Renewables in Philippines could cut power costs by 24% by 2029

Renewable energy growth in the Philippines could lead to a 24% decrease in average annual spot power prices by 2029, driven by the displacement of higher-cost plants and planned additions to green energy capacity. Lower spot market rates have not yet translated to decreased electricity tariffs for consumers due to expensive long-term contracts with generators. However, retailers are purchasing more from the cheaper spot market to minimize reliance on costly agreements.

Increasing adoption of renewable energy in the Philippines is poised to significantly reduce average annual spot power prices by 2029, according to the Independent Electricity Market Operator of the Philippines (IEMOP). Spot power prices have already reached a post-pandemic low of 4.14 pesos ($0.0731) per kilowatt-hour (kWh) in the first half of 2025, as reported by Reuters [2].

The growth in renewable energy usage has displaced higher-cost plants, contributing to the decline in spot market rates. Planned additions to green energy capacity are expected to further cut prices by between 0.90 pesos and 1.32 pesos per kWh by 2029. This is a notable improvement from the average spot electricity prices of 5.58 pesos/kWh in 2024 [2].

Natural gas-fired power plants, which can quickly adjust their output to balance fluctuations in renewable supply, have also played a role in lowering spot prices. The Philippines, traditionally one of the most coal-dependent grids in Southeast Asia, is experiencing its first annual decrease in coal-fired electricity production since 2008 due to an increase in liquefied natural gas-fired power generation [2].

However, lower spot market rates have not yet translated into reduced electricity tariffs for consumers. Manila Electric Co (MERALCO), the nation's leading power retailer, recently increased tariffs despite the fall in spot market rates. This is due to expensive long-term contracts with generators. Nonetheless, many retailers are increasingly purchasing from the cheaper spot market to minimize their reliance on costly long-term agreements [1, 2].

According to an analysis of IEMOP data, the share of spot market purchases rose to 21% of overall supply in the 24 months ended June 2025, compared to 12% in the preceding two years [1, 2]. This trend indicates a growing shift towards more cost-effective energy sources.

References:
[1] https://finance.yahoo.com/news/renewables-growth-philippines-cut-power-085831481.html
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L1N3TL0IZ:0-philippines-rising-renewables-use-could-push-power-prices-24-lower-by-2029-market-operator-says/