The Shifting Landscape of Energy in the Philippines: Coal, LNG, and Renewables
Over the past two decades, coal usage in the Philippines has surged to record highs, establishing the nation as a significant player in the coal-fired electricity generation landscape. However, recent data indicates a pivotal shift, as coal-fired electricity generation faces its first decline since 2008, with a notable 5.2% drop reported in the first half of 2025. This shift raises an important question: what’s driving this change in the country’s energy dynamics?
Recent media narratives often attribute the decline in coal to the rising imports of liquefied natural gas (LNG), suggesting a simple transition from one fossil fuel to another. Yet, these assertions overlook critical trends within the Philippine energy market. In actuality, renewable energy sources are growing at a remarkable pace, overshadowing the impacts of LNG, while natural gas generation lags behind historical levels.
The Rise of Renewables
The narrative framing LNG as the prime driver of coal’s decline fails to account for the explosive growth in renewable energy sectors. In 2024 alone, the Philippines added more than 1 gigawatt (GW) of solar capacity, considerably outpacing all other energy sources. This growth is attributed to strategic government initiatives, including centralized auctions designed to enhance project development in the renewable sector.
As part of these initiatives, the government has planned a fourth auction round aimed at acquiring up to 10.5 GW of new renewable capacity, including significant solar-plus-storage projects. Such advancements signal a strong commitment to shifting towards cleaner energy sources, impacting the energy supply landscape significantly.
Competition in the Energy Market
In the context of the Philippines’ liberalized electricity market, energy producers must compete based on the principle of “least cost,” which imposes a tough competitive landscape for LNG. To date, only one new LNG-fired project has successfully secured a contract through competitive selection processes. In contrast, the burgeoning renewables sector has gained traction, further highlighting the challenges LNG faces in the current energy climate.
Interestingly, coal capacity has still been on the rise, despite a moratorium on new greenfield coal plants that was enacted in 2020. This growth can be attributed to exceptions made for ongoing projects and brownfield expansions. Nevertheless, the renewable sector is outpacing coal and LNG, marking significant progress toward a more sustainable energy future.
Natural Gas: A Lagging Player
Another critical point worth discussing is the performance of natural gas generation in the Philippines. Despite a small rebound of 8.3% in 2024, gas generation remains below historical averages, underscoring an ongoing gap in the expected transition from coal to LNG. This situation can be largely traced back to diminishing output from the Malampaya gas field, which significantly impacted natural gas supply prior to the arrival of LNG import terminals.
Even with the introduction of LNG imports in 2023, the recovery of gas generation has not been robust enough to account for the observed decline in coal generation. The data suggests that while hydropower and solar sources have increased their contributions to the energy mix, it is inappropriate to position LNG as the principal driver behind coal’s diminishing role.
Outages and Capacity Shortages
Coal generation’s decline can also be attributed to operational challenges, particularly plant outages. In the first quarter of 2025, an unusual number of coal plants—eight in total—suffered outages lasting more than 30 days, a scenario that exacerbated the decline in coal-fired electricity. This disruption, along with the escalating performance of renewable energy sources, raises questions regarding the stability and reliability of coal as a power source.
Typically, outages occur during the hot, dry months, but the scale of disruptions in 2025 was particularly pronounced. In comparison, natural gas plants experienced fewer outages, suggesting that coal’s reliance on the historical norms of energy generation is increasingly fraught with challenges.
The Cost Factor
Cost efficiency plays a paramount role in the energy decisions being made in the Philippines. Some observers argue that the drop in coal use is linked to decreasing LNG prices, positing that LNG is becoming more competitive. However, current LNG prices remain considerably higher than those of coal—almost four times cheaper on an energy-equivalent basis.
The economic pressures associated with LNG are reflected in the rising generation rates from gas-fired power plants. For instance, the rates from LNG imports have recently climbed, leading to elevated electricity prices for consumers, thereby complicating any argument that LNG is supplanting coal as a cost-effective alternative.
Market analysts have pointed to the rapid growth trajectory of renewables and investments in transmission infrastructure as key drivers behind decreasing power prices in the Wholesale Electricity Spot Market (WESM). Reports indicate that solar energy is now among the least expensive sources of electricity available in the Philippines, reinforcing the narrative of a significant shift towards renewables.
Understanding the Transition
The broader global narrative surrounding energy transitions often emphasizes the role of LNG in replacing coal in markets like those of the Philippines. However, a closer examination reveals a landscape in which renewables are not only diversifying energy sources but gaining a foothold in driving costs down and enhancing sustainability.
The forward trajectory of the Philippine energy market seems poised for a new era, where coal’s dominance is threatened by innovative and cost-effective renewables, reshaping the dynamics of energy consumption for years to come. The interplay of government policies, market forces, and technological advancements signals a turning tide away from fossil fuel dependency and towards a more sustainable energy future.