Solar, wind power can protect Filipinos from price hikes

By Francis Allan L. Angelo

The Institute for Climate and Sustainable Cities is urging the Philippine government to accelerate the country’s shift away from imported fossil fuels, warning that the ongoing Middle East conflict exposes a deep vulnerability in the national energy system.

In a position paper released Monday, the ICSC said dependence on fossil fuel imports leaves the Philippines at the mercy of global price shocks triggered by geopolitical instability — a risk now playing out in real time as fuel costs surge worldwide.

“When global price shocks or supply disruptions occur, we are reminded time and time again of the expensive costs that this heavy dependence on importation entails — and this story has been retold again now in the escalation of conflict in the Middle East,” ICSC said.

The Philippines sources the majority of its crude oil imports from the Middle East, where escalating tensions have disrupted key energy infrastructure and supply routes, particularly the Strait of Hormuz — the transit point for a large share of the country’s crude oil imports.

Since the conflict began, global fossil fuel prices have surged, with crude oil increasing by 19 percent and liquefied natural gas by 47 percent as of March 5.

Although the disruption is primarily centered on oil supply chains, the deeply interconnected nature of global energy markets has pushed prices up across other fuels as well, the position paper noted.

The Department of Energy warned of fuel prices increasing this week, with diesel prices expected to go up to PHP 24.25 per liter and gasoline prices estimated to increase by up to PHP 13.00 per liter.

In a press conference on Sunday, the DOE also cited projections of up to a 16 percent increase in electricity rates by April if global supply disruptions continue.

The impact is even more pronounced in off-grid areas where electricity is largely generated using diesel. While government subsidies help manage electricity prices in these communities, the costs are ultimately borne by electricity consumers nationwide.

Rising oil prices also drive broader inflation, increasing the cost of transportation, goods, and services across the economy. Power generation costs are passed directly to electricity consumers, meaning higher fuel prices translate into higher power bills for households and businesses.

The Strait of Hormuz is a crucial global energy route and the primary transit point for a large share of the Philippines’ crude oil imports. When tensions escalate and this route is disrupted, it creates severe supply bottlenecks that put immense upward pressure on global oil prices — and because global energy markets are interconnected, a disruption there pushes up prices across all fossil fuels.

The ICSC position paper noted that the Philippines has confronted this same vulnerability before. In the early 1970s, when the country was heavily dependent on imported fuels that exposed the power sector to global supply and price shocks, the government pivoted toward developing indigenous energy resources.

As geothermal and hydropower expanded, the Philippines ultimately achieved a 52 percent renewable energy share in the early 1980s.

The government responded to renewed fossil fuel volatility during the Russia-Ukraine war in 2022 with policies promoting renewable energy, such as the preferential dispatch policy, an expanded rooftop solar program, the net-metering program, and the implementation of the Renewable Portfolio Standards, Green Energy Option, and Auction Programs.

The ICSC argues that the Philippines is now in an advantageous position where policy decisions favoring indigenous energy — solar, wind, hydro, and geothermal — can shift the country away from volatile global fuel markets.

Because these resources are locally available, their costs are largely insulated from global commodity price fluctuations, the position paper said. Increasing their share in the energy mix can help stabilize electricity prices while improving the resilience of the power system.

“Rooftop solar installations in homes, businesses, and government facilities can further reduce demand for fossil fuel-based generation while enabling consumers to produce their own electricity. Battery energy storage systems can enhance grid reliability by balancing supply and demand, while hybrid renewable systems can provide more stable and affordable electricity in off-grid and island communities,” ICSC emphasized.

Battery energy storage systems are critical for grid reliability because they provide the flexibility needed to balance electricity supply and demand. Battery storage serves as an operational lever to manage peak periods and handle daily demand swings without overstressing power plants.

As the country transitions to cleaner energy, battery storage supports higher shares of variable renewable energy by storing excess power and reducing curtailment.

In off-grid or island communities, integrating battery storage with hybrid renewable systems allows these areas to replace expensive, vulnerable diesel generators, protecting local populations from supply disruptions and lowering power costs.

The ICSC also argues that the country’s current centralized grid is increasingly misaligned with the needs of an archipelagic nation facing global shocks and supply disruptions.

A resilient and reliable system requires a shift toward a decentralized, distributed, diversified, and flexible power system, the position paper said.

Strengthening grid flexibility through investments in energy storage, upgraded transmission networks, and smart grid technologies is essential to support a resilient and secure power system that can handle daily demand swings, reduce renewable energy curtailment, and respond to external shocks, the ICSC said.

Advanced forecasting, grid modeling, and real-time monitoring can support operational decisions and long-term planning, enabling a more resilient and adaptable power system.

“Reducing dependence on fossil fuels also strengthens economic resilience. It improves the trade balance, shields the economy from commodity and currency volatility, and helps stabilize power costs,” the ICSC noted in the position paper.

Predictable rates enhance investor confidence and support emerging sectors such as electric mobility, green manufacturing, and digital infrastructure.

A power system increasingly supplied by indigenous renewable energy can make electricity affordable and stable, further accelerating the electrification of transport, industry, and buildings — sectors that rely heavily on imported fossil fuels, the position paper added.

Rooftop solar installations on homes, businesses, and government facilities reduce fossil fuel demand by empowering consumers to produce their own electricity. By generating power locally, these distributed systems directly offset the need for electricity produced by centralized, fossil fuel-based generation plants.

In off-grid and island communities, hybrid renewable systems can replace costly diesel generation, lowering power costs while protecting local populations from supply disruptions. These distributed solutions increase resilience, enhance self-reliance, and reduce dependence on imported fuels.

The ICSC also highlighted the role of local government units in supporting renewable energy deployment through active engagement with regulators, utilities, local communities, and other government agencies. This collaborative stakeholder engagement helps ensure that technical grid upgrades are effectively aligned with the social and economic priorities of each area.

While the position paper primarily focuses on economic and security benefits, the ICSC noted that upgrading the power system to support reliable, indigenous renewable energy unlocks the full environmental benefits of broader economic electrification — specifically by properly supporting electric vehicles, electrified industrial processes, and smart infrastructure.

The ICSC called on the Philippine government to act decisively to accelerate renewable energy deployment and modernize its power infrastructure to provide more affordable, reliable, and secure power for all Filipinos.

The group outlined five strategic actions: integrating flexible resources strategically; promoting decentralized and distributed solutions; encouraging data-driven system planning; aligning investment and policy with system needs; and supporting stakeholder engagement.

“Translating policy priorities into action requires accelerating renewable energy deployment — a no-regrets strategy for strengthening energy security,” ICSC added.