Renewable energy lowers, not raises, electricity rates

When electricity bills arrive, most of us look first for the charges driving them higher. Feed-in Tariff Allowance (FIT-All) and, more recently, Green Energy Auction Allowance (GEA-All) are easy targets because they appear as separate line items. It’s understandable why many consumers conclude that renewable energy is making electricity more expensive.

The largest expenses consumers bear, however, do not appear as separate line items. They are embedded in volatile coal and gas prices, peso depreciation, wholesale market spikes, emergency power purchases, and our continuing dependence on imported fuel. Renewable energy is already easing those hidden burdens by lowering wholesale prices and reducing our exposure to volatile fuel imports.

The market itself tells the story. Data published over the years by the Department of Energy, the Philippine Electricity Market Corp., and the Independent Electricity Market Operator of the Philippines consistently show that wholesale electricity prices fall when more solar and wind generation enters the grid during peak demand. The International Energy Agency has observed the same pattern in electricity markets around the world.

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Building on Wholesale Electricity Spot Market (WESM) data, a 2021 study by the Institute for Climate and Sustainable Cities (ICSC) found that utility-scale solar and wind reduced spot prices by as much as 28 percent during peak hours in 2019, despite supplying less than 3 percent of the country’s electricity. Using 2025 data, ICSC also estimates that higher renewable generation lowered WESM settlement prices by about 10 percent during peak demand hours, and that savings from FIT-supported projects have already exceeded the FIT-All collections paid by consumers over the life of the program.

The explanation is simple. In WESM, the price paid by everyone is often set by the last—and usually the most expensive—power plant needed to meet demand. When renewables replace that expensive generator, the market price falls for everyone buying electricity during that period. The savings are real even if they never appear as a credit on our monthly bills.

I understand why FIT-All is scrutinized because I was directly involved in the policy’s early development. From 2010 to 2016, I chaired the National Renewable Energy Board (NREB), the body that determined and recommended the FIT rates for approval by the Energy Regulatory Commission (ERC). We knew the initial FITs seemed high. But renewable energy was still a young industry, financing was difficult, investors were cautious, and there was little local experience in developing utility-scale projects. The Renewable Energy Act’s objective was never to create a permanent subsidy. It was to build an industry that competition would eventually make affordable.

After the ERC approved the first FIT rates in 2012 and updated them in 2015, nearly 2,000 megawatts of renewable capacity were installed under the program. Those pioneering projects proved the technology worked in the Philippines, attracted investors, developed local expertise, strengthened supply chains, and paved the way for today’s much lower prices. Solar projects that once received almost P10 per kilowatt-hour under FIT are now winning competitive auctions at around P3 to P4.

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That is exactly what the Green Energy Auction Program is designed to do. Instead of receiving guaranteed tariffs, developers compete to offer the lowest price. The results show the model is working. In the first auction, most winning solar bids matched the ceiling price. By the fourth, only one of the 58 winning solar bids did. Competition—not subsidies—is now driving renewable energy prices lower.

Consumers have every right to question the charges on their electricity bills. They should. FIT-All and GEA-All deserve strict review because consumers pay for them. Regulators should continue publishing independent assessments of these mechanisms, keep auctions genuinely competitive, ensure winning projects are built, and invest in the grid so lower-cost renewable power reaches consumers. But consumers should also consider what these mechanisms have made possible—and the expenses they have helped avoid. Imported fuel, market spikes, emergency power purchases, and years of delayed investment all carry a price that ultimately finds its way into our electricity bills.

We have spent years debating the cost of renewable energy. Perhaps it is time we paid equal attention to the cost of not investing in it. Properly designed and competitively procured, renewable energy is actually helping lower electricity rates—not raise them.

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Pete Maniego is senior policy adviser to the Institute for Climate and Sustainable Cities. He is a lawyer, engineer, economist, professor, and corporate executive. He was the former chair of the NREB, University of the Philippines Engineering Research & Development Foundation, Institute of Corporate Directors, and Energy Lawyers Association of the Philippines.