Gas-fired generation has often been suggested as a natural complement to variable renewable energy as a means to offset the intermittency due to its quick start and flexible operation capability. While falling solar panel costs facilitated by incentives have boosted installed solar capacity in many countries, interest in new gas fired-capacity has remained buoyant due to environmental considerations and current low LNG prices. Neither technology is displacing baseload coal in an economic manner in most Asian markets (for the time being), but the rising solar capacity and the continued development of coal capacity across many parts of the region appears to be squeezing the mid-merit and peaking market. This presentation will provide a brief overview of the current Philippines market (focused on the WESM area) and examine the recent fall in solar PV costs and their impact on the mid-merit and peaking market. A particular area of focus is gas and solar technologies and their interplay with baseload coal. The presentation will be structured as follows: i) provide some background context and recent developments in the Philippines market; ii) review the cost competitiveness of typical capacity options available in the Philippines; iii) analyse the impact of falling solar and battery costs on gas-fired generation and capacity entry using our in-house electricity system cost minimization model; and iv) discuss key findings, challenges and possible future scenarios on gas vs. solar economics.
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