Philippines gears up for first natural gas auction

MANILA, Philippines — The government is moving to launch the Philippines’ first auction for mid-merit natural gas capacity this year to strengthen grid reliability amid the expected influx of renewable energy.

Energy Secretary Sharon Garin said industry consultations are underway to refine the auction terms, paving the way for the planned bidding process.

“We are really targeting to award them (gas deals) before the end of the year,” Garin said in a chance interview.

She highlighted the role of gas-fired power plants in meeting the country’s mid-merit requirements, citing their ability to quickly adjust output in response to fluctuations in electricity demand.

“We want to encourage more mid-merit capacity, but specifically gas-fired power plants because they are the ones that really fit this role,” the energy chief said.

Mid-merit plants play a crucial role in keeping the power grid stable, bridging the gap between always-on baseload generation and peak-demand sources. Their flexibility allows them to ramp up or scale back output as electricity demand shifts.

Such plants also complement intermittent renewable power sources such as solar and wind, whose output can fluctuate depending on weather conditions and other natural factors.

“They (gas plants) can react faster than coal. Coal is slower, but it is cheaper. Diesel, on the other hand, is more expensive but is also fast. So the middle ground is gas,” Garin said.

Natural gas is emerging as a transition fuel that supports the rollout of renewables while helping the country gradually move away from coal dependence.

Last month, the Department of Energy (DOE) issued a circular prescribing the guidelines for the conduct of the mid-merit natural gas capacity auction.

The DOE said the increasing penetration of variable renewable sources underscores the need to strategically procure flexible mid-merit capacity to manage intermittency and maintain grid stability.

Citing simulations, the agency found that coal-fired power plants in Luzon are being pushed beyond their normal operating limits due to limited natural gas capacity. This raises the risk of forced outages.

Meanwhile, power grids in the Visayas and Mindanao, which have no natural gas plants, remain largely reliant on coal and oil-based generation.

Currently, natural gas accounts for around 14 percent of the country’s energy mix, according to DOE data.