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The Philippines’ energy landscape is entering a pivotal phase in 2026, marked by ambitious renewable development, evolving policy reforms, and shifting demand pressures. As the nation confronts rising electricity needs and global climate commitments, its energy transition trajectory will shape economic growth, grid reliability, and environmental outcomes in the years ahead.
Demand growth and the need for capacity expansion
The Philippines is facing sustained and rising electricity demand as population growth, urbanization, industrialization, and a digitally-driven economy increase the need for reliable power.
According to the Department of Energy (DOE), peak demand is projected to grow annually by 5.3% until 2028, reflecting expanding consumption by households and businesses. Demand is rising across the country’s three main grids. In Luzon, peak load is expected to reach nearly 14,800 megawatts (MW), while the Visayas grid could exceed 3,100 MW and Mindanao nearly 2,800 MW, particularly during the summer season. These figures illustrate the geographic breadth of rising energy needs.
Regionally, Luzon remains the largest electricity market, representing close to 72% of the country’s overall power demand. This is due to dense urban centers such as Metro Manila and robust industrial clusters in CALABARZON and Central Luzon, where manufacturing, logistics, and services sectors consume significant power.
The residential sector is the single largest electricity user, accounting for about 32 % of total electricity consumption, driven by widespread household electrification and appliance use. The industrial sector follows at around 26 % of total electricity sales, reflecting demand from manufacturing, processing, and construction activities, while the commercial sector contributes roughly 22 %.
Meeting this broad and sustained demand requires strategic capacity expansion, with nearly 19,190 MW of new generation capacity expected online between 2025 and 2030, with a particular focus on solar and wind energy.
Renewable energy scaling
Government reforms, streamlined regulatory processes, and incentives have helped drive a surge in clean energy installations. In 2024 alone, the DOE reported that the country added a record‑high 794.34 MW of new renewable capacity, surpassing the combined total installed over the previous three years. This milestone reflects both strong policy support and heightened private sector participation.
Industry analysis forecasts that this growth trajectory is set to continue over the coming decade. According to market research projections, the Philippines’ renewable energy market, currently estimated at around 14.45 gigawatts (GW), is expected to expand to more than 34 GW by 2031, representing a compound annual growth rate (CAGR) of nearly 19%.
Solar, wind, hydropower, geothermal, and biomass installations are all contributing to this broader build‑out, driven in part by energy policies that increase mandated renewable portfolio requirements and attract investments through auctions and streamlined permitting.
However, several countries are now contending with the operational and cost challenges of rapid renewable energy expansion.
In Germany, industry groups warn that the country’s energy transition could impose up to a €5.4 trillion burden on households and businesses by 2049, driven by high grid and integration costs. Spain suffered a nationwide blackout attributed to grid planning failures amid high renewables, spurring concern over system stability. In the UK, grid bottlenecks have limited output from major wind farms, triggering expensive curtailment payments that ultimately increase consumer bills.
Evaluating offshore wind (OSW)
The Philippines has enormous OSW energy potential, with estimates showing as much as 178 GW of technical resource in its territorial waters and service contracts already covering more than 65 GW worth of potential projects. In 2025, the DOE launched the fifth Green Energy Auction (GEA‑5), the first round dedicated exclusively to fixed‑bottom OSW capacity of up to 3,300 MW, slated for delivery between 2028 and 2030, signaling the government’s intent to move from planning to implementation.
Proponents argue OSW could diversify the generation mix and bolster energy security, potentially creating jobs and local economic value.
However, significant economic and technical challenges raise questions about whether this high‑cost technology is truly worthwhile for a developing economy. OSW stands out as the most capital‑intensive renewable energy option. The Global Wind Energy Council (GWEC) estimates that developers must typically invest $3 million to $4 million for each MW of installed capacity, reflecting the high costs of specialized turbines, marine infrastructure, and grid connections.
The Energy Regulatory Commission (ERC) reports that OSW electricity could cost around ₱14 per kWh, roughly three times higher than some solar power purchase agreements, which have been signed at about ₱4.50 per kWh. Industry analysts and energy commentators have raised concerns over these steep costs, warning that widespread deployment of OSW wind could place additional pressure on electricity prices and consumer bills.
Moreover, investing billions in offshore wind risks diverting scarce public and private funds from more pressing issues like poverty alleviation, health services, and essential social infrastructure in an emerging economy.
Coal remains a cornerstone, and gas supports the transition
Coal continues to be the backbone of the Philippines’ power system, providing stability and relatively affordable electricity as the country’s demand grows.
According to the International Energy Agency (IEA), coal accounted for roughly 62% of the nation’s electricity generation mix in 2024, and is projected to only marginally decline to about 60% by 2027 despite renewable expansion. Coal’s ability to operate continuously makes it a key source of baseload power that helps prevent outages amid rising demand.
Recent developments show the DOE has clarified the scope of the 2020 coal moratorium, allowing somenew coal capacity under specific conditions. In October 2025, DOE Secretary Sharon Garin signed an advisory outlining “exceptional circumstances” exemptions that permit new on‑grid coal plants only in cases such as a declared or imminent power crisis or severe local shortages — and explicitly covers own‑use facilities, off‑grid plants, and coal power for industrial parks that produce their own energy. Projects under these exemptions must apply for a formal “letter of acknowledgement of non‑coverage” from the DOE to proceed.
