Philippines' Clean Energy Surge Outpaces LNG, Reducing Coal Dependency

In a significant shift within the Philippine energy landscape, coal-fired power generation is on track to decline for the first time in decades, primarily driven by the rapid growth of renewable energy sources rather than the anticipated rise of liquefied natural gas (LNG). According to the latest data from the Department of Energy (DOE), coal generation fell by 5.2% in the first half of 2025, marking a pivotal moment in the country’s energy transition. While many industry commentators attribute this decline to LNG imports, evidence suggests that the burgeoning renewable sector is the main force reshaping the energy market.

Historically, coal has dominated the Philippines’ energy generation, peaking in recent years. However, a comprehensive analysis reveals a different narrative. In 2024 alone, the Philippines added over 1 gigawatt (GW) of solar capacity, outpacing LNG capacity increases, which have stalled since 2017. Dr. Sarah Johnson, Professor of Energy Economics at Stanford University, emphasized this trend, stating, “The rapid deployment of solar energy is a clear indicator that the Philippines is prioritizing clean energy over fossil fuels.” Moreover, a recent report from Bloomberg New Energy Finance (BNEF) indicates that solar energy has become the cheapest source of electricity in the country, with levelized costs ranging from USD 35 to USD 72 per megawatt-hour (MWh).

The argument that LNG is driving coal's decline has gained traction in media reports. For instance, a Reuters article contended that coal's downturn was linked to rising LNG-fired power generation. However, this perspective overlooks a crucial aspect: the Philippine energy market's structural dynamics. According to the IEEFA, coal plant outages significantly contributed to the decline in generation. In the first quarter of 2025, eight coal plants totaling 1.4 GW were offline due to extended maintenance, a stark contrast to the relatively stable natural gas performance during the same period.

Additionally, the high costs associated with LNG further complicate its role in the energy transition. Current LNG prices remain elevated compared to coal, which is nearly four times cheaper on an energy equivalent basis. This disparity puts upward pressure on electricity prices from gas-fired power plants, making them less competitive against renewables. Meralco, the Philippines' largest distribution utility, reported that LNG generation costs have surged to between PHP 8 to 11 per kilowatt-hour (kWh), significantly higher than coal and solar rates.

The Philippines' energy policies have also favored renewables, with the government conducting multiple auctions for new capacity, including up to 10.5 GW of renewable projects. The liberalized electricity market allows competitive selection processes (CSP), where utilities must secure power at the lowest possible cost. Notably, only one greenfield LNG project has successfully navigated this competitive landscape.

Despite the narratives surrounding LNG as a cleaner alternative to coal, experts argue that the growth of renewables like solar and hydropower provides a more sustainable and economically viable pathway. Professor Mark Thompson, an energy policy analyst at the University of the Philippines, stated, “The Philippines stands at a critical juncture where investment in renewables can lead to energy independence and lower electricity costs for consumers.”

In conclusion, while LNG remains a topic of discussion in the energy transition narrative, the evidence clearly shows that renewable energy is the driving force behind coal's decline in the Philippines. This shift not only signals a commitment to cleaner energy sources but also highlights the economic and environmental benefits of prioritizing renewables over fossil fuels. As the nation moves forward, the implications of this transition could redefine its energy future, making it imperative to focus on sustainable energy policies that support the growth of renewables and reduce reliance on fossil fuels.