10 Insights from the Philippine Energy Q2 2025 Report
- August 18, 2025
By March 2025, the Department of Energy (DOE) stated that the Philippine energy sector was worth approximately ₱3.3 trillion, more than five times its value in 2022.
Former DOE Secretary Raphael Lotilla said this figure shows “how large, how healthy, and how vibrant” the industry is, underlining its importance to the economy. He added that the sector’s value highlights the expansion of assets spanning power “generation, transmission, and distribution.”
However, Malaya Business Insight’s analysis of the Philippine Energy Q2 2025 Report revealed a season of extreme strain, as record dry-season heat drove power demand to new highs and pushed the grid to its limits. The quarter laid bare infrastructure and policy shortcomings while offering a clear glimpse of a sector amid transformation.
Here are ten key takeaways from that period:
1. Permitting delays are taking their toll.
Persistent permitting delays and supply chain bottlenecks now cast serious doubt on the DOE’s ambitious plan to roll out 7,000 MW of new capacity this year. Although nearly all of these projects, mostly initiated by the private sector, were slated for completion in 2025, many remain in limbo, stalled between approval and actual commissioning.
Industry observers warn that unless bottlenecks are swiftly resolved, the reliability and resilience of the electricity supply could be compromised at a time when load forecasts are already tightening.
2. Renewable energy alone cannot carry the load.
The Philippine grid gained fresh momentum in mid-2025 with a wave of new renewable projects, headlined by the June launch of the Talim Wind Power Plant, signaling stronger private-sector faith in wind as a counterbalance to solar’s daylight limits. Smaller additions included the 4.8 megawatt (MW) Dupinga hydro facility and more than 15 MW of solar from San Jose.
Still, rising air-conditioning demand during Q2 2025’s scorching dry spell strained the grid to its limits, with supply unable to keep pace despite fresh renewable capacity. That mismatch forced grid operators into difficult decisions, including temporarily curbing power exports between regions and activating demand-side controls.
The Institute for Climate and Sustainable Cities (ICSC) had projected in April that Luzon’s power reserves would tighten heading into June because of a decline in coal generation. This would prompt possible export cuts to the Visayas. While the move helped stave off a potential red alert in Luzon, it left the Visayas facing a more precarious supply situation.
(Also read: Energy Strategy in Focus at BusinessWorld Economic Forum)
3. Underestimating electricity use comes at a cost.
In Q2 2025, Luzon’s electricity demand surged to 14,769 MW, well above forecasts. A spike in air-conditioning use, coupled with unexpected baseload plant outages, eroded reserve margins and triggered repeated yellow alerts.
In the Visayas, peak demand climbed to 3,111 MW, also surpassing projections and straining the region’s reliance on imports from Luzon and Mindanao via the 250 MW high-voltage direct current (HVDC) link. By early June, those lifelines tightened as Luzon restricted exports to safeguard its reserves.
Mindanao emerged as the outlier, keeping the lights on with steady reserves and uninterrupted exports. A broader mix of power sources and milder demand offered a rare snapshot of regional balance in a summer defined by strain elsewhere.
4. Energy storage is climbing the agenda.
Summer 2025’s record heat sent electricity demand soaring, cementing energy storage as essential for keeping the grid stable during extreme weather.
In a decisive policy shift, the DOE placed storage at the heart of its planning, debuting solar-plus-storage bids in its Green Energy Auction’s fourth round (GEA-4) and issuing new rules to cover technologies from batteries and flywheels to pumped hydro and compressed air. A technology-neutral stance opened the door for next-generation options like hydrogen and sodium-based systems.
Investors took notice. Backed by the 100% foreign ownership policy, billions in overseas capital have been committed to storage projects.
5. Smart grid tech is crucial in the energy transition.
The surge of energy use exposed the vulnerability of traditional power systems and underscored the urgent need for modern solutions to manage weather-driven demand spikes.
Amid the pressure, smart grid technologies proved their worth. Real-time monitoring and automated responses kept disruptions in check, while bidirectional energy flows allowed rooftop solar to feed excess power back into the system during peak daylight hours.
These advanced platforms also optimized the use of battery reserves, timing discharges to smooth the sharp fluctuations of wind and solar output.
6. Swift regulatory action powers sector expansion.
Philippine regulators are tackling policy hurdles as grid pressures grow, with energy storage now in focus. Classified as generation and bound by ownership caps, storage is being reconsidered for its value in balancing supply, stabilizing the grid, and supporting renewables. Reclassification could draw more investment and boost resilience.