Some energy experts view natural gas as a bridge fuel, helping to gradually reduce reliance on coal-fired power while supporting the eventual integration of zero-carbon energy sources. Like coal plants, gas-fired facilities provide reliable baseload power, capable of operating continuously to deliver an uninterrupted supply of electricity.
Making energy affordable
As the country’s electricity costs remain among the highest in Southeast Asia, making energy affordable is emerging as a central policy focus for the Philippines in 2026.
The Philippines charges a 12% VAT on electricity, covering generation, transmission, and distribution, which adds to consumer costs. Recently, major business groups and a labor organization backed House Bill 6740, which seeks to exempt power from VAT. The groups argued that electricity is an essential input for households, businesses, and key industries, and that removing VAT would provide immediate relief. Lower power costs could also reduce operating expenses, attract investment, support MSMEs, sustain jobs, and enhance competitiveness in energy-intensive sectors.
At the same time, the government’s RE strategy, while long‑term aimed at lowering generation costs, has sparked debate over its short‑term impact on affordability. The Green Energy Auction Allowance (GEA‑All), newly approved by the ERC at ₱0.0371 per kWh, will appear as a separate line item on consumers’ bills starting January 2026 to support RE developers under the Green Energy Auction Program.
Consumer groups such as Kuryente.org and electricity consumer advocates have urged the ERC to defer the implementation of GEA‑All, arguing that ratepayers are already burdened by high costs and need immediate relief rather than more charges tied to green energy rollouts. They have called instead for the passage of a Just Energy Transition bill that would protect consumers from rising prices during the shift to cleaner energy.
(Also read: Consumers Can Expect New Renewable Energy Fees on 2026 Bills)
The rise of electric vehicles (EVs) and data centers
EVs and data centers are becoming major drivers of energy demand and infrastructure planning in 2026.
Sales of electric four‑wheeled vehicles tripled in 2024 compared with the previous year, and registrations continued to rise significantly in 2025. From January to July 2025 alone, the country recorded over 28,000 new EV registrations, surpassing the previous year’s total and showing growing consumer interest in greener transport. Government targets and supportive legislation like the Electric Vehicle Industry Development Act (EVIDA) are expected to further encourage EV adoption and expand charging infrastructure nationwide. As of 2025, the number of public charging stations in the Philippines had grown to 1,159, with plans to reach 7,300 stations by 2028 to support the projected increase in EV use.
At the same time, the data center industry is booming as businesses and cloud‑service providers expand digital infrastructure to support cloud computing, artificial intelligence, remote work, and data storage needs. The Philippines’ data center capacity is projected to reach 1.5 GW by 2028, driven by investments from both local and foreign operators. This expansion reflects strong demand for digital services and positions the country as a growing hub for digital infrastructure in Southeast Asia.
Both trends are reshaping the country’s energy landscape. EVs increase electricity demand from the transport sector, while data centers require large, reliable power supplies for servers and cooling systems. Together, they place new pressure on the energy grid and highlight the need for diversified, clean, and resilient energy sources.
(Also read: C-Trike Sparks an Electric Future for PH Transport)
Grid modernization
Grid modernization means upgrading the country’s electricity transmission and distribution systems so they are more efficient, reliable, and capable of handling modern demands.
The National Grid Corporation of the Philippines (NGCP) and government agencies are investing in stronger transmission lines, expanded substation capacity, and new interconnections between regions to improve overall grid stability and resilience. Between 2009 and 2024, the NGCP added 5,475 circuit‑kilometers of transmission lines and increased substation capacity to ensure more robust electricity delivery across Luzon, Visayas, and Mindanao. Plans outlined in the Transmission Development Plan include large infrastructure investments worth P485.2 billion to further enhance grid capacity into the 2030s.
However, the rapid deployment of renewable energy such as solar and wind also adds complexity to this trend. Renewable sources are variable, which means the grid must be more flexible and have backup capacity or storage systems to balance supply and demand.
A real‑world example of this challenge was seen in the Netherlands, where rapid growth in renewables and electrification outpaced grid capacity. Thousands of businesses and generation projects ended up on long waiting lists because the existing network could not handle the demand and variable generation, causing grid congestion and delays.
Around 10,000 large electricity users and 7,500 generation projects were waiting to connect to the grid due to capacity limits, slowing development and forcing expensive modernization efforts. Additionally, energy infrastructure upgrades were costly and took years to build, and households faced rising grid fees as a result.
Developing nuclear power
After decades of limited progress, the government has put in place formal frameworks and safety laws that lay the foundation for nuclear power development. In September 2025, President Marcos Jr. signed the Philippine National Nuclear Energy Safety Act, establishing the Philippine Atomic Energy Regulatory Authority (PhilATOM) — an independent body responsible for regulating nuclear energy to international safety and security standards.
