A rational energy policy for the Philippines
Energy is the backbone of economic growth and social progress. Yet, the Philippines faces a defining moment in its power trajectory—where rising electricity costs, recurring power shortages, and an outdated, baseload-centric grid threaten national stability and development. The choices we make today will determine whether we’d continue to struggle with an inefficient system, or embrace a future of clean, affordable, reliable, and secure energy.
The energy trilemma presents a framework of three fundamental objectives that energy policymakers should balance: sustainability, security, and equity. These concepts are not abstract but are pressing imperatives for the Philippines where outdated energy policies hinder economic progress and result in long-term consequences for Filipinos.
The country was once a leader in renewable energy (RE), reaching a 52 percent RE share in 1984. However, policy shifts in 1986 led to an increasing reliance on coal, reversing decades of progress. Yet, the country still possesses vast untapped renewable energy potential, including 58.1 gigawatts of solar, 94 GW onshore wind resources, over 170 GW of offshore wind potential, and the third-largest geothermal resource in the world.
Today, coal accounts for over 60 percent of power generation, while renewables have declined to 23 percent.
Since the 1990s, the Philippine power strategy has always focused on expanding baseload capacity, assuming that electricity is consumed at all hours of the day. However, our load profile clearly shows that the peak hours occur between 9 a.m. and 9 p.m., with significant seasonal variations where demand typically peaks during the second quarter of every year.
In determining the need for baseload capacity, we have to identify the demand during off-peak hours, because only this level of demand can support the 24-hour stable operation of baseload power plants. Using the 2024 Luzon load profile, this level of demand ranges between 6,000 megawatts and 9,000 MW depending on the season, while the current baseload capacity in Luzon is 12,300 MW.
This means baseload power plants will have to ramp down during off-peak hours and ramp up again the following day. However, coal power plants, as baseload, are not suited to operate in this manner. This constant ramping up and down of baseload power plants affects their reliability and is the root cause of their forced outages. We already witnessed this multiple times, including in the Panay blackouts in early 2024.
A coal-dependent grid has proven neither cost-effective nor resilient, as evidenced by frequent blackouts and spot market volatility. Additionally, with 70 percent of the country’s coal supply being imported, the power sector remains at the mercy of global fuel price fluctuations, passing on unpredictable costs to consumers.
The solution is clear: the Philippines must shift to a flexible and distributed energy system. Investing in renewable energy, energy storage, and smart grid technologies will create a more flexible, cost-efficient, and resilient power system that benefits all Filipinos.
Solar energy has already proven its capability for rapid deployment, often contributing to the grid even before full commercial operation. Cost comparisons further strengthen the case for renewables—based on Meralco rates, renewable energy is priced between P3 to P5 per kilowatt hour, while coal costs range from P5 to P14 per kWh.
Investments in transmission infrastructure are also essential to fully harness renewable energy, as the Philippine grid was not built to accommodate large-scale renewable integration. However, the long approval process by the National Grid Corp. of the Philippines for the requisite system impact study and lack of interconnection points have delayed the completion of many RE projects.
The Philippines’ archipelagic geography makes it ideal for distributed energy systems, which can improve grid resilience and even expand access in remote areas. In addition, the strategic deployment of solar, wind, and storage technologies tailored to local demand profiles will optimize grid performance and integrate renewables effectively.
The evidence overwhelmingly supports a fundamental shift in the country’s energy strategy. Policymakers must take bold, informed action, and invest in distributed renewable energy projects to accelerate the energy transition, reduce fossil fuel dependence, and build a more resilient power system for the Philippines.
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Alberto Dalusung III is the energy transition advisor of the Philippine-based NGO Institute for Climate and Sustainable Cities. He served as director for energy planning in the Department of Energy and was former president of the Biomass Renewable Energy Alliance.
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