The NGCP transmission lines (Photo from NGCP’s Facebook page)
Every month, customers prepare themselves for the arrival of their electricity bills, often met with frustration and complaints about the steep costs.
This persistent household issue has become a regular concern that sometimes dominates conversations, especially when bills are due.
As many Filipino families confront the financial strain imposed by high electricity rates, discussions about the factors contributing to these expenses and potential solutions have become major talking points.
Dr. Rowena Guevara, the Undersecretary of the Department of Energy (DOE) overseeing the Renewable Energy Management Bureau and Electric Power Industry Management Bureau, addressed these concerns during the 16th Media Seminar of the U.S. Embassy in the Philippines’ Public Affairs Section, which took place on July 8 in Iloilo City.
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Why do some areas pay more than others?
In May 2024, the DOE reported that the average electricity rates in the Philippines range from P5.93 per kilowatt-hour to P19.01 per kilowatt-hour.
“The price of electricity varies widely across the country, with rates from as low as P5.93 per kilowatt-hour to as high as P19.01 per kilowatt-hour. For instance, Meralco charges P9.45 per kilowatt-hour, VECO P9.71 per kilowatt-hour, and Davao Light P7.94 per kilowatt-hour. So, why do some areas pay more than others when the generators and electric lines are essentially the same?” Guevara said.
The reliability of power supply
According to Guevara, one key factor contributing to the high electricity cost is the power supply’s reliability.
She noted that Meralco, the electric utility company serving Metro Manila and nearby provinces, provides a notably “reliable power supply” because its customers experience only minimal occurrences of blackouts in a year.
However, Guevara said that this high level of reliability incurs substantial costs. She explained that maintaining such dependable service would require investment, reflected in the higher electricity rates charged to consumers.
“All distribution utilities (DUs) strive to make their power supply more reliable, but there is a price to pay for this reliability,” Guevara said.
The lack of government subsidy
Another reason for the high electricity prices is the lack of government subsidy, Guevara said. In many other countries, the government helps to cover part of the electricity costs for consumers, which lowers the overall price they have to pay.
These subsidies can come in various forms, such as direct financial support to power companies, tax breaks, or other incentives that reduce the cost of producing and delivering electricity.
However, in the Philippines, the government does not provide such financial support to the electricity sector. As a result, the full cost of electricity production, maintenance of infrastructure, and other operational expenses are passed directly to consumers.
“Our neighboring countries like Thailand, Taiwan, Vietnam, Malaysia, Sri Lanka, Indonesia, and South Africa boast lower electricity prices because their governments subsidize 36 to 60 percent of the costs,” Guevara said.
“If our government were to subsidize electricity, the funds would come from taxpayers, meaning we would still be paying for it indirectly,” she added.
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Why do some countries pay lower electricity costs?
Countries like Malaysia have ample local petroleum resources, which play a crucial role in their power generation sector. Petroleum can be used directly or converted into other forms of energy such as natural gas or electricity.
This abundance allows Malaysia to produce energy at a lower cost compared to countries that rely more on imported fuels or have limited domestic resources.
On the contrary, the Philippines relies heavily on imported fuels like coal and natural gas, as well as some locally produced resources like the Malampaya gas field. However, these resources are not sufficient to meet the entire energy demand of the country.
The Malampaya gas field, for example, contributes significantly to the energy mix but does not provide enough supply to fully offset the costs associated with energy production and distribution.
Other factors of high electricity cost
A 2023 working paper from the Ateneo Center for Economic and Development revealed that electricity rates in the Philippines continue to rank among the highest globally.
The study identifies several factors contributing to these high prices, including inadequate generation capacity, governance challenges, bureaucratic inefficiencies, and limited competition within the energy sector.
The Philippine Energy Plan 2030-2050
To address these issues and achieve long-term reductions in electricity prices, the Department of Energy has devised the Philippine Energy Plan 2023-2050.
This comprehensive strategy aims to ensure the availability of affordable, reliable, and clean energy, Guevara said.
The plan outlines three distinct scenarios:
Reference Scenario: This scenario aims to increase the share of renewable energy in the electricity mix to 35 percent by 2030, with a further increase to 50 percent by 2040-2050. It focuses on incremental changes while maintaining the current energy infrastructure.
Clean Energy Scenario 1: Targeting a more aggressive 50 percent renewable energy share by 2040, this scenario involves repurposing existing coal plants and integrating nuclear energy to accelerate the transition to cleaner energy sources.
Clean Energy Scenario 2: This scenario proposes an even more ambitious goal, emphasizing the development of offshore wind energy. It aims to achieve 50 gigawatts (GW) of offshore wind capacity by 2050, higher than the initial plan of 19 GW. This scenario means that offshore wind is a crucial future energy source for the country.
“The difference from reference from CES 1 is that in CES 1 we have 50% percent in 2040, and more than 50% in 2050 and then we also have coal repurposing…you know that coal plants can be co-generating meaning to say pwedeng coal yung 80% tas yung 20% ay pwede mong palitan ng biomass (that 80% then 20% you can change that to biomass) so biomass remember is renewable and then we also have nuclear capacity we are targeting 1,200 MW by 2032, 2,400 MW by 2035, and 4,800 by 2050,” she said.
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The potential of Nuclear energy
She added, “Nuclear has to be part of the mix because nuclear is fast reacting so pwede siyang makatulong dun sa (it can help there in the) variable renewable energy natin and then 19 GW of offshore winds by 2050.”
Furthermore, the Ateneo working paper discusses the potential addition of nuclear energy to the energy mix. Executive Order No. 164 has set the stage for re-evaluating nuclear energy as a viable option.
The study states that modern advancements in nuclear technology, particularly Small Modular Reactors (SMRs), offer a promising alternative. Unlike traditional nuclear reactors with capacities of 600 to 1000 megawatts, SMRs produce less than 300 megawatts per module, which makes them suitable for powering both large industrial complexes and off-grid areas in the Philippines’ archipelagic landscape.
Renewable energy as source of power
Meanwhile, Guevara said that the country was prioritizing the expansion of renewable energy sources as a central strategy; however, she noted that renewable sources such as solar and wind become cost-effective over time, despite their initial high setup costs.
For instance, establishing solar plants requires investments in solar panels, inverters, and related infrastructure, but operational costs decrease significantly once these investments are recouped.
“Another yung Geothermal, Geothermal is very expensive from the start, but then it operates for a hundred years…after the first 20 years biglang babagsak yung presyo ng Geothermal. Same thing with Hydro[thermal], 10 to 15 years…10 to 13 pesos kwh pero after 20 years pag nabayaran na ng developer ang utang niya sa bangko pwede nang bumagsak to 3 pesos kwh. So the initial investments for RE is high. The prices that consumers have to pay initially is also high, but eventually it will go down,” she said.
(Another one is geothermal, Geothermal is very expensive from the start, but then it operates for a hundred years …after the first 20 years,the price of geothermal will fall. Same thing with hydro[thermal], 10 to 15 years…10 to 13 kwh but after 20 years after the developer has finished paying the bank loan then we can really bring the price down to 3 pesos kwh. So the initial investments for RE is high. The prices that consumers have to pay initially is also high, but evenutally it will go down.)
Currently, the Philippines relies heavily on coal, which has an installed capacity of 12,556 megawatts and a dependable capacity of 11,467 megawatts. Following coal, the country uses oil-based, natural gas, and renewable energy sources.
