ICSC urges renewable energy, battery storage over new gas plants

QUEZON CITY — The Institute for Climate and Sustainable Cities (ICSC) is urging the government to prioritize renewable energy and battery storage over new natural gas power plants, warning that greater dependence on imported fuel could expose Filipino consumers to higher electricity costs.

The climate and energy policy group called for a comprehensive assessment of the country’s power requirements before the Department of Energy (DOE) proceeds with its planned auction of approximately 3,800 megawatts (MW) of mid-merit natural gas capacity.

The proposed procurement has significant implications for electricity consumers, particularly in the Visayas, where additional gas-fired generation is being considered to address power supply constraints and improve grid reliability.

ICSC warned that expanding gas capacity without fully evaluating renewable energy alternatives could lock consumers into long-term exposure to volatile international fuel prices, foreign exchange movements, and additional electricity charges.

Under the DOE’s proposed auction, approximately 2,900 MW will be allocated to Luzon, while 940 MW will be designated for Cebu and Panay, bringing the total capacity target to 3,840 MW.

The planned Visayas allocation includes 440 MW of new gas capacity targeted for delivery in 2028 and another 500 MW by 2031, according to the DOE’s auction framework.

Mid-merit power plants operate between baseload facilities, which provide continuous electricity, and peaking plants, which respond to sudden increases in demand.

Natural gas plants are considered suitable for this role because they can adjust electricity production more quickly than conventional coal-fired facilities when demand changes or renewable generation declines.

The DOE has positioned additional gas capacity as a means of strengthening grid flexibility as the country expands its use of solar and wind energy.

However, ICSC argued that the need for flexible electricity generation should not automatically translate into building more gas-fired power plants.

The group said the government must first establish whether renewable energy, battery energy storage systems, and other flexible resources can provide the same services at lower long-term costs.

ICSC has previously raised similar concerns about the Visayas grid, emphasizing that power supply problems should be addressed through solutions suited to local operating conditions rather than relying primarily on additional fossil fuel capacity.

The organization noted that declining domestic natural gas reserves could increase the country’s dependence on imported liquefied natural gas (LNG), exposing electricity consumers to fluctuations in international commodity prices.

Because LNG imports are generally priced in foreign currencies, a weaker Philippine peso could further increase generation costs even without corresponding increases in global fuel prices.

These risks are particularly important for households and businesses because generation costs are passed through to electricity bills.

Data from ICSC’s PRESYO-PH electricity price monitoring platform indicate that power costs associated with LNG procured by Manila Electric Co. (Meralco) have increased since imported LNG entered the utility’s supply mix in 2024.

According to ICSC, LNG-sourced electricity prices reached as high as PHP 15.50 per kilowatt-hour (kWh) in October 2026.

The figure refers to the cost of LNG-sourced power tracked by ICSC, not Meralco’s overall residential electricity rate.

Meralco separately reported that its overall residential rate increased by PHP 0.3191 per kWh in October, bringing the rate for a typical household to PHP 15.0615 per kWh from PHP 14.7424 in September.

The increase translated into an additional PHP 64 on the monthly bill of a household consuming 200 kWh.

Meralco attributed part of the increase to higher LNG fuel costs and the peso’s depreciation against the U.S. dollar, which affected approximately 89% of the dollar-denominated costs of its First Gas/Prime CoreGen supply.

The developments illustrate how international energy market disruptions can affect domestic electricity prices, even when the underlying demand for power remains relatively stable.

PRESYO-PH tracks changes in electricity generation costs and fuel sources to help consumers and policymakers understand their effects on electricity rates.

Beyond fuel price exposure, ICSC also raised concerns about the proposed gas auction’s payment structure and its potential financial consequences for consumers.

Under the proposed arrangement, payments to natural gas plant operators would depend on auction prices, fuel costs, and revenues earned from selling electricity through the Wholesale Electricity Spot Market (WESM).

If revenues from the spot market fall below the amounts owed to plant operators, the resulting shortfall could be recovered from electricity customers.

The mechanism could create additional financial obligations for consumers, depending on the final settlement rules and the performance of participating power plants.

ICSC called for greater transparency in determining these costs and clearer public explanations of how the proposed arrangement could affect electricity bills.

The Energy Regulatory Commission has been developing rules governing the auction’s price thresholds, gas price benchmarks, and settlement mechanisms.

The regulator has also emphasized the need to prevent excessive capital cost recovery by gas plant operators while protecting consumers from unreasonable charges.

ICSC maintained that renewable energy combined with storage technologies could provide an alternative approach to managing fluctuations in electricity supply and demand.

“Solar paired with battery energy storage and pumped-storage hydropower can play complementary roles in meeting the Philippines’ power system needs. Solar can supply electricity during daylight hours, while batteries can store surplus generation and deliver it when demand rises or solar output declines. Solar and battery storage also offer an increasingly cost-competitive source of electricity, with solar generation not exposed to fluctuations in international fuel prices,” said ICSC Energy Transition Advisor Alberto Dalusung III.

Battery energy storage systems can absorb excess electricity during periods of strong renewable generation and release it when demand increases or solar output decreases.

This capability makes storage particularly relevant to grids that must balance changing electricity demand with the variable production of solar and wind facilities.

Pumped-storage hydropower offers another form of flexibility by moving water between reservoirs at different elevations, storing energy when electricity is available and generating power when additional supply is needed.

Unlike conventional gas plants, these technologies do not require continuous purchases of imported fossil fuels to produce or deliver stored electricity, although their economic viability depends on investment costs, operating conditions, and available generation.

Dalusung said the government should also account for pumped-storage hydropower projects being developed through its renewable energy auction program.

“Pumped-storage hydropower capacity included in the fourth round of the Green Energy Auction (GEA-4) can further strengthen the system’s energy storage capacity. The government should consider how these resources can work together for affordable and reliable power,” he added.

DOE records show that standalone pumped-storage hydropower projects were specifically covered by the third Green Energy Auction (GEA-3), while GEA-4 focused on solar, wind, and integrated renewable energy projects with storage systems.

The distinction highlights the different technologies already being pursued under the government’s renewable energy procurement program.

The DOE is targeting renewable energy to account for 35% of the country’s power generation mix by 2030 and 50% by 2040.

In February 2026, the department announced plans to auction at least 25 gigawatts of additional renewable energy capacity through 2035 to strengthen electricity supply and support those targets.

For the Visayas, the challenge is not simply increasing installed generation capacity but ensuring that additional power can be delivered reliably when and where it is needed.

Grid constraints, transmission limitations, changing demand, and the availability of flexible generation all influence whether new power investments translate into more stable electricity service.

ICSC argued that these operational considerations should guide procurement decisions, particularly when evaluating the relative costs and capabilities of gas-fired plants, renewable energy facilities, and storage technologies.

The group said a comprehensive assessment would help determine whether additional gas generation is necessary and, if so, how much capacity the system actually requires.

Such an evaluation could also clarify whether renewable energy and storage investments would offer a more economical response to specific reliability problems.

For electricity consumers, the outcome of these decisions could determine not only the reliability of future power supply but also their exposure to fuel price shocks and long-term generation costs.

ICSC emphasized that building a dependable power system should involve more than securing sufficient generating capacity.

The organization said government energy decisions must also protect consumers, strengthen national energy security, and support a more sustainable development path.

Ultimately, the debate over new gas capacity centers on whether the Philippines can meet its growing electricity requirements without creating additional financial risks for households and businesses already struggling with high power costs.