About this report
This briefing note examines the risks of the Philippines’ continued reliance on coal and its impact on electricity affordability, reliability, and energy security. It highlights how import dependence, inflexible baseload capacity, and recurring plant outages contribute to price volatility and system vulnerability.
The findings aim to support a transition toward a more diversified, flexible, and resilient energy system anchored on indigenous resources and modern grid solutions.
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Coal-fired power generation has long been regarded as a reliable and affordable baseload source for the Philippines. Over the past decade, its dominance has only grown, expanding to account for about 56 percent of total power generation in 2025. This is a classic case of putting all of your eggs in one basket. Yet the country grapples with persistent affordability crises and reliability failures: recurring forced outages in baseload plants, frequent red and yellow grid alerts, extreme volatility in the Wholesale Electricity Spot Market, and the highest electricity rates in Southeast Asia.
Despite decades of reliance on coal, the Philippines has not achieved affordable or secure electricity. Rather, coal has embedded structural vulnerabilities that undermine both reliability and affordability.
Import Dependence Undermines Affordability
The affordability argument for coal collapses under scrutiny, particularly when energy security is considered. In 2024, the country imported more than 70% of its coal supply, the majority of which was directed to power generation. This dependence subjects the nation to global price swings and foreign exchange risks that are entirely beyond domestic control.
Figure 1: Price of Newcastle coal from 2018 to present
Because coal supply contracts typically include automatic pass-through provisions, these price shocks flow directly into local electricity rates, burdening households and businesses. This is not a theoretical risk. During the peak of the global energy crisis in 2022-2023, prices from various electric cooperatives reached an all-time high because of the impact of volatile global markets.
The same is happening today amid the Middle East crisis, which has affected coal prices in global markets, further exposing the country to external supply and pricing disruptions. As geopolitical tensions tighten fuel markets and supply chains, the cost of imported coal remains volatile, with direct implications for generation charges. These impacts will be passed on to consumers through higher electricity rates via automatic pass-through mechanisms.
Coal is not truly affordable once these vulnerabilities are accounted for. Rather than lowering power costs, it reinforces them, leaving the country exposed to price volatility and energy insecurity.
Too Much of the Inflexible Kind of Capacity
The Philippines has 27,927 MW of total dependable capacity against a peak demand of approximately 19,000 MW, meaning the country has more than enough power plants on paper. Yet power interruptions and grid alerts remain frequent. The issue is not insufficient capacity but too much of the inflexible kind. With 18,511 MW locked into rigid baseload capacity (65.3%), the system lacks the flexible, fast-ramping generation needed to follow daily demand swings.
Figure 2: Sample hourly generation dispatch in 2024, showing coal ramping up and down
This scenario forces system operators to cycle coal plants up and down, a task that they were not designed for and consequently accelerates wear and increases tailure rates. The path forward is not to build more baseload capacity, which would compound the problem, but to expand the fleet toward a genuinely flexible and diversified system.
Recurrent Frequent Outages from Coal Plants
The consequences of this inflexibility are now evident in plant performance data. An analysis of 2024 operational data shows that coal plants frequently exceeded allowable forced outage rates and outage durations as mandated by the Energy Regulatory Commission, especially during periods of tight supply when dependable output was most critical. These breaches in plant performance standards are not confined to aging facilities. Even plants less than 10 years old have experienced recurrent forced outages, indicating that the problem is structural rather than incidental.
The impact on the system is immediate. Outages contribute directly to price spikes in the Wholesale Electricity Spot Market, as replacement power must be procured at higher marginal cost. Historical data also show that coal-fired power plants are the primary drivers of recurring grid alerts nationwide. When several large coal units simultaneously trip offline in Luzon, Visayas, or Mindanao, operating reserves fall quickly, pushing the system into yellow or red alert conditions. Rather than reinforcing reliability, heavy reliance on large coal units has increased system vulnerability.
The Path Forward
The Institute for Climate and Sustainable Cities maintains that Philippine energy policy must urgently prioritize developing indigenous energy resources to reduce systemic risk and strengthen long-term affordability. With coal dominating the generation mix, the country is overly exposed to an imported fuel source, and recent price volatility and plant outages have demonstrated the consequences of that concentration of risk and reliance on inflexible baseload generation.
Strengthening and upholding the coal moratorium is a practical step toward reducing this concentration of risk. The Philippines does not face a shortage of baseload capacity; it faces structural weaknesses arising from dependence on imported fuels and inflexible generation that cannot respond effectively to fluctuations in demand or supply disruptions.
Diversifying toward indigenous resources such as geothermal, hydro, solar, and wind reduces exposure to global market shocks while enhancing energy security and insulating consumers from fuel price swings. Given the country’s archipelagic geography and exposure to extreme weather, generation must also be more distributed to improve resilience, ensure local reliability, and limit the impact of outages or natural disasters.
Finally, the system must become more flexible. In the Philippine context, reliability will not come from adding more baseload plants but from deploying storage, modern grid technologies, and fast-ramping capacity that can respond to fluctuating demand and recover quickly from shocks. Prioritizing indigenous and distributed sources such as solar and wind enhances supply reliability while lowering fuel costs and emissions.
A diversified, distributed, flexible, and resilient energy system provides the only stable foundation for affordable, reliable, and secure electricity for all Filipinos.
For more information, check out our report on coal: “Coal Dominance in the Philippines: Assessment of Operational Performance and Implications for the Philippine Energy Sector.”