Neglected issues

With new leadership in DOE and ERC, maybe some long standing issues that keep our power situation iffy will now get some attention. These are difficult issues that involve several power sector stakeholders but energy officials can’t just close their eyes and hope these issues go away.

We have just been lucky over the last year because the weather wasn’t El Niño hot and demand was down. There was also more rainfall so our hydro reserves had enough water to generate electricity.

Power demand in Luzon declined by 1.6 percent so far this year to 13,786 MW from 14,016 MW last year. Total country is at 19,141 MW, a decline of 1.4 percent from last year’s 19,406 MW.

Economic slowdown contributed to the weakness of demand. GDP in the first and second quarter of 2025 grew at a slower rate (2025 Q1 5.4 percent, 2025 Q2 5.5 percent) as compared to the same periods in 2024 (2024 Q1 5.9 percent, 2024 Q2 6.5 percent). The national elections held in the first half of 2025 didn’t move the needle on the economy.

Some energy officials were congratulating themselves that there were no blackouts during the summer months.

But that’s only because they ordered plant owners to go on deferred maintenance. Of course, the delayed maintenance caught up with a yellow alert early this month in the Visayas despite a wetter than usual rainy season.

An anti-coal lobby group, the Institute for Climate and Sustainable Cities (ICSC), immediately took the yellow alert notice to highlight the problems we are having with our dependence on aging coal power plants.

Nine coal-fired power projects, which had been approved before the 2020 moratorium and total 2,255 MW, are expected to boost the country’s main power grids by 2028, according to the DOE.

DOE has identified almost 3,800?MW worth of 20?year?old coal plants for possible early retirement, using criteria like inefficiency, emissions intensity, and health impact in densely populated regions. DOE claims it is encouraging voluntary early and orderly decommissioning or repurposing of coal-fired plants but has not come up with a plan.

According to DOE figures as of April 2024, two plants are between 36–40 years old, and two plants over 40 years old; five plants are between 26–30 years old; three are 21-25 years old; three are between 16-20 years old; 10 plants are between 11-15 years old; 23 plants are between 6-10 years old and 15 plants are about five years old.

A snapshot of the power situation shows that on Aug. 4, 2025, the following baseload power plants remained offline due to unplanned outages as monitored by ICSC:

DCPP Therma South Unit 1 (150MW, coal): offline since July 31; SMC Malita Unit 2 (150MW, coal): offline since July 30; FDC Misamis Unit 1 (135MW, coal): offline since July 24; Sarangani Energy Corp. Unit 2 (118MW, coal): offline since July 31; STEAG Unit 1 (116MW, coal): offline since Aug. 4; STEAG Unit 2 (116MW, coal): offline since July 12 and went online on Aug. 2; Powersource Philippines Energy Corp. (20MW, coal): offline since July 5; Panay Energy Development Corp. Unit 1 (83MW, coal): offline since July 22.

Aggravating the reliability problem of the older coal plants is the introduction of more variable renewable energy like solar and wind into the grid.

Coal plants are designed for steady and continuous operations as baseload plants. However, as ICSC points out, they are increasingly being forced to ramp up and down to meet VRE requirements in today’s grid operations. This increases wear and tear that leads to more frequent breakdowns, higher maintenance costs, and declining reliability.

As ICSC explained, a single unplanned outage of a baseload coal plant can remove a significant amount of supply from the grid. Things get worse when multiple outages occur simultaneously, as seen in the Aug. 1 and 4 grid alert incidents.

Multiple coal plants are exceeding the outage limits set by the ERC. Now, even relatively newer facilities are experiencing frequent forced outages.

ERC fines and show-cause orders will not solve outage problems. Why these are happening will likely reveal unattended basic issues. DOE orders for deferred maintenance also add to the problem.

These outages force distribution utilities to buy from the spot market and consumers end up bearing the high replacement costs.

DOE and ERC ought to review policies, like the WESM price caps, that discourage more investments in power plants. The current tight supply and demand balance in the grid leaves little room for eventualities like plant breakdowns.

The market data assumptions used about 10 years ago in setting the price caps need revalidation. The primary cap was made permanent in January 2016 and the secondary cap was made permanent in December 2014.

WESM’s secondary price cap, while protecting consumers from extreme spot price spikes, discourages investments in much needed new generating capacity.

For mid-merit and peaking plants, which typically rely on high spot prices during peak hours to recoup investments, the cap undermines their business case. Without reliable returns, investors are less inclined to build or maintain these flexible capacities, which are vital for grid reliability.

Industry players want the level of price caps to ensure merchant generators can still “make money” in the spot market. Investor confidence must be restored to secure the needed capacity cushion for the grid.

In the end, populism bites back the consumers who end up realizing having no power is more expensive.

ERC delays on the rate resets of the utilities and NGCP are lingering big headaches. There are still roughly P600 billion worth of grid expansion or capex projects for NGCP still pending.

We also haven’t heard of how DOE plans to address the power requirements of data centers which are huge, with over 1,500?MW in projects underway or planned. If left unaddressed, we will end up with inadequate supply and that will raise power rates for everyone.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco