Now is the time to restructure the Philippines electricity sector
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Key Findings
With over 7,000 islands, the Philippines mostly relies on imported diesel to provide electricity to its areas, leading to the highest electricity rates in the ASEAN region.
The Philippines can save approximately Php10 billion annually by replacing imported diesel with renewable energy generation.
Lazard, one of the best financial advisory firms in the world, has stated in its report that it would cost more to operate conventional fossil fuel energy sources in a country like the Philippines than in much more developed countries.
Executive Summary
Electricity rates in the Philippines are among the highest in the AESEAN region, due in large part to the nation’s dependence on expensive imported fossil fuels, both diesel oil and coal.
But it doesn’t have to stay this way. There are economically sensible options that can help lower electricity prices across the Philippines—provided the government is willing to take the necessary steps to plan for a sustainable future rather than opting to live in the past.
High electricity prices hurt the entire Philippine economy by slowing industrialization efforts, limiting overall competitiveness, worsening the current account deficit, and undermining the country’s ability to attract foreign direct investment. Access to dependable and fairly priced electricity is the top constraint for Philippine businesses, according to a recent World Bank Group survey.
The country’s electricity issues are an outgrowth of the nation’s geography: the Philippines consists of more than 7,000 islands, many of which are small and have been served traditionally by generators relying on imported diesel. These islands frequently experience rolling blackouts and unplanned power outages because of grid instability, inadequate generation capacity, and lack of affordable fuel. In many cases, weak daytime demand does not justify 24/7 service. But perhaps worse, even unreliable service is heavily subsidized through what is known as the Universal Charge for Missionary Electrification (UCME), with rates being set by the Philippines Energy Regulatory Commission (ERC).
Press release: Electricity-Sector Transition in the Philippines
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