The DOE has also issued a landmark integration framework for the Philippines’ first commercial nuclear power plant, known as the Pioneer Nuclear Power Plant, intended to become a baseload facility with incentives for investors.
In addition, the DOE plans to begin accepting applications for nuclear projects by 2026, which would open the door for both traditional nuclear plants and small modular reactors (SMRs) that could be built more quickly and flexibly than large plants. The national roadmap aims for the Philippines to have its first nuclear power capacity of about 1,200 MW operational by 2032, with gradual expansion to about 4,800 MW by 2050.
Nuclear energy is being promoted as a reliable, low‑carbon baseload option that can strengthen the grid and reduce dependence on imported fossil fuels while complementing renewables.
Private sector participation in electric cooperatives (ECs)
ECs are non‑profit, member‑owned utilities responsible for providing electricity in rural and underserved areas under the supervision of the National Electrification Administration (NEA).
They were created to achieve rural electrification and community‑focused power distribution across the archipelago. However, many face financial and technical constraints that limit service expansion and modernization.
One key example of this trend is the joint venture between Central Negros Electric Cooperative (CENECO) and Primelectric Holdings (a company linked with MORE Power). This partnership resulted in a new entity called Negros Power, which took over CENECO’s assets to modernize and improve electricity distribution in Bacolod and nearby cities — a significant private‑involvement model with over P2 billion in assets transferred.
Similarly, Manila Electric Company (Meralco) is actively pursuing joint ventures with around 15 ECs, including discussions with First Laguna Electric Cooperative (FLECO) and South Cotabato II Electric Cooperative (SOCOTECO II), under which Meralco would infuse capital and expertise into EC operations.
In the ongoing situation involving the Northern Davao Electric Cooperative, Inc. (NORDECO) and Davao Light and Power Co. (Davao Light), Republic Act No. 12144 took effect in April 2025, expanding Davao Light’s franchise area to include municipalities previously served by NORDECO in Davao del Norte and Davao de Oro. The proposed expansion is positioned as a response to long-standing concerns over high power rates in NORDECO’s franchise areas.
Energy access and reliability
Access to electricity and a reliable power supply are essential for reducing poverty and improving the quality of life. While the country has made significant progress in electrification, with nearly 98 % overall access and substantial rural connections, around 2.7 million households continue to live without consistent electricity. Many more have intermittent service, which limits opportunities for education, business, and economic participation.
Electricity access enables families and communities to use basic appliances, study after dark, refrigerate food and medicine, and power small businesses. These improvements translate into better jobs, increased productivity, and more income-generating opportunities. Research on energy poverty in the Philippines shows that greater electricity consumption is associated with higher employment rates, increased work hours, and improved education outcomes, all of which help lift households out of poverty.
Recognizing these links, the government has prioritized total electrification through the 2023–2032 National Total Electrification Roadmap and the Microgrid Systems Act (Republic Act No. 11646), which aim to bring electricity to unserved and underserved communities by expanding grid connections, deploying microgrids, and strengthening partnerships with electric cooperatives and private utilities. The roadmap is designed to achieve 100 % household electrification by 2028 and unlock economic opportunities in isolated areas.
Prioritizing reliable & affordable power
With all these emerging trends from digitalization and data-heavy industries to electric mobility and grid modernization, reliable and affordable electricity is more important than ever for the Philippines. Power is no longer just a utility. It is the backbone of education, health care, small businesses, manufacturing, and daily life. Without a stable and cost-effective energy supply, digital progress will only widen inequality rather than close it.
Before racing to meet global net-zero targets, the country must first fix its internal energy challenges, such as grid congestion, aging infrastructure, weak distribution systems, high system losses, and unreliable service in many areas. These problems already place a heavy burden on households and businesses. Adding complex and costly energy transitions without resolving these fundamentals risks pushing electricity prices even higher and undermining economic stability.
The priority should be energy policies that drive growth, not hardship. Investments must focus on improving grid reliability, lowering system losses, strengthening ECs, and ensuring that power reaches every community at a price people can afford. Clean energy can play a role, but only if it supports development goals.
Sources:
https://mb.com.ph/2025/03/03/doe-summer-power-demand-expected-to-exceed-la-year-s-levels
https://www.verifiedmarketresearch.com/product/philippines-power-market
https://powerphilippines.com/renewables-to-drive-5600-mw-surge-in-2025-doe
https://www.mordorintelligence.com/industry-reports/philippines-renewable-energy-market
https://solaren-power.com/solar-energy-philippines-future-of-energy
https://pia.gov.ph/press-release/doe-reaffirms-2032-target-for-nuclear-power-at-global-energy-forum
https://dailyguardian.com.ph/philippines-to-open-nuclear-project-bids-by-2026
https://en.wikipedia.org/wiki/Negros_Power
https://businessmirror.com.ph/2025/10/07/meralco-keen-on-joint-ventures-with-ecs
https://mb.com.ph/2025/10/09/davaolight-negotiates-1-billion-franchise-expansion
https://www.developmentaid.org/news-stream/post/198477/powering-up-rural-philippines
https://legacy.doe.gov.ph/announcements/2023-2032-national-total-electrification-roadmap