Powering entrepreneurs

Like many Filipinos last Monday, I watched with interest President Ferdinand Marcos Jr.’s State of the Nation Address. It was delivered with great passion, and I admire his candor in addressing the issues that are now foremost on the people’s minds.

The topic that I observed received the most applause was the issue of power rates. I suppose it is something that gravely affects all of us right now. All over the world, the cost of energy is rising due to several events beyond any one country’s control. As someone whose professional life has revolved around business, I view this through the lens of someone who has to keep the shop doors open. And so while I fully understand how households feel the pinch of increasing power rates, I can imagine how catastrophic it is for the millions of Filipinos who run small businesses.

Electricity is a daily input to their business operations. Bakeries, garment workshops, food processors, welding shops, even the small neighborhood computer shop and sari-sari store need reliable power for lighting, refrigeration and, with the increasing reliance on technology, digital systems.

When electricity rates rise, the effect on MSMEs is immediate and uneven. MSMEs usually have less room to absorb higher costs than larger firms, who commonly rely on contracts with power producers. While such contracts have their own pros and cons, the most obvious advantage to those who have them right now is their being shielded from fluctuations in power. Now, for how long that shield stays up depends on the length of the contract, but you can just imagine what it’s like for businesses that don’t have this advantage.

For many of them, higher bills translate into smaller margins, delayed expansion, reduced operating hours, cutting down on other expenses like labor and, in the worst cases, closure. In that sense, rising electricity rates become a hidden tax on entrepreneurship and on the jobs that MSMEs create in communities across the Philippines.

The relationship between electricity rates and MSMEs is ultimately economic, but its consequences are social. A small enterprise runs on thin profit margins and depends on predictable operating costs. When power becomes more expensive, costs can rise faster than sales, especially for businesses that compete in local markets where they cannot simply pass everything on to customers. Local jobs are lost, and crucial services become unreliable or unavailable when these small businesses shutter.

Even when an MSME wants to improve efficiency or modernize equipment, higher power costs and greater uncertainty make financing riskier and discourage investment in productivity upgrades. Over time, this weakens competitiveness and affects even the larger companies who depend on the MSME ecosystem. This may also work against the competitiveness of Filipino companies over their counterparts in the region where energy costs are lower or where alternative power solutions are more accessible.

I suppose that is why, when the President enumerated his proposals such as removing the systems loss charges, amending the EPIRA law and pushing for the Sariling Kuryente Act, there was thunderous applause from the audience; I guess I am not alone in seeing how deeply and widely felt the burden of expensive power rates has become.

Even now, we are seeing how the Sariling Kuryente Act is already being put into practice by Filipinos who have deployed their own rooftop solar solutions. When businesses depend on these solutions not as a way to reduce costs and be able to expand capacity or have more money to hire more people, but in order to keep from slipping into survival mode, then we must consider the President’s proposals seriously and with urgency.

Some have viewed these challenges as opening the pathways to solutions, even opening up long-dormant conversations about expanding the country’s energy mix to include even nuclear energy. This situation may yet force the conversation, but for now solar energy presents a practical starting point for MSMEs because, as many small businesses around the country have now shown, it can be deployed in phases and scaled as funds become available.

Many MSMEs have daytime activity patterns that align well with solar generation, such as food preparation, processing, light manufacturing, warehousing and retail operations. Even where solar is used primarily for cost reduction, the benefits can be tangible in the form of lower monthly electricity bills and reduced dependence on grid power for certain hours of operation. For enterprises connected to agriculture and forestry value chains, renewable options using biomass or biogas may also be relevant, especially where there is access to feedstock that would otherwise be wasted. In these cases, energy becomes linked to livelihood and local materials, turning a cost center into a value-creating system.

However, alternative energy will only translate into inclusive growth if it is realistically accessible to MSMEs. The practical barriers are well known: upfront investment requirements and limited technical capacity have prevented many small businesses from going beyond consumer-level solutions. Access to financing and technical assistance can be a lifesaver at this point. If there is anything this year’s energy crisis has taught us, it is the need for a permanent solution to the country’s energy insecurity. Will it be shared infrastructure for renewables? Financing? A more pragmatic approach to the country’s energy mix?

For inclusive and sustainable growth, these solutions must come sooner rather than later. When MSMEs can stabilize their energy costs, they can plan more confidently and protect jobs. We all benefit when businesses remain resilient through shocks and can continue supporting livelihoods, including in times of economic stress. Over time, the broader economy can move toward a cleaner energy mix that supports long-term sustainability goals.

Rising power costs can threaten MSMEs, yes, but they can also motivate the adoption of solutions that make growth more inclusive, resilient and sustainable.