El Niño could squeeze power supply, raise rates

El Niño could tighten the country’s power supply and push electricity prices higher as hotter weather drives up demand while weighing on the output of several power generation technologies.

Speaking to reporters at the sidelines of the ASEAN Business Energy Forum on Tuesday, Energy Secretary Sharon S. Garin said the Department of Energy (DOE) is already preparing for the weather phenomenon, which is expected to emerge in the last quarter of the year, persist into the first quarter of 2027, and potentially extend through the summer months.

“The hotter the climate is, the higher the demand, basically. This is something we need to prepare for and also try to do our education campaign on energy savings or demand management,” Garin said.

The pressure could come from both sides of the power market, with electricity consumption rising as households and businesses use more cooling equipment while extreme heat and dry conditions constrain generation.

Garin said hydroelectric facilities could be hit by lower water levels as rivers dry up, while coal-fired power plants could suffer efficiency losses and outages under extreme heat.

“I don’t want to be a doomsdayer, but I just want to be very transparent about this. When it’s very hot, our rivers are dry, so that’s (affecting) hydro plants already. Our coal power plants, not only are we over-extending their production, but also the heat affects their efficiency,” she said.

“And many times, we have seen this in previous years; it goes into an outage. And biomass, the same thing, biomass is also affected.”

Even solar facilities could see their performance affected when temperatures become excessively high, Garin said.

“Of course, solar, even if you think that solar automatically produces more when it’s hotter. If it’s too hot, then there is also a negative impact on that. It will affect our supply. And DOE is preparing to cover for that based on the other options that we have,” she said.

A tighter supply-demand balance could also spill over into the Wholesale Electricity Spot Market (WESM), where electricity prices respond to available supply and demand.

Asked whether consumers could face higher electricity prices, Garin said: “It’s possible because the demand-supply relationship always affects the market, on WESM. So it might affect that.”

Earlier this week, Science and Technology Secretary Renato Solidum Jr. said all provinces in the Philippines could experience dry conditions or drought by the end of March 2027 due to El Niño.

As such, the DOE said preparations are already underway on the domestic front, including assessments covering disaster preparedness and energy resilience as the government braces for potentially hotter and drier conditions.

To prevent market abuse should supply tighten, the Energy chief said it is coordinating with the Energy Regulatory Commission (ERC).

“I’ve talked to the ERC and am trying to find ways to do something about the market so that there is no abuse on the part of the one selling electricity in the market,” Garin said.

The DOE is also banking on energy conservation to temper demand, with Garin saying simple measures by consumers could help reduce electricity consumption by 10 percent to 20 percent.

“Our appeal is for the public to be aware of this so that we can already start having the mindset of energy savings. This is one way we can help by turning off our lights, pulling out the plugs for appliances that we don’t need, and that would help us at least 10 to 20 percent reduction of our demand,” Garin said.

“I don’t know if we are over-preparing, but it’s better to be over-prepared for this problem.”