More offshore wind and rising inflation, is there a connection?

That question propped out of my mind when I read that more offshore wind (OSW) are being offered by the Department of Energy (DOE) under the Green Energy Auction (GEA) program. See for instance these recent reports in
The STAR written mostly by Brix Lelis:  “Over 16 gigawatts offshore wind power seen by 2028 – DOE” (Jan. 20), “Philippines unveils offshore wind roadmap amid permitting gridlock” (June 24), “Offshore wind auction on track this year – DOE” (Aug. 16), “Luzon ports to be converted into offshore wind sites” (Sept. 1).

As of end-July, the DOE issued 87 OSW service contracts with a combined capacity of about 68,000 megawatt. That is huge. Like around 5,000 MW in Mindoro alone, around 4,000 MW in CALABARZON, 3,600 MW in Ilocos Norte and Cagayan, around 2,000 MW in Camarines Norte and Sur, 650 MW in Northern Samar, nearly 2,000 MW in Negros-Guimaras-Iloilo, and many other provinces.

The DOE’s GEA-5 targets 3,300 MW in fixed-bed OSW. These are targeted to further increase the RE share in total power generation from the current 22 percent (mainly geothermal and hydro) to 35 percent by 2030 and 50 percent by 2040. So far the DOE has not produced yet what would be the levelized cost of electricity (LCOE), and much more  the levelized full cost of electricity (LFCOE) to include the cost of battery, pumped storage and diesel back up power plants as ancillary services. High RE share means high LFCOE and we do not know yet the impact on electricity prices in the future, which very likely will be higher.

How high it would be? I checked the experience from actual data of many countries. I used the database of Energy Institute’s Statistical Review of World Energy 2025.

First I got the wind generation and total generation in terawatt-hours (TWH) of these countries for 2014 and 2024, one-decade apart. Then I got the wind/total generation percent share or W/T ratio.

Second I got the annual inflation for 2013-2015 to cover the W/T ratio in 2014, and inflation 2023-2025 (Jan-June 2025) to cover the W/T ratio in 2024. The results for these countries in (a) W/T ratio 2014 to 2024, and (b) average inflation 2013-2015 to 2023-2025, respectively, all units in percent:

A. Europe:

Denmark: (a) 40.6 to 57.9, (b) 0.4 to 2.1; UK: (a) 9.5 to 29.5, (b) 1.4 to 4.3.

Portugal: (a) 22.9 to 28.6, (b) 0.3 to 3.4; Germany: (a) 9.3 to 27.9, (b) 1.0 to 3.5.

Netherlands: (a) 5.6 to 27.1, (b) 1.0 to 3.6; Finland: (a) 1.6 to 24.8, (b) 1.1 to 2.7.

Sweden: (a) 7.3 to 23.5, (b) 0.5 to 2.9; Spain: (a) 18.7 to 21.9, (b) 0.2 to 2.9.

Greece: (a) 7.3 to 21.5, (b) -1.1 to 3.3; Belgium: (a) 6.4 to 17.5, (b) 0.8 to 3.1.

Poland: (a) 4.8 to 15.2, (b) 0.1 to 6.5; Austria: (a) 5.9 to 11.1, (b) 1.5 to 4.6.

B. North America and Australia:

US: (a) 4.2 to 9.9, (b) 1.1 to 3.3; Canada: (a) 2.0 to 7.4, (b) 1.3 to 2.8.

Mexico: (a) 2.1 to 5.6, (b) 3.5 to 4.7; Australia: (a) 3.9 to 11.6, (b) 2.1 to 3.7.

C. Asia:

China: (a) 2.8 to 9.9, (b) 2.0 to 0.1; Vietnam: (a) 0 to 4.2, (b) 3.8 to 3.4.

India: (b) 2.7 to 4.0, (b) 6.7 to 4.3; Thailand           : (a) 0.2 to 1.7, (b) 1.1 to 0.6.

Philippines: (a) 0.2 to 1.0, (b) 2.3 to 3.6; Indonesia: (a) 0 to 0.1, (b) 6.4 to 2.5.

Malaysia: (a) 0 both years, (b) 2.5 to 1.9.

So there, in European countries with high W/T ratio of 11 to 58 percent in 2024, they have rising inflation, 12 out of 12, hardly a coincidence but more of causality.

In America and Australia, same trend as Europe, four out of four countries.

In Asia, W/T ratio is low, maximum of 10 percent (China) while near-zero for Indonesia and Malaysia. And their inflation are either declining or low.

Why is this so? I see three main reasons. One, the high cost of construction and maintenance of wind farms especially those offshore, plus the cost of ancillary services like backup diesel plants, batteries, when the wind is not blowing.

Two, high cost of transmission, from landed station in far away shores like Ilocos Norte and Cagayan, Mindoro, then bring the power to big demand centers like Metro Manila.

Three, the distraction and reduction in fishery production, non-tourism in coastal areas near those giant wind farms.

Currently there is feed-in tariff allowance (FIT-All) for intermittents like solar and wind that are charged to all on-grid electricity consumers nationwide. Soon we will see GEA allowance (GEA-All) in our electricity bill.

No guaranteed price for OSW under GEA-5 has been published yet, it is still under study by the ERC and DOE, upon the lobbying of the ADB, WB and other multilaterals and OSW developer-lobbyists. From what I heard, they are lobbying between P10-12 per kwh.

If these numbers are correct, then the projected GEA-All someday will be high. Average WESM prices of P4-5 per kwh current or a difference of P6-8 per kwh to fatten the pockets of OSW developers and impoverish Filipino consumers with even higher electricity prices.

The numbers on inflation are already there, actual not hypothetical. So the Philippines should avoid that trap – we should avoid higher inflation someday by avoiding those OSW projects now.