The rise of renewable energy sources in the Philippines is causing a decrease in coal usage, not natural gas.
The Philippines is undergoing a significant shift in its energy sector, with renewable energy taking the forefront of the country's energy transition. This transition is primarily driven by the lower, more stable long-term costs and greater resilience that renewable energy sources offer, compared to liquefied natural gas (LNG).
One of the key reasons for this shift is the zero fuel costs and price stability associated with renewable energy. Solar and wind power, for instance, reduce exposure to global oil and gas price shocks, making electricity prices more affordable and stable over time. This aligns with the Department of Energy's (DOE) objective of making electricity prices more manageable for consumers [1].
The DOE's commitment to renewable energy is evident in the 1,392 renewable energy service contracts it awarded in early 2025, with a potential capacity of 152 gigawatts [1][5]. This demonstrates an unprecedented investment momentum in renewables.
While LNG is expected to meet some of the rising power demand and replace coal by 2030 due to a moratorium on new coal projects, its role is supportive and secondary to renewables in the transition. In fact, studies suggest that coal’s decline is better explained by increased renewable capacity and outages at coal plants, rather than LNG growth [4][5].
In contrast, the growth of new LNG capacity has been slower and limited. From 2017 to 2024, no new greenfield LNG power plants were added; recent gas capacity increases came from uprating existing plants, while renewables grew faster and received significant new investments [5].
The Philippine Energy Plan aims for renewables to comprise 35% of the energy mix by 2030 and 50% by 2040, requiring enormous investments that indicate a strategic shift focused on renewables rather than LNG expansion [3].
In the first quarter of 2025, eight coal plants with a combined capacity of 1.4GW were offline for more than 30 days. The average coal plant capacity on outage in 1Q2025 was markedly higher than the same period last year. By contrast, natural gas generation in the Philippines remains below historical levels, despite an 8.3% rebound in 2024 [1].
The government is holding a fourth auction round this year for up to 10.5GW of new renewables capacity, including 1,100MW of solar-plus-storage projects. The Independent Electricity Market Operator of the Philippines (IEMOP) recently attributed falling WESM prices to the country's rapid renewables growth and transmission infrastructure investments [1].
Over the past two decades, coal usage in the Philippines has reached record highs. However, annual coal-fired electricity generation is on track to fall for the first time since 2008, after declining 5.2% in the first half of 2025 [1]. This decline is attributed to the rise of renewables, rather than a decrease in LNG use as some media coverage might suggest [1].
A recent analysis by Bloomberg New Energy Finance (BNEF) shows that solar is now the cheapest source of electricity in the Philippines [1]. In 2024 alone, the country added more than 1 gigawatt (GW) of solar, outpacing all other asset classes [1].
Despite the promising growth of renewables, LNG imports have put upward pressure on generation prices from gas-fired power plants in the Philippines. However, recent coal prices are nearly four times cheaper than LNG on an energy equivalent basis [1]. This price discrepancy, coupled with the environmental benefits of renewable energy, continues to drive the Philippines towards a more sustainable and cost-effective energy future.
- The Philippine Energy Plan aims for a significant shift in its energy mix, targeting renewable energy to comprise 35% of the energy mix by 2030 and 50% by 2040, requiring enormous investments emphasizing renewables rather than LNG expansion.
- Solar energy is now the cheapest source of electricity in the Philippines, as shown by a recent analysis by Bloomberg New Energy Finance (BNEF), with the country adding over 1 gigawatt (GW) of solar in 2024, outpacing all other asset classes.
- The Philippines is experiencing a dramatic energy transition, with renewable energy taking the forefront of its energy sector, driven by the lower, more stable long-term costs and greater resilience offered by renewable energy sources compared to liquefied natural gas (LNG).
- In contrast to LNG, the growth of new LNG capacity has been slower and limited, with no new greenfield LNG power plants added from 2017 to 2024; recent gas capacity increases came from uprating existing plants, while renewables grew faster and received significant new investments.
- The government's commitment to sustainability and clean energy is evident in the investments in renewable energy, as shown by the 1,392 renewable energy service contracts awarded by the Department of Energy (DOE) in early 2025, with a potential capacity of 152 gigawatts.
