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Coal Production in the Philippines: Development, Issues and Challenges

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Coal Production in the Philippines: Development, Issues and Challenges
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    Coal Production in the Philippines: Development, Issues and Challenges  Margarita R. Silva  Yuchengco Center 2 Coal Production in the Philippines: Development, Issues and Challenges   Margarita R. Silva I. Introduction   Throughout history, humans relied heavily on coal as a power source. Its usage was acknowledged during the industrial revolution, with the introduction of the transport system such as the railroad and the steam boat (Image 1). Coal mining was introduced in England in the 17 th -18 th  century, and toward the 19 th  century, it was recognized as a major power source. The two World Wars, the first in 1914 and the second in 1937, adversely affected mining. Subsequently, coal was utilized to generate iron needed for weapons (OKD, 2016). Before the 20 th  century, its production and use were limited due to lack of technological advancement. With these developments, coal was produced in a large scale and became a major source of energy. It remains the base in electricity generation and iron making (Coal Industry Advisory Board, 2002). Image 1.Coal Production during the Industrial Revolution   Source: https://infogr.am/An-Industrial-Revolution It is one of the most commonly used fossil fuels, since it is cheapest and abundant. It is a strategic resource that is widely recognized as essential to modernity; a key contributor to development, and an alternative source of energy. In 2011, it was documented as providing 30 percent of the world’s primary energy needs generating 41 percent of global electricity (Society for Mining, Metallurgy and Exploration, Inc. 2012). Due to its abundance, it is recognized as a fuel resource globally. Its geographic accessibility is better compared to gas and oil. In the past , nearly half of the world’s demand on energy relied on coal; the other half depended on other renewable sources. (Society for Mining, Metallurgy and Exploration, 2012).  Coal Production in the Philippines: Development, Issues and Challenges 3 Coal is contributory to development. It is a key component in the production of important industrial products such as steel and cement. There  were about 1.3 billion people in the world without access to electricity and about 2.7 billion people who did not have clean cooking facilities in 2012 (World Coal  Association, 2012). This problem was evident most especially in sub-Saharan  Africa and in developing Asian countries. Electrification catalyzes development. It contributes substantively to public health, education, transportation, communications, manufacturing and trade (Coal Industry Advisory Board, 2002). In the international market, China and the United States are considered the top two largest producers of coal in the world (Mining-Technology.com, 2014). They, along with other industrialized nations such as the European Union, Australia and India, have begun investing in the production of other renewable sources of energy (Sustainable Technology Forum, 2012). However, as energy requirements expand and as technology advances through time, new sources of renewable energy, such as solar, geothermal and hydroelectric have been recognized and tapped. The Philippine Scenario In the Philippines, the gap between the supply and demand of coal is extremely wide. This is due to the increasing demand for energy to meet the needs of the increasing population and development. Since the 1970s, one of the challenges the country has been facing is the lack of energy supply with resultant black-outs, particularly in areas of Mindanao (Kessels, and Baruya, 2016). Moreover, electricity rates in the country are the highest in Southeast Asia.  Almost 200 USD/MWh are spent on electricity consumption compared to 100 USD/MWh in Indonesia and Malaysia and 120 USD/MWh in Thailand (Bloomberg, 2016) (Figure 1). Figure 1. Electricity Rates in Selected Countries in Asia, 2015 Source: Bloomberg, 2016  Yuchengco Center 4  The trend in coal production in the country has been rising. Consumption and importation have also increased. Population is growing in numbers and there is an increasing per capita demand for energy and development. Concomitantly, consumption has been incremental underscoring the need for importation. From 1977 until 1990, coal production had been stable  with an incipient rise between 1990 to 1995 and a linear progression thereafter. (Figure 2.) Figure 2. Source: Department of Energy, 2013   Table 1. Coal Production, Consumption and Importation in the Philippines, 1977-2010 Year Production (million metric tons)  Consumption (million metric tons)  Importation (million metric tons)    Δ Production- Consumption  Δ Production-Importation 1977 0.285 0.259 0 0.026 0.285 1990 1.234 2.234 1.344 -1 0.89 2000 1.353 8.749 6.814 -7.396 1.935 2013 7.329 13.312 10.966 -5.983 2.346 Source: Department of Energy, 2013  Table 1 shows that over time, coal production rose although consumption exceeded production from 1990 onwards. Through the sequential decades, consumption rose drastically with production lagging behind. Industrial development increased the demand for coal. To augment the shortfall, importations were resorted to. The Philippines cannot rely on production alone  which will not suffice to meet the energy demand of its growing population and other developmental requisites. 0510151977199020002010    i   n   M   i    l    l   i   o   n   M   e   t   r   i   c   T   o   n   s Year Coal Production, Consumption and Importation, Philippines1977-2010 ProductionConsumptionImportation  Coal Production in the Philippines: Development, Issues and Challenges 5 Figure 3. Philippines Coal Production by Year Source: United States Energy Information Association, 2013 In Figure 3, coal production somewhat plateaued from 1983 to 2001 and rose over time, peaking in 2011 with a noticeable decline in 2012. This was due to the decreased consumption by some cement factories and coal-fired power plants (Department of Energy, n.d.). Around this time, there were various mining-related accidents which could have halted the operations (Santos, 2013). One can assume that if the rising trend from 2000 to 2012 persisted, coal consumption would still heavily rely on imports. With improvement of government policies, subsidies to coal production, and reduction of mining accidents, it is expected that importation will decline and alternative sources will be tapped. II. Issues in Coal Production 1. Meeting the Energy Needs for Development   Coal will be the bedrock on which energy access will be built. The International Energy Agency projections in 2035 showed that it can provide for more than half of the ‘on - grid’ electricity needed to deliver energy for all (World Coal Association, 2012). Power supply is one of the driving factors for efficient business management. Economic development is inextricably related to energy (La Viña and Ang, 2015). To achieve sustainable economic development, efficient supply of energy must be ensured. Coal usage is projected to rise by 2030, with developing countries accounting for 97 percent of this increase to meet electricity needs (Society for Mining, Metallurgy and Exploration, 2012). In the coming years, it will remain as one of the primary sources of energy, as it had been in the last two centuries.
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