Power consumption is seen to contract by six percent this year as the sector continues to reel from the impact of the coronavirus disease 2019 pandemic.
“We expect the COVID-19 pandemic to continue weighing heavily on the power and renewables sector in the Philippines in the near term, and have made further downward revisions to our forecast,” Fitch Solutions said in its latest commentary.
The unit of credit watchdog Fitch Ratings pointed out that the substantial slowdown in economic activity due to the lockdowns is seen to weigh on power demand and generation. It expects power consumption to shrink by six percent and coal generation to drop by 14 percent this year, with further downside risks.
“We also expect continued headwinds to power capacity growth over the near to medium term, due to government financial constraints, weaker private investments, and ongoing disruptions to labor and supply chains,” Fitch Solutions added.
It expects coal generation to come under the highest pressure from the fall from power demand, noting that several coal-powered plants have already been forced to shut down temporarily.
However, over the longer term, it sees power demand rebounding strongly, necessitating stronger capacity growth. The Department of Energy estimates that an additional 44.8 gigawatts of new power capacity will be needed by 2040, from thermal sources and renewable energy.
The contraction caused by COVID-19 may affect the power sector negatively in the short term but if we look at it with a wider horizon, the downturn provides a rare opportunity for the sector to recalibrate a post-COVID future where a renewed focus on sustainability can allow cleaner and greener sources of power to drive the progress and development that our country has been yearning for.*