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IEEFA Report: Philippine Banking Sector at Risk in Ill-Advised US$21 Billion Expansion of Coal Fleet

October 12, 2017

October 12, 2017 (IEEFA) – The Philippines’ banking sector is dangerously exposed to a proposed new fleet of coal plants that are likely to become stranded assets if they are built, a report co-published today by the Institute for Energy Economics and Financial Analysis (IEEFA) concludes.

The plants would add more than 10,000 megawatts of capacity nationally at a cost of US$21 billion (PHP1.05 trillion at PHP50 to US$1), according to the report— “Carving out Coal in the Philippines: Stranded Coal Plant Assets and the Energy Transition”—was published by IEEFA with the Manila-based Institute for Climate and Sustainable Cities (ICSC).

“Prudent reform is required to level the playing field in the energy sector and to hold investors accountable for their own investment errors,” said Sara Jane Ahmed, an IEEFA energy finance analyst and co-author of the report with Jose Logarta Jr., and ICSC energy policy advisor. “The Philippines is heavily but needlessly over-dependent on coal, which is a losing gamble. The entire nation could be locked into two decades of paying for coal power it may end up not using.”

“Retail competition, natural gas, and the cost deflation of renewable energy are inexorably disrupting the dominance of coal,” Ahmed said.

Current energy policies in the Philippines pass on the costs of coal risk to consumers, who are forced to shoulder higher electricity bills as a result, notes the report, which shows how adding renewables to electricity systems erode the utilization rates of coal power because cleaner energy has become the least-cost option in many areas.

The report recommends that the Energy Regulatory Commission require carve-out clauses in all fossil fuel projects to protect consumers. Carve-out clauses allow for reducing the amount of power a utility must buy from a power generator and can exempt distribution utilities from the consequences of coal-plant overbuild.

Ahmed noted that Meralco, the largest electricity-distribution in the Philippines, already relies on such mechanisms.

“Meralco had the foresight to put a carve-out clause in its power sector agreements (PSAs), recognizing the inevitability of stranded asset risk and the need to protect ratepayers from stranded assets by shifting stranded costs to the independent power providers and their investors,” Ahmed said.

The report concludes also that investments in renewable energy and liquefied natural gas are more cost-effective and less risky for investors and consumers alike.

“Coal prices soared last year by 60 percent globally while solar prices fell by over 40 percent in just the past six months,” Ahmed said. “It is ironic that we import 75 percent of our coal supply even though the Philippines is a global leader in geothermal energy and holds a vast potential for development of other renewables, including wind and hydro.”

Full report here: “Carving out Coal in the Philippines: Stranded Coal Plant Assets and the Energy Transition”

Additional detail, including infographics here:


PHILIPPINES/ICSC: AC Dimatatac  |  [email protected]  |  +63 917 851 4890

INDONESIA/IEEFA: James Lorenz  |  [email protected]  |  +61 400 376 021

U.S.: Karl Cates  |  [email protected] | 917 439 8225



The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment.



The Institute for Climate and Sustainable Cities is a policy group in the Philippines promoting low-carbon development strategies, sustainable energy solutions and fair climate policy in vulnerable countries.



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Sara Jane Ahmed

Sara Ahmed is founder of the Financial Futures Center and an advisor to the Vulnerable 20 Group of Finance Ministers (V20) of the Climate Vulnerable Forum (CVF). The Financial Futures Center supports developing countries catalyze an economic transformation to launch a decade of progress with five years of fast-tracked action aimed at ultimately achieving climate prosperity by 2030.

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