Renewables could have cushioned PH oil price shock
Stronger investments in renewables, particularly geothermal energy, could have reduced the impact of surging oil prices on the Philippine electricity sector, an energy economist told the Inquirer.
Skyrocketing oil prices caused by the United States and Israel’s bombing of Iran have rattled economies worldwide, with the Philippines feeling the blow harder than most.
Experts say the country’s heavy reliance on imported fossil fuels and historically low appetite for investing in renewable energy leave Filipinos vulnerable when global markets spike.
While a two-week US-Iran ceasefire offered some breathing room for what could have been steeper oil price hikes, the Department of Energy (DOE) projects diesel prices soaring between P185 and P230 per liter and P140 to P175 per liter for gasoline.
Meanwhile, electricity prices in April have soared by 52.5 percent in the Wholesale Electricity Spot Market (WESM), a trading venue for electricity, according to the Independent Electricity Market Operator of the Philippines. Consumers may eventually shoulder price hikes in WESM through their electricity bills.
University of the Philippines School of Economics professor Karl Robert Jandoc said oil prices often rise alongside other fossil fuels, such as coal and gas, making electricity generation more expensive. Coal and natural gas dominate the country’s energy mix at 62.5 percent and 14.1 percent, respectively, based on 2023 data from the International Energy Agency (IEA).
The Philippines also imports more than half of its coal supply, leaving local energy prices more vulnerable to global shocks.
Jandoc said renewable energy “could cushion the economy by providing a domestic, stable and relatively cost-competitive source of electricity.”
Naturally replenishing
Among the sources of renewable energy—which harnesses clean, naturally replenishing resources to reduce carbon footprint—is geothermal. This power source is known for its “baseload” capacity or ability to generate electricity 24 hours a day, “whereas solar and wind are intermittent and cannot always supply electricity when demand is high,” Jandoc said.
“If the Philippines had expanded geothermal capacity earlier, dependence on imported coal would likely have been lower, which could have softened the pass-through of global fuel price shocks into electricity prices,” he added.
In economics, “pass-through” describes changes in the prices of outputs, like electricity, to reflect changes in the costs of inputs, such as oil, which is needed for transporting imported coal and gas.
“Higher oil prices raise transport, logistics, and production costs, and these are often passed on to food and other essential goods,” Jandoc said.
But while geothermal power shows promise as an oil shock buffer, only 9.1 percent of the country’s power grid is sourced from it, according to IEA data.
Geothermal energy also produces “far fewer emissions and pollutants than fossil-fuel-based generation,” Jandoc said. “So earlier investment could have delivered both energy security and cleaner growth.”
“Over time, that would have meant a power system that is not only less vulnerable to foreign energy shocks, but also less carbon-intensive,” he added.
Among the country’s top renewable energy producers is Aboitiz Renewables Inc., whose broad portfolio of renewable energy assets spans the Luzon, Visayas, and Mindanao grids. Its geothermal plants provide 307 megawatts of total attributable net sellable capacity to the Luzon grid, the company said.
Strong reliability
“Over the past three years, geothermal operations have consistently delivered strong reliability, achieving a 95-percent availability factor,” Aboitiz Renewables told the Inquirer.
“This reflects a stable and dependable baseload supply, underpinned by disciplined maintenance practices and ongoing innovation to enhance asset performance and longevity,” the company explained.
Aboitiz Renewables also operates some of the country’s few geothermal binary plants, located at its Makiling-Banahaw (MakBan) and Tiwi facilities.
A binary plant harnesses the residual heat from fluids beneath the earth to generate electricity.
It does so through a closed-loop system that extracts heat from geothermal brine and transfers it to a working fluid, which vaporizes and drives a turbine, said Gerald Tolentino, operations supervisor at Aboitiz Renewables’ MakBan geothermal powerplant.
The turbine then drives a generator, which produces electricity, he added.
But geothermal projects require a large investment up front, and drilling does not always guarantee a viable site, Tolentino said. This limits the sector’s growth, even as the Philippines holds its place as the world’s third-largest geothermal energy producer.
“If you go back to the history books, in 1973, when we had a similar crisis, it was already prescribed during that time that we should go for renewables,” DOE Undersecretary Rowena Cristina Guevara told the Inquirer.
“The only roadblock that we had was that new technologies [were] too expensive for our people when they were introduced,” she added.
Guevara said the DOE has partnered with the Department of Finance to set up the Philippine Geothermal Resource De-Risking Facility (PGRDF)—a fund that aims to lower the risk of well drilling for geothermal exploration, supported by a $170-million sovereign loan from the Asian Development Bank.
Under the program, state-owned Landbank will provide loans covering up to 50 percent of well drilling exploration costs, Guevara said.
Developers who succeed are to repay the loan, but those who fail are not required to do so, as the initial loan is converted into a government grant, she added.
Untapped resources
For geothermal energy producers like Aboitiz Renewables, government initiatives like the PGRDF put the industry in a better position to explore and develop untapped geothermal resources.
“Such support can help improve investment confidence and enable the sustainable and financially sound expansion of geothermal operations in the Philippines given the right opportunities,” Aboitiz Renewables said.
Beyond efforts to increase the share of renewable energy in the national power grid, Aboitiz Renewables also provides support for communities that host its plants through programs that generate local employment and improve access to health care.
In Bukidnon, the Higaonon tribe now generates P26,000 in weekly income through Aboitiz Renewables’ “Kabamboohayan Project,” a bamboo-farming enterprise and skills training initiative for the local indigenous community.
Aboitiz Foundation’s “Elevate AIDA” (Artificial Intelligence Data Annotation) also helps upskill stay-at-home mothers from rural areas through training opportunities for data annotation, allowing them to earn from home while the project promotes economic inclusion for women.
Meanwhile, host communities such as Laguna and Batangas also consistently benefit from regular medical missions and health initiatives, providing health-care services to over 1,000 residents.
“Together, these efforts demonstrate Aboitiz Renewables’ advocacy of uplifting communities while delivering reliable, clean energy,” the company said.
As the oil crisis continues to lay bare the impact of the Philippines’ dependence on imported fossil fuels, renewable energy producers like Aboitiz Renewables are now faced with the challenge to advance the country’s transition to clean energy.
“Transformation in the generation, transmission, and distribution of electricity is necessary not only to extend power to all who need it, but also to leave a better Earth for future generations,” Aboitiz Renewables said. INQ
Lau Bacia, Andre Esguerra, and Jaemie Talingdan are scholars of the Philippine Daily Inquirer-AboitizPower Journalism Scholarship Program. The three are set to conclude their journalism studies at the University of the Philippines Diliman.
