimally and expensively." 

He also cited that global financial institutions have announced coal finance restrictions as first steps toward more substantive action in support of the Paris agreement. The Lopez group has developed over the past 20 years a 3,500 MW capacity sourced from geothermal, wind, solar, and hydro power.

The Ayala group, on the other hand, has been gung-ho on solar and wind projects. While considered an industry late-comer, the Ayalas are about to cross their 2,000 MW target capacity next year, according to John Eric Francia, president and CEO of AC Energy, the subsidiary focused on power investments. They have set a new target: 5,000 MW by 2025, and renewables will account for 50 percent of that.  

“We’re not shying away just yet from thermal because we still believe in a balanced portfolio mix,” Francia explained in the recent Asia Power & Energy Summit.  

This was echoed by Emmanuel Rubio, the president and CEO of the Aboitiz family’s power arm. In the same industry event, he said: "We need a balanced mix of technology in order to meet the requirement of the energy demand. We have a unique daily load profile, annual profile with regards to demand for power. We all have a role to play with our own portfolio in making sure that demand is actually met.” 

The Aboitiz group is considered the local champions in hydro technology, one of the renewable and indigenous sources. They invested in run-of-river hydropower generator built some 40 years ago. But with these facitilites' capacities just a fraction of the fossil-based ones, the Aboitiz group acquired and built more conventional power plants to ramp up their portfolio. 

Aboitiz Power is targeting to hit energy capacity of 4,000 MW by 2020. Its current attributable power capacity is 3,200 MW, of which 1,200 MW is sourced from hydro and other renewables.

Motivating force

San Miguel’s Ang, too, has maintained that a diversified portfolio of traditional and renewable energy sources is the most ideal. 

Subsidiary SMC Global Power is pushing through with its planned coal-fired power plants in Pagbilao in Quezon province and Mariveles in Bataan province. Both new plants will use the circulating fluidized bed technology that, according to Ang, emits “90 percent less than the regular coal-fired power plant. It is multi-fuel. We can use low-grade coal, brown coal, rice husk, or municipal waste. Therefore, it is a clean technology." 

Clean coal, however, has had its fans and detractors. While it’s cleaner than the traditional, to the purists, it’s a "dirty lie." Coal, after all, is still one of the major sources of greenhouse gas emissions, which many believe to be the culprit behind climate change.

This belief is not lost on Ang. 

His trigger for seeking projects that depend on renewables? “Everywhere I go, I always get asked, ‘Do you have renewable energy?’ I’ve gotten tired of hearing it,” he explained in the vernacular. 

“That’s when I said we should go out and look for viable technology that can be done quickly and is cheap and reliable. To our surprise, we found something that’s cheap, easy, and fast [to install].”

Thus, the March 2020 promise. 

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