By Carlos Korten
President, Green Tiger Markets
In the Philippines, energy is not just a utility—it is the cost of everything.
From the price of a sack of rice to the productivity of a manufacturing facility, electricity underpins every facet of economic life. The nation’s high electricity costs and volatile power prices stifle growth, burden businesses, and erode the welfare of everyday Filipinos. Modernizing the power industry is not just a commercial imperative; it is a necessary condition to economic prosperity.
The Philippines endures some of the highest electricity rates in Southeast Asia. During September 2024, as a sample, commercial buyers paid well over ₱8 per kWh, and for the typical household a kilowatt-hour of electricity cost more than ₱11. This is nearly double the equivalent rates in Thailand or Vietnam.
For electricity-intensive industries like cement manufacturing, these costs represent a commercial chokehold. Producing one ton of cement requires approximately 120 kWh of electricity, fully 20% of the production cost. With cement being a cornerstone of infrastructure development—roads, bridges, and housing—these expenses inflate construction costs, delay projects, and hinder economic multipliers like job creation and urban growth.
Other industries, such as ice manufacturing or food processing, face similar pressures. A mid-sized ice plant producing 20 tons daily will experience monthly electricity bills of ₱500,000– as much as 50% of its operating costs. When power prices spike due to fuel price volatility or grid inefficiencies, these businesses face a stark choice: absorb losses or pass costs to consumers. Either way, the ripple effect is felt across the nation—higher prices for fresh foods, reduced purchasing power for families, and diminished economic activity.
High electricity costs disproportionately harm Filipino households. The average family spends more than 10% of their income on utilities, squeezing budgets for essentials like food and education. Volatility in power prices, a hallmark of the electricity industry in recent years, adds uncertainty, making it harder for families to plan and save. Affordable, stable energy is foundational to improving living standards and breaking cycles of poverty.
The path to modernization is emerging.
The adoption of renewable sources—solar, wind, and geothermal, where the Philippines has abundant potential—can reduce reliance on costly fuels. Streamlining regulatory frameworks to foster competition in power generation and distribution, as mandated by the Electric Power Industry Reform Act of 2001, will empower businesses to negotiate better rates, directly benefiting industries like cement and ice production.
The adoption of novel commercial practices, such as the use of Financial Hedging to resolve spot price volatility and improve the return-on-capital along the entire energy supply chain, will also play a critical role in making the Philippines economy more dynamic and efficient. The broad adoption of Financial Hedging as an industry best practice is a particular point of focus for our company, as we work to promote solutions that have been successful and important in other energy markets with an active spot market, including Europe, Australia and Japan.
Energy modernization fuels economic growth by attracting investment. Stable, affordable power establishes a business-friendly environment, drawing manufacturers and tech firms that create jobs.
Energy is the fundamental cost of everything—the cement for roads, the ice for food distribution, the light for schools and hospitals. Next time you’re waiting in traffic on EDSA, remember that energy drives the cost of curing traffic jams. And when you enjoy a fresh salad, remember the energy that keeps it crisp.
By modernizing the power industry, the Philippines can unleash its full economic potential, and uplift the lives of every Filipino.
This article was originally published on GreenTigerMarkets.com.
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