Philippines: Coal dominates power generation, while oil is only at 1% — so why are electricity rates rising?

Manila: Following the massive jump in oil prices due to the tanker squeeze in the Strait of Hormuz, the Philippines' power distribution giant Meralco has announced an additional electricity charge.

And this does not yet include the effect of the current crisis in the Middle East.

Where does the electricity of the Philippines come from; what runs the Asian nation's power plants?

Coal power

Turns out more than half comes from coal, a type of rock that is "fossil fuel".

Meanwhile, only about 1/5 comes from 'green' energy sources like solar, geothermal, hydro, biomass, and wind.

Official government data from the Department of Energy (DOE) in 2024 shows a breakdown of energy production in megawatt-hours (MWh), by source.

As energy prices surge due to global events like the Middle East crisis, the power calculus has reignited discussions on the Philippines' electricity mix.

Reliance on fossil fuels

The DOE's 2024 data paints a picture of a nation still heavily dependent on coal and other fossil fuels, despite growing calls for a shift to renewables.

With total gross generation reaching 126,940,827 MWh, coal alone accounted for 62.2% of the supply, underscoring vulnerabilities to imported fuels and environmental concerns.

The breakdown by plant type reveals a stark imbalance.

Coal is followed by natural gas.

Renewables (geothermal, hydro, solar, wind, batteries), while significant, make up just over a fifth (22.2%) of the total – a figure that aligns with global trends in emerging economies but falls short of the country's ambitious targets for sustainability.

Oil-based sources play a minimal role, often serving as backup during peak demand or shortages.

Here's a detailed table summarising the 2024 generation data:

Source: Department of Energy (percentages rounded)

This highlights the Philippines' ongoing challenges: coal's dominance exposes the grid to price volatility from imports, while natural gas, sourced partly from domestic fields like Malampaya, provides some stability but is dwindling.

Oil-based plants (mostly diesel and petro powered), though minor, are crucial for reliability in isolated areas or during outages.

In 2024, the country added a record 794 MW of new renewable capacity – a 294% jump from 2023 – signaling progress amid policies like 100% foreign ownership in renewables and green energy auctions.

However, fossil fuels still powered 78-79% of electricity here. And while emissions per capita remained below global averages, it is rising steadily.

Role of renewables

Renewable energy plays a pivotal but underdeveloped role in the Philippines' electricity sector, contributing 22.2% of generation in 2024 and helping offset reliance on expensive imports.

As an archipelago with abundant natural resources, the country ranks as the world's third-largest geothermal producer and has vast potential in hydro, solar, wind, and biomass.

Geothermal and hydro lead the renewable pack, providing baseload power that's reliable and emission-free, reducing the nation's carbon footprint by millions of tonnes annually.

Why electricity rates are rising in the Philippines — even though coal dominates power generation

At first glance, the situation looks contradictory. Coal provides the largest share of electricity in the Philippines, while oil accounts for only about 1% of power generation.

Yet electricity prices are still rising.

Energy officials say the explanation lies not in oil’s share of the energy mix, but in how the power market works and how fuels are priced globally.

Global fuel prices are pushing electricity rates higher

According to the Department of Energy (Philippines), electricity prices could rise by up to 16% as global fuel costs surge due to geopolitical tensions and disruptions in energy markets.

Energy Secretary Sharon Garin said higher petroleum and fuel prices can eventually feed into power generation costs—even if oil itself generates only a small portion of electricity.

The reason: fuel prices influence the entire power market, including coal and gas contracts.

Coal dominates, but most of it is imported

Coal may supply the largest share of Philippine electricity, but more than 80% of the coal used in the country is imported, according to energy data.

That means Philippine electricity prices still depend heavily on global commodity markets. When coal prices rise internationally, power generation costs also increase, and those costs are passed on to consumers.

This reliance on imported fuel is one of the main reasons the Philippines consistently has some of the highest electricity prices in Southeast Asia.

Momentum building

It is hoped that the spike would only be temporary.

And with over 10 GW of new projects awarded in recent auctions, momentum is building.

Experts argue that accelerating renewables isn't just green – it's essential for affordable, resilient power in a climate-vulnerable nation. Key benefits:

Renewable energy (RE) could reduce dependence on imported coal and gas, shielding consumers from global price shocks. In 2024, renewables already saved Filipinos billions in avoided fossil fuel expenses.

More RE investments in the pipeline

Over time, they lower electricity rates by avoiding fuel costs – potentially dropping prices by up to 90% in some regions by 2050 through diversification..

The country is also encouraging distributed systems like solar rooftops and microgrids electrify remote islands, where 2 million people still lack power. They also create local jobs and boost economic recovery.

For example, government employees under the GSIS are now being offered loans to build home solar power system.

Goiing forward, the DOE targets of 35% renewable share by 2030 and 50% by 2040/2050.