Assessing Energy Security in the Philippines

Energy security ranks high in the Philippines’ economic agenda, as announced by President Ferdinand Marcos Jr in November last year. It is also apparent in recent government actions, such as the renewal of a major natural gas concession and the fast-tracking of the permitting process in the energy sector.

But how can we define and assess energy security? There are various definitions of energy security, including those provided by international organisations: the International Energy Agency, the World Energy Council, and the United Nations Development Programme. In the Philippines, there is the Philippine Development Plan 2022-2028 and a 2023 paper published by the author and other researchers. The literature lists six elements of energy security that are important — sufficiency, reliability, resilience, affordability, accessibility, and sustainability. These elements can be measured and monitored to comprehensively assess energy security in a country, albeit with varying levels of relevance. Accessibility, for instance, is more relevant to developing countries than to advanced countries, as many developing countries have yet to achieve universal access to electricity.

In the case of the Philippines, all these elements are relevant. A recent paper analysed these using several representative indicators.

The first is the sufficiency of supply. The Philippines’ energy self-sufficiency ratio peaked in 2009 at 62 per cent but generally declined thereafter and stood at 51 per cent in 2021. The path of the Hirschmann-Herfindahl Index (HHI) for Philippine energy imports, an index measuring the market concentration of energy imports with respect to source countries, shows that the country’s coal HHI has been generally increasing and reached a high of 0.954 in 2021, due to the Philippines’ high dependence on Indonesian coal. The Philippines’ HII for crude oil imports is lower at 0.451 in 2021, which shows that the country’s oil import sources are more diversified than coal import sources. But the country’s imports are mostly from the Middle East region, which exposes it to geopolitical and market risks there.

The second indicator is the reliability or continuous availability of energy supply. In the electrical power system, instances when the available capacity (which should be 25 per cent higher than peak demand) was dangerously low became frequent from 2018 to 2019. Reliability is also a problem at the distribution utility level. In 2021, the system average interruption frequency index averaged 46.01 power interruptions per customer, higher than the regulatory benchmark of 25 interruptions per customer per year.

Another indicator is the resilience of the energy system. The domestic downstream oil industry opposes a proposed legislation on mandatory minimum oil inventory, a measure meant to boost resilience to supply disruptions.  Yet there had been only five instances between 1996 to 2021 when the days of on-land oil stocks exceeded the proposed mandatory inventory level of 30 days.

Given its huge potential for indigenous energy resource development, Philippine policymakers have to clarify the unclear or insufficient legislative and regulatory frameworks for upstream energy development.

Energy security in the country is closely linked with affordability of energy products. Among ASEAN countries, the Philippines had the third highest retail prices of gasoline and diesel (USD1.31 per litre and USD1.09 per litre, respectively) as of 8 April 2024, and second most expensive electricity (USD0.199 per kilowatt-hour for residential consumers and USD0.139 per kilowatt-hour for business consumers) as of September 2023.

In terms of accessibility, universal access to electricity remains an elusive goal for the Philippines. As of 2020, most ASEAN countries had already achieved universal access or near-universal access to electricity. The Philippines’ 92.96 per cent electrification rate was second lowest compared to last-placed Myanmar at 57.83 per cent.

The last indicator is the sustainability of energy production and consumption. The carbon emissions of the Philippines per unit of gross domestic product (GDP) have been declining and reached 0.007 metric tons of carbon dioxide equivalent (MTCO₂e) per billion pesos of GDP in 2021. This means that the country has been polluting less per unit of production. But Filipinos’ emissions per capita have been on an uptrend and reached 1.1833 MTCO₂e per million population in 2021. Lower production and consumption entail a smaller carbon footprint.

An indicators-based assessment would enable policymakers to have a deeper understanding of what energy sector issues are prominent and what policy interventions are needed. Given the huge potential for indigenous energy resource development, Philippine policymakers have to clarify the unclear or insufficient legislative and regulatory frameworks for upstream energy development. Policy improvements in this area can also provide entry points for foreign direct investments. To improve energy accessibility and reduce energy poverty, policymakers also have to find innovative ways of accelerating the Philippine electrification programme.

Other needed policy interventions in the Philippines are standard strategies for energy sector development and can also be adopted by its Southeast Asian neighbours. These are: upgrading the transmission and distribution infrastructure to improve the reliability and resilience of the power system, promoting further competition and facilitating clean energy transition to help reduce the prices of final energy products, and supporting industries and consumers through green finance and clean energy incentives to enhance the environmental sustainability of energy production and consumption. Its Southeast Asian neighbours can also view any support to propping Philippine energy security as an opportunity for mutual gains. For instance, the recent energy cooperation pact between Indonesia and the Philippines not only updates the agreement on secured coal supply but also includes collaboration on clean energy transition, given that both countries are major sources of energy transition minerals.

The analysis of the six elements of energy security using specific indicators in the Philippines demonstrates an evidence-based method of understanding energy security issues. Energy security can be pursued more effectively if there is a clear articulation of objectives and measurement of the indicators of success or failure. This method can very well be replicated in other Southeast Asian developing countries, provided that the data are available for the specific indicators.

For example, indicators show that ensuring supply sufficiency and addressing import risks are the motivations of Thailand and Cambodia in revisiting a possible joint hydrocarbon exploration in the Gulf of Thailand. The indigenous natural gas supply of Thailand is dwindling and the internal conflict in its major import source — Myanmar — led to Western sanctions and disrupted import shipments. Cambodia, meanwhile, has banned greenfield coal power plants and needs natural gas — a transition fuel — that is cheaper than imported sources.

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