The Philippine power market is going through such monumental changes. It’s adjusting to a new environment teeming with technology and changing tastes. This new information provides a game-changing look at the market’s capacity, generation and consumption trends from 2023 through 2035. This analysis highlights the annual generation share by technology, sectoral power consumption, market structure, and various macroeconomic factors impacting the industry.
The country is doing everything it can to power the nation while transitioning to renewable energy. That is why it is so important for other stakeholders – including, legislators, regulators, investors, and consumers – to understand these dynamics. The findings illustrate a diverse energy landscape characterized by a shift toward renewable sources, alongside the continued reliance on traditional thermal power generation methods.
Power Generation Trends and Capacity Projections
The Philippine energy market reflects a significant shift in electricity generation technology for 2023. Projections for 2035 paint this transition even more starkly. In 2023, fossil fuels are still the overwhelming majority of what we generate energy from. They make up the majority of the output, by far. Projections for 2035 indicate a 29 percent increase in renewable energy contributions. Much of this growth will be driven by public sector efforts to decrease GHGs and invest in clean, sustainable practices.
Figure 1 illustrates this slow, steady and expected coal-fired generation decline. The country’s investments are increasingly shifting away from fossil fuels and towards solar and wind technologies. Governments and private investors are increasingly focusing on developing renewable energy projects to diversify the energy mix and enhance energy security.
Aside from generation share, as shown in Figure 12, it’s important to look at cumulative capacity and annual generation from 2015 through 2035. Taken together, these numbers show a consistent upward trend of new renewable facilities continuing to go online adding to the growth trajectory. By 2035, renewable energy is expected to provide a much larger share of our energy needs.
Sectoral Power Consumption Patterns
Analyzing the power consumption by sector in 2030 helps inform our understanding of the energy use activities different industries are engaging in. Figure 2 highlights that the residential sector will account for a significant portion of total consumption, reflecting ongoing urbanization and population growth. The commercial sector is a close second as businesses continue to expand and create demand for electricity.
Figure 10 displays this data as of 2023. Perhaps most importantly, it underscores that industrial usage will remain a dominant force shaping overall consumption trends for the foreseeable future. We know the manufacturing sector will be a huge consumer of energy. It will still be one of the greatest influencers and consumers of the market.
The macroeconomic factors at play that drive these patterns of consumption are explained in Figure 4. Beyond 2015, economic growth rates are profoundly tied to growth in energy employment in every sector of the economy—from 2015 to 2030. However, rapid population growth and increasing incomes have raised electricity consumption, presenting new opportunities and challenges for energy providers alike.
Market Structure and Company Dynamics
An idea of the overall market structure is important for understanding competitive dynamics in the Philippine power sector. Figure 5 { id=fig:restructuring } depicts the current market structure with multiple, independent generation companies competing against each other for market share. Combined with a market-based adjustment mechanism, this competitive environment has inspired innovation and efficiency among providers.
Information shown in Figure 6 focuses on the market power of generation owners in 2023. Specifically, it shows an alarming level of concentration among the largest railroads. These companies maintain an iron grip on the market. More and more often, they’re competing with upstart renewable energy companies looking to establish their new brand in this rapidly changing market.
Figure 7 offers a high-level view of deal values and transaction counts from 2015 through 2023. This information illustrates a growing interest in mergers and acquisitions within the power sector as larger companies look to expand their portfolios and invest in cleaner technologies. To conclude, the writing on the wall indicates that smart alliances and liaisons will be pivotal in determining who thrives or dives in the new energy universe.
Future Directions: Challenges and Opportunities
Today, just as the Philippine power market continues to evolve, significant challenges and emerging opportunities continue to develop. Meaningful regulatory reforms to accelerate investment in renewable resources and to better maintain a reliable, affordable supply of electricity will be crucial. Additionally, as we look towards a rapidly increasing demand for electricity from different sectors, including transportation, infrastructure build-out will be critical.
This long term forecast uncovers a powerful trend of growth powered by economic development and the trend of urbanization. If we want to meet increasing demands with sustainable solutions we will have to face potential supply constraints head on.
Moreover, Figure 8 shows deals by type in 2023 year-to-date, showing a clear shift towards investments in renewable projects. As these headlines show, companies are doubling down on clean energy projects. They need to comply with international standards and local codes that require lower carbon footprints.