Decrease in coal usage in the Philippines is mainly due to the surge of clean energy, rather than LNG (Liquefied Natural Gas).
The Philippines' Energy Transition: Renewables Leading the Way
In contrast to media coverage suggesting a significant role for liquefied natural gas (LNG) in the Philippines' energy transition, recent developments indicate that renewable energy sources are driving the country's long-term shift towards a sustainable and cost-competitive energy future.
One of the key reasons for this shift is the zero fuel costs associated with renewables, making them less vulnerable to price volatility and supply risks linked to LNG and global gas markets. This advantage is particularly significant for the Philippines, which aims to increase renewable energy to 35% of its energy mix by 2030 and 50% by 2040, as outlined in the Renewable Energy Law and supported by ongoing investments.
Despite projections for a 508% rise in LNG imports by 2029 to cover short-term supply gaps, the country faces challenges with LNG infrastructure, including large upfront investments, geopolitical risks, and the potential for stranded assets if reliance on LNG persists beyond the transition timeline.
Policy and regulatory barriers also cause delays for renewable energy projects, but advocates emphasize the need to accelerate renewable energy deployment, modernize the grid, and scale energy storage to achieve a secure and sustainable energy system without locking in LNG dependency.
Environmental and social concerns linked to LNG infrastructure, such as impacts on biodiversity and indigenous communities, further reinforce the push for renewables as the safer, cleaner alternative aligned with climate goals and human rights commitments.
In practice, this shift is evident in the Philippines' energy landscape. In 2024 alone, the country added more than 1 gigawatt (GW) of solar power, outpacing all other asset classes. The government did not add any new greenfield gas or LNG-fired power capacity between 2017 and 2024.
The Philippine 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. In the country's liberalised electricity market, only one greenfield LNG-fired power project has managed to win a supply contract with distribution utilities through auctions.
The average coal plant capacity on outage in the first quarter of 2025 was markedly higher than the same period last year, while natural gas generation rebounded by 8.3% in 2024 but remains below historical levels. The decline in coal generation may not be primarily due to the rise of LNG, as suggested by some media reports, but may be more nuanced with other factors contributing to the trend.
The Independent Electricity Market Operator of the Philippines (IEMOP) recently attributed falling Wholesale Electricity Spot Market (WESM) prices to the country's rapid renewables growth and transmission infrastructure investments. LNG is keeping electricity prices high for Filipino consumers, as LNG generation rates are significantly higher than solar and coal generation rates, as well as purchases from the WESM.
In conclusion, while LNG is serving as a temporary "bridge" due to the depletion of domestic natural gas and the need to replace coal and other fossil fuels, renewable energy is the fundamental and strategic driver of the Philippines' long-term energy transition, supported by policy frameworks, cost advantages, and climate imperatives.
- The Philippines aims to increase the proportion of its energy mix from renewable sources, with targets of 35% by 2030 and 50% by 2040, as outlined in the Renewable Energy Law and supported by ongoing investments.
- The zero fuel costs associated with renewable energy sources make them less vulnerable to price volatility and supply risks linked to liquefied natural gas (LNG) and global gas markets.
- In the Philippines' liberalized electricity market, only one greenfield LNG-fired power project has managed to win a supply contract with distribution utilities through auctions.
- Environmental and social concerns linked to LNG infrastructure, such as impacts on biodiversity and indigenous communities, further reinforce the push for renewables as the safer, cleaner alternative aligned with climate goals and human rights commitments.
- In practice, the shift towards renewable energy is evident in the Philippines' energy landscape, with the country adding more than 1 gigawatt (GW) of solar power in 2024 alone, outpacing all other asset classes.
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