Experts warn LNG fuels higher electricity costs, push renewables

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By Francis Allan L. Angelo

Experts are pushing back against President Ferdinand Marcos Jr.’s suggestion that liquefied natural gas (LNG) can reduce the Philippines’ high electricity costs, arguing instead that LNG is more expensive and less reliable than renewable alternatives.

They say continued reliance on imported fossil fuels could deepen the country’s energy insecurity and climate vulnerabilities.

Marcos, in his recent State of the Nation Address (SONA), positioned natural gas as a clean energy source alongside solar and wind, amid persistent blackouts, power rate hikes, and worsening floods.

But economists and energy analysts warn that LNG’s economic and environmental costs outweigh its benefits.

“While expanding subsidies to low-income households is a socially responsible step, the subsidy itself applies to electricity still predominantly generated from coal and natural gas,” said Prof. Leonardo “Butch” Lanzona of Ateneo de Manila University.
“Without conditions to encourage clean energy use or reforms to the generation mix, the government may end up subsidizing the very emissions that worsen climate risks like flooding.”

Lanzona added that the SONA failed to address systemic issues plaguing the country’s energy sector — including the lack of regulation of vertically integrated power players, bottlenecks in the transmission grid caused by the National Grid Corporation of the Philippines (NGCP), and secretive power supply agreements.

“High power rates not only burden households — they erode industrial competitiveness and discourage green investment,” he said.

LNG prices spike, renewables stay low

Recent power generation data undermines the narrative that LNG is responsible for the Philippines’ first major drop in coal generation since 2008. A study by the Institute for Energy Economics and Financial Analysis (IEEFA) found that renewables — not LNG — are behind the decline, along with multiple coal plant outages.

IEEFA’s July 2025 report noted that while eight coal plants with a combined capacity of 1.4 gigawatts were offline for extended periods in Q1 2025, solar and hydropower generation increased more than natural gas during the same period.

Meanwhile, government data shows that Meralco, the Philippines’ largest distribution utility, paid PHP 8–11 per kilowatt-hour (kWh) for electricity generated by LNG-fired plants — rates much higher than those from solar and coal plants.

A joint study by Zero Carbon Analytics (ZCA) and the Center for Renewable Energy and Sustainable Technology (CREST) projected that LNG imports in the Philippines could surge by 508% from 2025 to 2029, with an estimated cost of PHP 301.5 billion (USD 5.4 billion). This could drive generation charges up by as much as 24%, intensifying financial pressure on consumers.

The Philippine Statistics Authority recently identified electricity as the country’s top inflation driver.

Energy security still elusive with LNG

LNG’s record in the region has also been spotty, according to the ZCA-CREST study, “Can LNG imports guarantee Southeast Asia’s energy security?” The paper cites several reasons why LNG imports can worsen — rather than fix — energy insecurity.

During the 2022 energy crisis, price volatility forced some countries like Pakistan and Bangladesh to default on LNG contracts or cancel planned deliveries because traders preferred selling to higher-paying markets in Europe.

Thailand, meanwhile, saw electricity prices soar due to expensive LNG purchases, which doubled domestic gas costs. Singapore hiked power tariffs by 8% in Q3 2022 as a result of higher LNG spot prices.

“LNG purchases are usually made in U.S. dollars, which is costly for countries with weaker currencies,” the report stated.

“As the peso weakens, the cost of LNG imports could become more burdensome, similar to the experience of Bangladesh and Thailand.”

PHL lagging in renewable rollout

The Philippines enacted its Renewable Energy Act in 2008, making it the first in Southeast Asia to legislate a comprehensive clean energy policy. But implementation has fallen behind.

“One of the challenges in the last decade was the non-implementation of the renewable energy law or the delays in the implementation of the RE law,” said Gerry Arances, Executive Director of the Center for Energy, Ecology, and Development.

“We lag behind already in comparison to our neighboring countries who have massively reduced their electricity costs by positioning renewable energy deployment at the center of their energy strategy.”

IEEFA noted that the country added over 1 GW of solar capacity in 2024 — the fastest growth among all energy types. Government-led green energy auctions are now targeting 10.5 GW of new renewable projects, including 1,100 MW of solar-plus-storage systems.

Despite this progress, fossil fuels still dominate the Philippine energy mix.

“Natural gas generation remains below historical levels,” IEEFA stated.

“The Philippines hasn’t added any new LNG-fired capacity since 2017, and only one greenfield LNG project has won a competitive supply contract.”

By contrast, solar is now the cheapest electricity source in the Philippines, according to Bloomberg New Energy Finance. Levelized costs for utility-scale solar are now between USD 35–72 per megawatt-hour — significantly cheaper than LNG, even at lower global prices.

Floods, outages fuel public frustration

Over the past two weeks, three typhoons — Crising, Dante, and Emong — triggered floods in more than 1,200 areas across Luzon, displacing over 90,000 people.

The National Disaster Risk Reduction and Management Council (NDRRMC) said more than 800,000 were affected, despite the government having spent PHP 1.2 trillion on flood control since 2009.

Critics say this underscores the need for a comprehensive energy and climate strategy that integrates disaster resilience with energy reforms.

“We need an energy system that’s both low-carbon and resilient,” said Arances.
“That means investing in renewables, upgrading the grid, and decentralizing generation — not locking in more gas.”

The government’s current plan would see the Philippines become the largest LNG importer in Southeast Asia by 2029. But experts argue that every peso spent on LNG infrastructure is a peso not spent on resilient, local energy systems.

Alternatives gaining momentum

Regional neighbors like Vietnam offer a counterexample. Between 2018 and 2023, Vietnam increased its solar photovoltaic (PV) capacity sixteen-fold, sharply reducing its reliance on fuel imports and stabilizing energy prices.

ASEAN countries also possess the industrial base to manufacture clean technologies like solar panels and wind turbines domestically, offering a route to economic development that doesn’t rely on volatile fuel markets.

“They can either import LNG with the uncertainty that brings, or they can look towards their domestic renewable energy sources to strengthen their resilience,” the ZCA-CREST report concluded.

IEEFA analysts echoed this sentiment.

“Arguments that LNG is replacing coal fail to stand up to scrutiny when considering the growth of renewables, coal plant outages, and long-term cost trends,” the institute said.

Policy crossroads

As the Marcos administration prepares for further energy planning and subsidy reform, experts are urging a pivot toward renewable energy deployment, improved grid reliability, and transparency in procurement and regulation.

“The Philippines is at an energy crossroads,” Lanzona said.
“We can either continue with business as usual, where consumers pay more and get less, or we can chart a new path with clean, affordable, and resilient energy.”

With over 3 million households still unconnected to the grid and electricity inflation straining household budgets, the stakes of choosing the right energy path have never been higher.