By John Knorring is the founder and CEO of Green Tiger Markets,
As a former energy trader for Goldman Sachs, I’ve witnessed how transparency and price discovery can revolutionize energy markets globally.
In the Philippines—a nation driving economic growth at an average of 6% GDP annually over the past five years—the electricity sector remains a critical challenge.
Despite progress in renewable energy adoption, the lack of transparent pricing mechanisms and robust price discovery continues to burden consumers, deter investment, and hinder the nation’s energy stability. It’s time to address these systemic issues head-on to unlock a more reliable and affordable energy future.
The Philippines electricity market, centered around the Wholesale Electricity Spot Market (WESM), struggles with price volatility and unpredictability. Historically, participants have relied on long-term bilateral agreements to secure electricity supply, a process often mired in lengthy negotiations and limited flexibility. Without such agreements, they turn to WESM’s spot market, where prices can fluctuate wildly. During peak demand periods, spot prices have been known to spike, contributing to consumer price shocks.
These swings create uncertainty that reverberates across the economy, affecting industrial productivity and household budgets alike. A more transparent system, where future prices are visible and accessible, would allow market participants to plan with confidence, reducing the risk premiums that inflate electricity costs.
Transparency in pricing is not just a technical fix—it’s a cornerstone of fairness. In a market where electricity prices rank among the highest in Southeast Asia, at around PHP10/kWh, consumers deserve clarity on how costs are determined.
Transparent pricing mechanisms reveal the true cost of electricity, enabling distributors to make informed procurement decisions and pass on savings to end-users. This visibility also empowers regulators to monitor market behavior, ensuring competition drives efficiency.
Price discovery, the process of establishing a market-driven price through active trading, is equally vital. In a forward market, participants can buy and sell electricity for a future date, locking in prices and mitigating the risks of spot market volatility. This stability benefits everyone: generators can hedge against price drops during high-supply periods, such as midday solar surges, while distributors can secure predictable costs, protecting consumers from bill shock.
Moreover, price discovery creates a forward price curve—a critical tool for signaling future supply and demand trends. Such a curve allows market players to anticipate shortages or surpluses, adjusting their strategies accordingly to maintain balance in the grid.
The benefits extend beyond stability to capital investment. The Philippines faces a looming supply crunch, as the Department of Energy (DOE) has warned of tight electricity reserves in the coming years. Investors, however, are hesitant to fund new generation capacity without clarity on future returns. A transparent market with active price discovery reduces this uncertainty, enabling generators to assess the profitability of new projects—be it a solar farm or a geothermal plant—and secure financing with confidence. This is particularly crucial as the DOE targets 35% renewable energy by 2030, a goal that demands significant capital to achieve.
The Philippines’ energy mix—hydro, coal,natural gas, solar, geothermal, and more—holds immense potential, but its efficiency hinges on market mechanisms that prioritize openness. As an industry, we must champion transparency and price discovery to modernize the electricity sector. These principles can stabilize prices, attract investment, and ensure that the benefits of electrification reach every Filipino. The path to a bright energy future begins with clarity—let’s embrace it.
About the Author
John Knorring is the founder and CEO of Green Tiger Markets, the first and only provider of a forward marketplace for the Philippines energy industry. He has over 25 years experience in forward hedging markets. He is a believer in the power of markets and a proponent of transparency and price discovery. John, a Chicago native, is a resident of Austin, Texas.
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