Lower power rates remain elusive
The discovery of a new natural gas source near the Malampaya field off Palawan announced by President Marcos last week has somewhat brightened the gloomy mood caused by the flood control scandal. The country’s first discovery in more than a decade, it is expected to lessen dependence on imported fuel particularly for the power plants running on natural gas in Batangas province.
The discovery is very timely as the Malampaya gas field, the country’s first and only indigenous gas resource supplying about 40 percent of Luzon’s electricity needs, is expected to be commercially depleted by 2027. Adding to the optimism is that the Filipino consortium operating Malampaya is drilling two other wells—the Camago-3 and Bagong Pag-asa-1—in the vicinity. The Department of Energy (DOE), which is closely monitoring the drilling activities, is hopeful that more gas reserves will be found to help secure the country’s power supply. The government expects initial results from two wells by the end of this quarter.
While classified as cleaner than coal, natural gas is a fossil fuel energy source that gets depleted. A big push for renewable energy and nuclear sources remains the most powerful action in ensuring supply stability and lowering electricity prices. However, there is much that needs to be done to improve the local RE and nuclear sectors.
Strategic shift
The DOE has long believed that increasing the share of RE in the country’s power generation mix is the strategic shift needed to move away from costly and volatile fossil fuels that, in turn, will lower electricity prices in the long run. Energy Undersecretary Rowena Cristina Guevara, in a media session organized by Clean, Affordable, and Secure Energy (CASE) for Southeast Asia in June last year, said: “We’re focused on ensuring that the transition delivers on its promise of affordability, reliability, and energy security. Renewables have no fuel costs. That means less exposure to price shocks from global oil and gas markets. With every solar or wind project we bring online, we reduce our dependence on imported fossil fuels.”
Guevara noted the heightened interest in RE after the DOE awarded 1,392 service contracts in April 2025 amounting to a potential capacity of 152 gigawatts. But earlier this month, such optimism was doused by the DOE’s announcement that it has terminated 163 RE service contracts from 2024 to 2025 due to proponents’ failure to meet their obligations. Energy Secretary Sharon Garin said the canceled contracts represent a combined potential capacity of 17,904.02 megawatts (MW) and that most of the terminated contracts involve solar energy.
Significant gap
The failure of the developers to pursue the RE projects may be due to a host of other problems hounding the local RE sector. Last week, S&P Global said the Philippines is likely to miss its ambitious RE targets for the end of the decade as grid constraints and high financing costs “create a significant gap between government policy and market reality.” S&P Global Commodity Insights director Vince Heo pointed out that while the country targets to hike the share of RE in the power generation mix to 35 percent by 2030 and 50 percent by 2040, the actual share may reach only 27 percent by 2030. The shortfall suggests the Philippines will remain dependent on fossil fuels to meet the projected increase in demand.
Heo cited the financial constraints that dampen the interest of foreign lenders, including the fact that the weighted average cost of capital for solar projects in the Philippines is higher than in competing regional markets. This disparity, he pointed out, significantly impacts the cost of electricity as financing alone accounts for about 25 percent of total project costs.
Negative public perception
The potential of RE in lowering electricity prices is huge. In the CASE forum last year, Guevara shared simulations on the potential impact of increased renewables on spot market prices by 2050, assuming all the projects it approved go online. The projections indicate that prices can go down significantly from P4.95 a kilowatt hour in 2026 to 28 centavos in 2050 in Luzon; from P5.28 to 48 centavos in Visayas, and from P4.06 in 2026 to 36 centavos in Mindanao.
Another option to boost energy security and lower prices is going nuclear. The Philippines aims to operate its first nuclear power plant by 2032, targeting an initial 1,200 MW to boost energy security and reduce carbon emissions. However, the govt needs to address the negative public perception about nuclear and improve public awareness and acceptance to allow the country’s nuclear energy program to move forward.
There is indeed reason to be hopeful about lower electricity prices in the long term. It is an aspiration that the government must earnestly pursue as the Philippines grapples with lack of stable power supply and remains among the countries with the highest electricity rates in Asia.
