Amid rising demand during the dry season and the risk of power plant outages, concerns are mounting in the Philippines over tight electricity supplies. The Energy Regulatory Commission (ERC) has noted that prices on the Wholesale Electricity Supply Market (WESM) could increase by approximately 4 pesos per kWh.
This increase is due to a combination of factors, including high temperatures, the shutdown of some power plants, and rising fuel costs.
These conditions are also causing instability in the power supply at the regional level. For instance, Boracay’s supply capacity has not kept pace with the surge in electricity demand fueled by the tourism recovery, prompting the use of generators in some areas. Although transmission operators aim to avoid power outages through future infrastructure improvements, reliance on backup power sources continues to some extent.
Overall, the Philippine power system is in a precarious state, caught between rising demand and supply constraints. This environment creates a structure that drives up electricity costs and encourages the use of alternative power sources, such as generators.
Source: BusinessMirror, The Manila Times
PSR Analysis: What is noteworthy about this news is not the existence of the generators themselves, but rather, the manifestation of power shortages as price increases, which directly influence demand-side behavior. Generators have been used during supply shortages in the past. However, the confirmation of their use at the same time as the projected rise in WESM prices indicates that we have entered a phase where both electricity costs and supply risks are recognized simultaneously.
Of particular importance is the fact that the grid’s supply capacity is insufficient to handle even relatively predictable factors, such as the recovery of tourism demand coinciding with dry-season demand.
Under these circumstances, demand-side actors may increasingly take proactive steps to supplement their power supply, rather than passively receiving electricity based on costs and supply conditions. Though still limited in scope, in an environment where electricity price fluctuations and supply concerns occur simultaneously, this can be interpreted as a sign that generators’ role is expanding from “emergency use” to “part of supply-demand adjustment.” PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, at Power Systems Research
