Rethinking the Philippines’ energy future

By Mhicole A. Moral, Special Features and Content Writer

The energy sector remains the country’s top contributor to greenhouse gas emissions, with a share of 56.9%. If current consumption patterns continue, national energy use could triple by 2040. Projections show an annual increase of 5.02%, potentially pushing consumption to the equivalent of 99.3 million tons of oil.

The Philippines will also require 54,655 megawatts (MW) by 2040 — more than three times the demand in 2020, which stood at 15,282 MW. The steady climb in demand means the country must shift course toward cleaner alternatives.

Energy transition was among the discussions at the BusinessWorld Economic Forum 2025 last May 22. A panel of key figures from both the government and the private sector discussed the future of energy in the Philippines.

According to Department of Energy (DoE) Undersecretary Rowena Cristina L. Guevara, energy transition does not mean an abrupt shutdown of coal facilities. Instead, it must involve a planned and measured shift to green energy.

“Transition has to be calculated and calibrated,” Ms. Guevara told the panel. “We do not want this to impact the economic growth of the country by suddenly turning off our coal-fired power plants.”

The undersecretary shared that the government plans to move in phases by maintaining current coal capacity while slowly bringing in cleaner energy sources over the next few decades. However, she acknowledged that renewable energy cannot carry the full load for now.

“While renewable energy has made impressive strides in recent years, the country can’t rely on it entirely yet,” she explained. “We have already awarded over 1,400 renewable energy service contracts — that’s more than 160 gigawatts, but we currently only have 28 gigawatts installed. The real challenge is turning those contracts into real projects that generate electricity.”

Miguel G. De Jesus, ACEN’s managing director and chief operations officer for the Philippines, emphasized that energy transition means dealing with the real-time effects of the climate crisis, which continues to affect energy supply and infrastructure reliability.

“We’re trying to move from fossil fuel-based systems to renewable ones, but it’s not just about replacing one with the other,” he said. “It’s important to remember that we’re not just dealing with energy supply. We’re also dealing with the climate crisis — the very thing we’re trying to fix. But that crisis itself puts extra pressure on our systems.”

Energy Regulatory Commission (ERC) Chairperson and Chief Executive Officer Atty. Monalisa C. Dimalanta said the concept of energy transition is not new in the Philippines. She pointed out that one of the biggest shifts already happened years ago.

“Aside from the energy transition currently happening, one big transition that has really had an impact on our rates is a transition from a public-sector-driven to a private-sector-driven industry,” she said.

While private companies now lead in building and investing in energy projects, Atty. Dimalanta said the government continues to shape the industry’s direction. For example, the DoE sets renewable energy targets and lays down the policy framework, while the ERC regulates pricing and checks that market practices remain fair.

Meanwhile, First Gen Corp. Senior Vice-President and Chief Revenue Officer Vincent Martin C. Villegas explained the energy shift involves big bets on long-term projects and cleaner technology.

“Returns for renewable energy investments today are far better than what we’ve seen in the past,” Mr. Villegas said. “The cost of setting up clean energy projects has also come down. The difference in cost compared to traditional systems is now just around 7%.”

As the country adds more renewables to the grid, the industry leaders also acknowledged that fossil fuels will be part of the mix for now — especially for baseload supply during peak demand.

Renewable energy by numbers

The country’s renewable energy share in power generation rose from 22% to 26% from 2021 to 2023, with added 7,200 megawatts of renewable energy capacity. The government now aims to push that share to 35% by 2030.

“Based on our multiple committed projects, we have about 9.5 megawatts of solar energy and we have about 7.5 megawatts of wind. That’s about 18 megawatts,” Ms. Guevara said.

While 18 MW may sound small compared to the country’s total power needs, the DoE official said this number only covers projects marked as “committed,” which already have funding and are being built. Once finished, they will supply power directly to the national grid.

Aside from these projects, the DoE also tracks a much larger number of projects still in earlier stages, such as those in application or undergoing feasibility studies.

“If you do the numbers… we’re going to get the 35% RE target,” the undersecretary said.

Meanwhile, Atty. Dimalanta mentioned the sharp rise in solar panel installations through the government’s net-metering program. The net-metering program allows households and businesses to install solar panels and sell excess electricity back to the grid.

“Between 2022 and 2023, net-metering installations jumped by 121%. That’s consumers taking charge of their own material and energy destiny. They are producing their own power from solar.”

During the same period, Atty. Dimalanta noted that retail competition in the electricity market grew by 8%-10%, with more consumers choosing their electricity providers, especially those offering renewable sources.

“There’s a push from both sides of the equation,” she said. “From the supply side, there are market mechanisms from the DoE, such as auctions. Now, consumers are choosing to be supplied by renewables. And if they can’t be supplied, they’ll reduce their own cost.”

Since many rooftop solar installations are not formally reported, Mr. De Jesus believes the actual number of systems in place are bigger than what they know.

“We’ve been doing some studies just looking at the change in demand. When you install rooftop solar, the demand on the grid drops,” the ACEN executive explained. “That drop is what we monitor. We estimate somewhere between 300 and 500 megawatts have already been installed. That’s not a small amount — that’s already a power plant.”

