PhilStar 68, The new ES, the AI effect of OSW and GEA

The new ES, the AI effect of OSW and GEA

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star

November 20, 2025 | 11:00am

https://www.philstar.com/business/2025/11/20/2488453/new-es-ai-effect-osw-and-gea

 

The government economic team saw major changes in leadership this week.

 

First, Department of Finance (DOF) Secretary Ralph Recto was promoted by President Marcos to become the new Executive Secretary (ES). Second, Special Assistant to the President for Investments and Economic Affairs Frederick Go became the new DOF Secretary. Third, Budget Secretary Amenah Pangandaman has resigned and was replaced by Undersecretary Rolando Toledo.

 

The new ES has the widest government experience among the Cabinet, as a former Senator, former Congressman and head of DOF who is in charge of raising the bulk of revenues for the entire government. Being competent and very experienced in running the economy attracts detractors.

 

Among the consistent high profile critics of Secretary Recto is a physician who contributed to the horrible lockdown dictatorship and medical tyranny of 2020-2021, Dr. Tony Leachon, a former special adviser to the National Task Force against COVID, the implementing arm of the Inter-Agency Task Force. He resigned from the body in June 2020 and became a public figure advocating for continued lockdown and more vaccination.

 

In 2020, the Philippines suffered a 9.5 percent GDP contraction, the worst economic contraction in Asia, the worst in Philippine economic history since post WW2 or the past 75 years.  The Philippines’ GDP size at constant 2018 prices were: P19.38 trillion in 2019, shrank to P17.54 trillion in 2020, slightly increased to P18.54 trillion in 2021, and recovered to 2019 level of P19.95 trillion in 2022.

 

The country saw nearly P3 trillion of business and economic losses due to the prolonged lockdown and medical tyranny of two years. And among the architects of such economic sabotage is getting noisy attacking a competent government official who wants faster economic growth and not contraction. Pity.

 

The economic team also includes DEPDev and the BSP and among their concerns aside from faster GDP growth, are low unemployment, low inflation and price stabilization.

 

Electricity prices, electricity abundance or scarcity is a big contributor to overall inflation. When there are frequent blackouts, the poor use candles and the rich households and corporations use gen-sets running on diesel, which is costly both in capex and opex. The cost of running gensets in manufacturing, in restaurants and hotels, in shops and malls, is passed on to the public, which contributes to overall inflation.

 

In recent years, the Department of Energy (DOE) has conducted various Green Energy Auction programs to attract more renewables, especially solar and wind power investments. There have been GEA 1 to GEA 5 for offshore wind (OSW).

 

The current subsidy scheme for renewables is via feed-in-tariff allowance (FIT-All). Wind, solar, biomass, run-of-river hydro are given a guaranteed fixed price for 20 years. The difference between such guaranteed prices and the average Wholesale Electricity Spot Market (WESM) multiplied by RE generation constitutes the FIT-All subsidy that must be collected from all on-grid consumers nationwide.

 

The FIT system allocation is largely filled up and more wind and solar projects are coming in via GEA. So by 2026 or 2027, the government Transmission Company (Transco) will compute that GEA Allowance (GEA-All), submit to ERC for review and approval, then all electricity consumers will be slapped with GEA-All on top of FIT-All, to be paid to RE companies, old and new.

 

The DOE produced their own estimates of GEA-All starting 2026. If WESM prices are low like P2/kwh, P3/kwh, P4/kwh, GEA-All in 2026 in centavos per kwh would be 20, 15 and 10 respectively. Then the GEA-All in 2027, still in centavos per kwh would be 45, 30, 15 respectively.

 

GEA-All in 2030 per kwh would be P1.12, P0.88 and P0.64 respectively. GEA-All in 2032 would be P1.09, P0.87 and P0.65.

 

I made my own rough computations as more OSW are added — 3,300 MW by 2030, the GEA-All per kwh would be P0.04 in 2026, P0.20 in 2027, P0.34 in 2028, P0.47 in 2029, P1.57 in 2030, P1.68 in 2031 and P1.63 in 2032.

 

OSW are expensive, at least P12 to P15/kwh, according to one ADB study. The lower the WESM prices, the higher the GEA-All because of the high difference between guaranteed high price of GEA vs WESM price.

 

As more must dispatch intermittent RE generation goes into the grid, it distorts WESM prices, eliminating the much needed price signals for new capacities for mid-merit and base load. It is a vicious cycle. As the merit order moves closer to the demand line, WESM prices become optically low. But GEA-All and FIT-All will be adjusted upward to cover the contract for difference with WESM prices.

 

Add to this is the rising cost of increasing the reserve requirements via more ancillary services that must be contracted by the National Grid Corp. of the Philippines.

 

So OSW and GEA programs are big risks in affordability and inflation (AI) in the Philippine economy. I believe that President Marcos and ES Recto should rethink if not stop the continuing GEA program and their AI effect on the economy.

 

Meanwhile, I saw last week the press statement of Meralco PowerGen Corp. (MGEN) through its thermal subsidiary Panay Energy Development Corp. (PEDC), in collaboration with the Iloilo City Government, and with the support of One Meralco Foundation that they have illuminated the La Paz Football Ground in Iloilo City.

 

I have been to La Paz plaza several times. It is walking distance from the house of my in-laws in La Paz. The area is wide and spacious but lacks good lighting at night. Now MGEN and PEDC have provided an internationally compliant football lighting system for a plaza- based facility. Good move by MGEN.