The DOE and the Energy Regulatory Commission (ERC) are also signaling flexibility in rules. Moves toward technology-neutral policies and looser foreign investment limits are making the country a more competitive energy market.
7. Investments shift with project results.
Momentum in the energy sector is shifting, with wind power buoyed by the Talim project’s success and storage climbing the agenda amid clearer policies and rising demand for grid stability. Investors are also eyeing distributed generation, valuing its reliability and efficiency over the transmission challenges of distant large-scale plants.
Meanwhile, natural gas has reasserted its role as a bridge fuel, with Independent Electricity Market Operator of the Philippines (IEMOP) data showing output up more than 25% in June 2025 and 5.2% in the first half of the year. Its share of generation rose to 17.5%, recovering from a 2023 low despite persistent concerns over declining Malampaya reserves.
(Also read: Can Natural Gas Help Secure Our Energy Future?)
8. Dependable output from coal plants is still essential.
According to Judith Albano of Malaya Business Insight, dependable output from traditional plants remains vital as renewables lead new capacity growth. “Transitioning systems must maintain legacy infrastructure while recalibrating operations to work in tandem with intermittent sources,” she wrote.
Philstar columnist Bienvenido Oplas stated that the Philippines produced 79.4 terawatt-hours (TWh) of coal power in 2024, far below Malaysia’s 98 TWh, Vietnam’s 153 TWh, Indonesia’s 228 TWh, and the US’s 712 TWh. The Philippines’ total coal output in 2024 matched only a few days of China’s production, roughly four months of Japan’s, and about half a year of Vietnam’s.
The DOE echoes this sentiment, noting that while coal still dominates the country’s power mix, the Philippines contributes only a fraction to global coal emissions. Citing European Commission data, it said the nation accounted for just 0.5% of global greenhouse gases in 2022, far below China’s 29.2% and Indonesia’s 2.3%.
9. Stable electricity is essential for driving sustained growth.
Lotilla warned that without expansion in the power sector, the country’s economic growth would stall. He explained that sustaining a 6% annual GDP growth would require electricity generation to rise by about 5.2% each year.
Oplas, citing IEMOP data, reported shifts in the country’s power mix for July 2025. Coal’s share in generation slipped to 54% from 59% in Q2, while gas rose to 21% from 17.7%. Geothermal held steady at about 8%, and hydro rebounded to 10.5%. Based on the figures, wind and solar accounted for over 11% of installed capacity but generated only 4% of power in July, indicating relatively low output likely due to resource variability and operational factors.
“Countries that experienced fast average growth of at least four percent yearly over the last decade, 2014-2024, are those that have high coal expansion of 4-162 TWH per year: Philippines, Malaysia, Vietnam, Indonesia, India, and China,” he wrote. “We need this energy and growth momentum to keep creating more jobs for our people.”
10. Energy stability fuels investment, tames inflation.
Oplas noted that the Visayas grid faced yellow alerts in early August, usually from 6 to 8 p.m., when demand peaks but solar output is zero. With solar making up nearly 10% of capacity yet producing little at night and during cloudy weather, coal expansions by MGen in Iloilo and Cebu and Aboitiz Power in Cebu, all brownfield projects with environmental clearances, are expected to boost capacity and help prevent blackouts in Cebu, Negros, and Panay.
He warned that recurring alerts could discourage investors, turning energy limits into economic limits. Citing Philippine Statistics Authority data, Oplas highlighted July 2025 inflation at a six-year low of 0.9%, helped by low power prices from coal and gas, which supply 75% of generation.
Bottom Line
The Q2 2025 report highlights progress and challenges in the Philippine energy sector. Delays, rising demand, and grid limits underscore the need for faster project delivery and improved integration to maintain a reliable power supply. Legacy fuels like coal and gas remain crucial in supporting the grid during this transition.
While renewables expand, smart grids, energy storage, and flexible policies are key to managing variability. A balanced energy mix that includes conventional sources is essential to sustain economic growth, attract investment, and keep inflation in check as the country moves toward a cleaner future.
Sources:
https://malaya.com.ph/special-features/summer-stress-test-the-philippine-energy-q2-2025-report/
https://www.philstar.com/business/2025/08/07/2463585/coal-power-plants-and-inflation-control
https://www.pna.gov.ph/articles/1250190
https://icsc.ngo/wp-content/uploads/2025/04/ICSC-Report-PowerOutlook2025-Final.pdf
https://dailyguardian.com.ph/luzon-visayas-face-tight-power-supply-in-june-2025-study-says
https://legacy.doe.gov.ph/press-releases/doe-response-article-ph-dependency-coal-fired-power-surpasses-china-and-indonesia