In addition, Mr. Villegas said private firms are adjusting fast to changes in the energy market, especially when consumer demand shifts toward cleaner sources.

“The numbers make sense, and it’s quite exciting because we see a lot of different states — both utility-scale solar power and high-level interest in solar,” he said. “There’s excitement this year because we have all these mechanisms available. Hopefully, the private sector will work together to make this happen.”

Creating effective policies

The DoE is currently working on a “coal transition policy” in response to a directive from President Ferdinand R. Marcos, Jr. Ms. Guevara said the planned policy will outline how the Philippines can gradually scale down its dependence on coal without compromising the stability of the power grid or slowing down economic growth.

While details remain under development, she said the policy is aligned with the country’s commitment to its Nationally Determined Contribution under the Paris Agreement, which includes lowering greenhouse gas emissions.

“Phasing down coal isn’t just about reducing emissions. It’s also about making sure the lights stay on and that businesses can keep running,” Ms. Guevara said.

At the same time, the government is preparing to launch a massive push for full electrification. About 6% of households nationwide still live without electricity, with many located in remote areas or communities served by electric cooperatives that face financial difficulties.

The undersecretary said the DoE estimates that P100 billion will be needed to bring electricity to every household in the country. The agency’s internal simulations suggest that the initial P100-billion investment could yield P400 billion in economic returns, as improved access to electricity boosts productivity and household income, especially in rural and underserved areas.

“We believe every peso invested here pays off four times over,” Ms. Guevara said. “We hope that when we talk about the energy transition, it should always include full electrification of the country.”

On the other hand, Mr. De Jesus mentioned that businesses are no longer waiting for regulations to tell them when or how to shift. Instead, they are reacting to a call from their customers to reduce carbon emissions and adopt more sustainable practices.

“We’re seeing really a groundswell of businesses looking to transition. It’s not quite at the household level yet, where we would like the truth to be arrived, but it’s moving,” he explained.

Implementing energy projects

Despite the optimism on paper, industry players said implementation remains the hardest part.

“Energy transition is coming, but it won’t come easy,” said Mr. Villegas. “The process is stressful. Timelines are tight, planning is complex, and regulation adds to the pressure.”

The First Gen executive said many projects are ready in theory, but turning them into functioning infrastructure means clearing roadblocks that still stand in the way. Among them are delays in permits, unpredictable power pricing, and disputes over land use.

“There are a lot of backups that are meant to be used,” Mr. Villegas added. “What is on us is to deliver quality and hard-to-know projects.”

Similarly, Mr. De Jesus said the private sector is eager to respond to policy shifts, but timing is often tricky.

“Sometimes it takes a little bit of time for the private sector to get ready,” he explained. “There’s quite a bit of work that needs to be done to make sure that projects are ready and right to be put forward.”

Mr. De Jesus said planning solar or wind farms isn’t as simple as it sounds. Companies need to do due diligence on potential risks, especially when it comes to grid connection and financial exposure.

“It’s not just about breaking ground,” he said. “You have to think about whether transmission lines can handle the output and whether investors are comfortable with the risks.”

Both industry leaders agree that careful coordination between the government and private companies is needed to turn plans into reality.

Cost of energy transition

Energy players weigh the fair returns for investors and manageable prices for consumers as they consider funding new projects.

“There are ways in which you can think about project risk on the basis of the pattern that you have,” Mr. De Jesus said. “There’s no expectation that you have 100% certainty around these projects, and increasing rates so significantly puts unfair pressure upon the public.”

The executives in the panel say the real challenge may not be on how fast it brings in clean power, but on how well it prepares both the systems and the workforce to support the transition. Therefore, the country must prepare its resources to manage the complexities involved in integrating renewable technologies on a wider scale.

Meanwhile, the government remains focused on making sure the transition does not push electricity costs beyond what households and businesses can afford, according to Atty. Dimalanta.

“If we ask consumers, it’s not the emissions target that they are concerned with. It’s not that we are not concerned about our global commitments on emissions, but our main job is to make sure that only reasonable rates are passed on to our consumers.”

“Rate rising is always there, and I think it will always be a tricky situation,” Atty. Dimalanta explained. “That’s where we really weigh in or balance the stakeholders’ interest — the generator’s interest and also consumer protection.”

The ERC has to consider both the long-term financial guarantees needed by renewable energy developers and the direct impact of electricity prices on households. To ease the burden on both regulators and consumers, Atty. Dimalanta emphasized the value of market-based programs to directly negotiate rates with renewable energy suppliers without going through traditional regulated channels.

“We’re preparing the consumers for a safe entry into that space,” she said. “Until we get to a time that we have that level of maturity among our consumers and suppliers, we need to make sure no one takes advantage of those entering for the first time.”

For now, the ERC continues to keep investor interest alive while making sure consumers don’t bear the cost of progress too soon.

“We are giving guarantees to large-scale renewable projects,” Atty. Dimalanta added. “We also need to think about the impact that will be borne by the consumers 20 years down the road.”