By John Knorring, CEO Green Tiger Markets, November 2025

The Philippines power sector is poised at a crossroads. As the archipelago contends with surging demand, grid stress, and the urgent desire to accelerate renewable investments, the country’s energy future will be shaped by its ability to send clear, reliable price signals to both producers and consumers. The emergence of a forward electricity market, though still in its infancy, holds the promise of solving one of the industry’s thorniest challenges: price discovery.

The Mechanics of Forward Markets

Forward markets operate on a simple principle: transacting parties agree today on a price for electricity to be delivered months, or even years, in the future. Unlike the spot market—where prices react instantaneously to supply and demand shocks—forward contracts allow generators and large users to lock in prices, hedging against volatility and uncertainty.

But their true value lies far deeper: forward prices become the “clearest signal in the noise,” offering all players a consensus view of where the market expects supply and demand to balance over time.

Facilitating Price Discovery

For too long, the Philippine electricity sector has struggled with price transparency. The spot market, while dynamic, is inherently prone to spikes and troughs and does not give any information about the future. In contrast, a functioning forward market consolidates the expectations of generators, utilities, and consumers, reflecting real supply-and-demand conditions, risk tolerance, and investment appetites.

As market participants compete to secure future contracts, their collective actions reveal the “fair” value for electricity in the coming months or years. This process, known as price discovery, is fundamental to an efficient, modern energy market.

Sending Investment Signals

Perhaps the most crucial benefit of forward markets is the price signal they send to investors. When forward prices climb above the long-run marginal cost of generation, developers are incentivized to build new power plants—be it solar farms in Ilocos, floating LNG terminals in Quezon, or flexible battery storage in Cebu. Conversely, if forward prices remain subdued, it sends a loud warning against overbuilding and wasteful capital expenditure.

Crucially, forward prices also shape the business case for demand-side investments. Industrial consumers, seeing high forward rates, might accelerate efficiency projects, behind-the-meter generation, or time-shifting consumption. Households, too, can anticipate future power bills with greater accuracy, supporting smarter consumption.

The Path Ahead for the Philippines

The first digitally executed forward trades in the Philippines have already taken place, thanks to Green Tiger Markets’ hedging platform. Even as liquidity and depth are still developing, early price signals can guide everything from utility hedging strategies to government planning for reserve margins.

To fully realize the potential of forward markets, the sector must address regulatory clarity, market access for smaller players, and integration with complementary financial instruments. The reward, however, is substantial: better price discovery, sharper investment decisions, and a power infrastructure that keeps pace with the country’s ambitions.

The Philippine energy sector cannot afford to stumble blindly into the next decade. It needs price signals—clear, trusted, actionable. Forward markets are the beacon that can light the country’s way.