From Coal to Clean Power: Inside the Philippines’ High-Stakes Energy Transition

The IMF finds that the Philippines’ renewable energy transition has become economically critical, offering a path to lower power prices, stronger energy security, and reduced reliance on imported fossil fuels, but starting from a very low base. Success will depend on overcoming major hurdles in grid infrastructure, financing, land access, and skilled labor while mobilizing massive long-term investment to meet rising demand and climate goals.

The Philippines’ drive toward renewable energy has become far more than an environmental aspiration. According to an IMF assessment prepared with inputs from government agencies, including the Department of Energy, the Board of Investments, the Department of Finance, the Department of Economy, Planning and Development, and research bodies such as the Philippine Institute for Development Studies, the country’s energy transition is now central to economic stability, energy security, and long-term growth. With low power capacity, heavy reliance on imported fossil fuels, and rising electricity demand, the Philippines faces a stark choice: accelerate the shift to clean energy or remain exposed to volatile global fuel markets.

Big potential, small starting point

On paper, the Philippines is rich in renewable resources. Solar and wind, both onshore and offshore, could theoretically generate around 1,200 gigawatts of power, far exceeding future demand. The country also has significant hydropower potential and is already the world’s third-largest producer of geothermal energy. Yet the reality on the ground looks very different. In 2024, total installed renewable capacity stood at only about 9.5 gigawatts. Coal remains the backbone of the power system, supplying nearly two-thirds of electricity, while fossil fuels as a whole account for close to 80 percent of generation. This dependence has serious consequences: electricity generation alone produced almost 90 percent of national greenhouse gas emissions in 2023.

Demand is rising, pressure is growing

Energy demand in the Philippines is set to surge. Peak electricity demand is projected to rise more than fourfold by 2050, driven by population growth, urbanisation, and industrial expansion. To meet this demand, the government’s Philippine Energy Plan 2023–2050 aims to raise the renewable share of power generation to 35 percent by 2030 and 50 percent by 2050, in line with climate commitments and the global COP28 pledge to triple renewable capacity. Cleaner scenarios rely heavily on offshore wind, energy efficiency, and new technologies. Even under these pathways, fossil fuel use continues to grow in absolute terms, highlighting how difficult the transition will be, but also how urgent it has become.

Reforms spark investment and lower prices

Recent policy reforms have changed the pace of the transition. Allowing 100 percent foreign ownership of renewable projects, speeding up permits through the Energy Virtual One-Stop Shop, and fast-tracking approvals under the Green Lanes for Strategic Investments have sharply improved investor confidence. Competitive bidding under the Green Energy Auction Program has already awarded around 12 gigawatts of new renewable capacity. The results are visible in the numbers: renewable energy investments surged between 2022 and 2024, reaching PHP 1.38 trillion in 2024 alone, led by wind and solar projects. This expansion is also helping bring electricity prices down. Wholesale power prices fell sharply in early 2025, and projections suggest that successful green auctions could cut average prices by about one-third by the end of the decade, good news for households and manufacturers alike.

Jobs, obstacles, and the road ahead

The clean energy boom is also creating jobs. Since the Renewable Energy Act of 2008, the sector has generated hundreds of thousands of job-years, particularly in solar and hydropower. Future demand for workers is expected to be strongest in wind and solar. But serious challenges remain. Many companies report difficulty finding skilled engineers, technicians, and project managers, raising the risk of delays. Beyond skills, the scale of investment needed is daunting. The IMF estimates that the Philippines will need around PHP 10.7 trillion in energy investments between 2029 and 2050, about 40 percent of today’s GDP. Weak grid infrastructure, slow land acquisition, financing constraints, and reliance on imported equipment all threaten to slow progress.

The IMF’s message is cautiously optimistic. The Philippines has built real momentum and put key policies in place, turning renewable energy into a core economic strategy rather than a side issue. Whether this momentum delivers affordable power, lower emissions, and stronger growth will depend on how quickly the country can upgrade its grid, mobilise long-term finance, resolve land and labour bottlenecks, and sustain reform over the next decade.