To achieve energy security, balance is key

On Aug. 13, nine business groups released a joint statement expressing their support for the Department of Energy’s pursuit of a balanced energy mix, saying that this policy is appropriate to the country’s particular context. “As an emerging market,” the group said, “the country must balance energy security and affordability with climate change concerns to support its economic progress.”

The groups — the Blockchain Council of the Philippines, the Employers Confederation of the Philippines, the Federation of Philippine Industries, the Financial Executives Institute of the Philippines, Fintech Alliance.PH, the Foundation for Economic Freedom, the Makati Business Club, the Management Association of the Philippines, and the Women’s Business Council Philippines — said that the country has growing energy demands and that our energy supply per capita is the third lowest in the ASEAN region. Thus, “we need to prioritize augmenting power capacity.”

They further pointed out that energy insecurity is expensive, using the power outage on Panay Island in January as an example. The outage led to about P3.8 billion in economic losses in Iloilo province.

Energy Secretary Raphael Lotilla has reaffirmed the importance of a balanced energy mix amidst claims that the Department of Energy’s moratorium on coal-fired projects is being violated. He stressed the need for a blend of renewable and traditional energy sources, such as coal, oil, and natural gas, to meet the Philippines’ energy demands while ensuring affordability, reliability, and environmental responsibility.

He further pointed out that the Energy department’s strategy involves not just the immediate expansion of renewable energy but also maintaining and upgrading existing coal and gas facilities to prevent power shortages.

We at Stratbase echo the sentiments of the business groups. Diversifying our energy sources will allow the Philippines to mitigate risks like power outages and wide-scale disruption, reduce the reliance on imports, and support economic stability while transitioning to cleaner energy which is a long and tedious process that will take decades to achieve.

We recognize the great need for power. An economy like the Philippines’ needs a reliable supply of electricity to power economic activity. Power costs here in the Philippines are among the most expensive in the region. We are also angling to attain middle-income status in the foreseeable future, and to achieve this, our industries must have a stable supply of power.

All this lies on a continuum between two extremes. On the one hand, there is a clear need to move away from dirty sources because these have been proven to cause harm to the environment on a planetary scale. Our commitment to the Paris Agreement and our very real experience of the calamitous effects of climate change should erase all doubt that we have to lessen and eventually eliminate our dependence on coal-fired power plants and fossil fuels as a source of energy.

On the other hand, purely renewable energy (RE) sources are not yet viable as a baseload alternative as these are still developing and costly technologies. While essential for reducing carbon emissions, renewables like solar, hydro, and wind are unpredictable and weather-dependent, risking power shortages without more reliable energy sources. The Philippine government’s targets — 35% RE by 2030, 50% by 2040, and over 50% by 2050 — reflect a keen recognition of this realty.

For the time being, only a balanced energy mix combining renewable and non-renewable sources will ensure energy security, affordability, and sustainability. This approach is what the Philippines needs at this time. It allows us room to manage the inherent variability of energy sources and recognize that there remains a significant need for fossil fuel-based sources to ensure energy reliability and affordability, all while moving toward the goal of being increasingly powered by cleaner energy over time.

With a balanced energy mix, we do not have to sacrifice economic growth and stability for environmental sustainability.

A crucial aspect of the balanced and optimal mix of energy sources are so-called transition fuels like natural gas. Natural gas delivers an adequate supply at the least social cost toward a smooth transition to cleaner energy. In the past two decades, the Malampaya gas field has served the country well in contributing a significant part of our energy needs, even as production has dropped significantly since 2022.

There is now an urgency to shift to imported liquefied natural gas (LNG) — a cleaner alternative as it emits 50-60% less carbon dioxide than coal. LNG also has quick startup and shutdown capabilities.

The private sector plays a crucial role in meeting the objectives of the country’s energy plan, including access to affordable energy, a reliable and resilient energy supply, and transition to clean, sustainable, and climate-centered energy resources. Private partners have the technical expertise and financial capability to build the necessary infrastructure to facilitate the transition to clean energy.

Thus, while the adoption of a policy of balanced mix of energy sources is commendable, as the business groups already articulated in their statement, there needs to be a parallel effort on the part of the government to create an attractive and enabling policy environment for investors. There are many private groups who would like to participate in helping in the transition to clean energy, and they should be given the opportunity to help and contribute to this crucial journey.

Victor Andres “Dindo” C. Manhit is the president of the Stratbase ADR Institute.