The WaterRock team understands all the nuances of the Philippine power and gas market through continuous client engagement with commercial investors and large end-users in the past 18 years.  We also have long and deep experience in providing power modelling services to project spot WESM market prices.  Furthermore, we have been engaged to do high profile projects to help shape the regulatory and investment landscape in the Philippines. 

• In early 2020, we were invited by JBIC to present to the Philippines' Energy Committee of the Senate and Philippines' House of Representatives on the role of natural gas and economics of building new LNG terminals in the Philippines.  

• We are the market advisor for several recent merger and acquisitions, including:

  • Tokyo Gas’ investment in an offshore floating LNG terminal in the Philippines

  • Mitsui’s investment in the Philippines (such as its investment in the Philippines wind assets of Mainstream Renewable Power)

  • Sembcorp’s entry to the Philippines power sector and its investment in the Philippines (such as utility-scale solar projects in Visayas).

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Summary of market dynamcis:

 

• Latest Market dynamics:

  • ​Falling but volatile WESM prices: From ~7.7 PHP/kWh (2022) → ~5.1 PHP/kWh (2024) → forecast 3–6 PHP/kWh, key drivers on weak 2025 prices include:

    • falling fossil fuel prices;

    • commissioning of a highly contracted 1320 MW Ilijan LNG-fired CCGTs and >1 GWp solar capacity in Luzon

    • unexpectedly weak demand growth in Luzon and Visayas;

    • unexpected high hydro generation; and

    • entry of a highly contracted big LNG-fired CCGT plant (1320 MW).

  • With the relatively fast entry of solar capacity, the morning hourly prices have fallen more than expected.  Average solar capture prices are only about 3 peso/kWh (55 USD/MWh) in Luzon, at a 25% discount against the time-weighted average price of 3.8 peso/kWh (69 USD/MWh). 

  • Visayas market prices have been the highest in recent years, while Mindanao prices are converging with the other two markets.  These are mainly driven by the tightening market situation in those two smaller grids. 

  • Scarce reserve supply in Visayas and Mindanao: 30–50 MW shortfall leading to elevated spot reserve prices.

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• Investment opportunities:  ​

  • Good macro backdrop. Easing the 40:60 foreign equity limitation opens opportunities for capital infusion into Filipino-owned RE projects.

  • WESM market price outlook: 

    • Solar captured prices in real terms could be 55-80 USD/MWh in the next few years, and decline to 35-50 USD/MWh in the long term.

    • The medium- and long-term time-weighted average prices (TWAP) need to be sufficiently high to attract the entry of new dispatchable capacity (like LNG-fired CCGTs), thus likely at 75-100 USD/MWh.

    • For wind generation weighted average price, it is expected to be in the middle of solar captured and TWAP, mainly because wind generation tends to concentrate in Q1 and Q4 when prices are lower than the other quarters. 

  •  Economics, cost-competitive RE and flexibility: Based on the levelized cost of energy (LCOE), utility-scale solar and onshore wind are cheaper than building new coal and gas projects. Offshore wind can also become more economical than coal plants after 2030.  For hybrid solar projects, they will become increasingly economical as BESS CAPEX costs are expected to continue declining relatively quickly in the near term. 

    • The main challenges for solar project investment are related to execution risks and site selection. 

    • For an onshore wind project, controlling the cost and selecting the right good resource sites are essential to ensure its economics