Rising liquefied natural gas (LNG) prices and the financial risks of developing domestic geothermal resources emerged as key energy policy concerns during a by-invitation-only, internal Learning@PIDSsession hosted by the ²ÝÝ®ÊÓƵ on October 22.
The discussion featured Sam Reynolds of the Institute for Energy Economics and Financial Analysis (IEEFA), who presented an analysis of the economic and financial risks of LNG dependence in Asia, and Migara Jayawardena of AMALA Clean Energy Advisors and Georgetown University, who presented an assessment of the barriers to geothermal development in the Philippines and a proposed mechanism for sharing exploration risks.
“Spot market LNG prices have tripled since before the Middle East conflict began,” said Reynolds, with figures showing about half of the country’s LNG supply comes from spot-market purchases.
The Philippines relies on spot-market purchases for about 50% of its LNG supply, leaving it exposed to international price volatility.
The country spent USD 1.2 billion on imported LNG in 2025, with expenditures reaching around USD 800 million through July 2026, Reynolds said.
He also cited the Excellent Energy Resources Inc. (EERI) Batangas gas-fired power plant, where the delivered cost of electricity had reached around PHP 16 per kilowatt-hour in recent months, compared with the PHP 6 per kilowatt-hour bid price under its power supply agreement with Manila Electric Co. (Meralco).
“The prices of fuel get passed through all the way to end consumers,” Reynolds said, adding that generation charges account for an estimated 60% to 70% of household electricity bills.
“Bringing generation costs down is the absolute key here,” he added.
Reynolds also presented a model showing that the combined effects of higher fuel and equipment costs and currency depreciation could increase delivered power costs by 143% under certain conditions. He emphasized that the figure was a modeled scenario, not a forecast.
He argued that expanding renewable energy could help reduce exposure to imported fuel costs, although he also identified implementation challenges, particularly delays in connecting renewable energy projects to the grid and the gap between capacity awarded through auctions and projects being developed.
The discussion also examined the potential of geothermal energy to diversify the country’s domestic energy supply.
Jayawardena presented findings from an assessment of 24 geothermal concessions, which found that almost half had remained at a very early stage of development for more than seven years—roughly the time needed to develop a geothermal resource.
Figures cited during the session put the Philippines installed geothermal capacity at 2,057 megawatts, with more than 2,000 megawatts of additional geothermal resources yet to be developed.
Jayawardena identified the financial risk of exploratory drilling as a major barrier. Developers must commit substantial capital before they can establish whether a geothermal resource is commercially viable, leaving them exposed to potentially significant losses if exploration fails.
To address this challenge, he proposed a geothermal resource de-risking facility that would share exploration costs among the government, development partners, and private developers.
Under the proposed arrangement, the facility’s contribution could be recovered if exploration establishes a commercially viable resource, allowing the funds to support other projects. If a resource proves commercially unviable, the cost-shared assistance could be converted into a grant, reducing the developer’s financial exposure.
“The idea is that lowering their exposure to that early-stage risk would get developers to jump in and make that leap,” Jayawardena said.
The proposal aims to encourage private investment in geothermal exploration. However, reducing exploration risks alone would not resolve other barriers, including financing for subsequent development, transmission infrastructure, and the commercial viability of individual projects.
The discussion comes as the Philippine Energy Plan targets renewables to account for 35% of the power mix by 2030 and 50% by 2040.
The presentations highlighted two related challenges for the country’s energy transition: managing the cost and supply risks associated with imported fuels while addressing the financial and infrastructure constraints that hinder the development of domestic and renewable energy resources. ### — MJCG
