Solar Energy vs. Coal Power Plants – Is Coal Really Cheaper?

Many people in the Philippines think that solar energy is expensive and is not yet competitive. In May 2016, the world’s lowest solar was bid in Dubai at P1.345 per kilowatt hour. The same scenario of having low bids was present in Mexico with P1.575 and P1.741 in the United States by Warren Buffett’s Berkshire Hathaway. The said decrease was the result of the diminished cost of solar panels of up to 90 percent over the past decade, the low-interest rates and high amount of sunlight in those areas. Philippines have quite higher cost for fossil fuels than solar energy in those places; where coal averages at P4, gas at P6 and diesel at P8.

Solar Energy in the Philippines

In the recent news, the Deutsche Bank ranked the Philippines ahead of those countries as being the world’s most attractive markets for solar energy because of the country’s high power rates and sunlight. Though the Philippines have this recognition, solar energy use is still not established here due to some conventional reasons like the said needed subsidies. Well, as we can see, solar energy is much cheaper than coal. So why do the Philippines don’t resort to solar energy as the source of power? Here are 6 reasons given by the founder of Solar Philippines, Leandro Leviste.

6 Reasons why the Philippines still don’t fully benefit from cheap Solar Energy

First, the local market has only now gained economies of scale. The Philippines had a total 4 megawatts of solar in 2013, but it has reached 900 MW by mid-2016.

Second, few companies integrate development, investment, and construction all in-house. But as the market matures, agents, middlemen, and subcontractors will struggle to compete.

Third, no local company has until recently gone into solar manufacturing, but now the need to beat fossil fuel is driving companies to vertically integrate to lower costs.

Fourth, projects previously avoided technologies like trackers that follow the sun and increase yield by 20 percent, because the Feed-in-Tariff had companies building fast to meet a deadline. But now, companies can take time to optimize performance.

Fifth, solar previously had subsidies, which are necessary to start an industry but over time make companies uncompetitive because necessity is the mother of invention.

And sixth, because companies may believe keeping prices high is in their best interest. But companies should consider that, if the entire industry lowered prices, solar would grow from a small subsidized market of just 1 percent of energy demand to 100 percent of the Philippines.

We could save P100 billion a year with Solar Energy in the Philippines

Solar needs batteries to be able to supply electricity even when there is no sunlight to generate, especially during the night. Batteries really will add an increase in the cost of solar energy for the Philippines at around P2.50 per kWh. But, it is believed that this will roughly decrease to P1.25 per kWh by 2020 due to constant battling against the use of coal as the source of energy. Still, with the current cost of batteries in mind, Philippines can save up to P100 billion a year if solar would replace all gas, oil, and diesel. It should lower our generation cost by up to 20 percent.

This energy transition of the Philippines will not happen overnight. It must first make the changes, gradually. The country must ensure a reliable energy source and replace the major power plants first, ending with the smaller power plants. As soon as 2020 we can make this gradual transition, says Leviste.

One problem left is that the coal plants about to start their construction already have long-term contracts. Pushing through those projects would still make us captive to the expensive, dirty and old source of energy. Why would we choose that if there is an offer of cheaper and cleaner source?