Developers push diesel phaseout to cut bills

Solar power developers are pushing for the accelerated phaseout of diesel-fired power plants in off-grid islands to lower electricity bills and ease the government’s growing missionary electrification subsidy burden, which could reach P44.2 billion in 2027.

The Asian Photovoltaic Industry Association (APVIA) said Wednesday replacing diesel generation with solar and battery storage systems could substantially reduce fuel expenses and lower the Universal Charge for Missionary Electrification (UCME) collected from grid-connected electricity consumers to subsidize power generation in remote areas.

The group is supporting the Department of Energy’s (DOE) planned Green Energy Auction for off-grid islands in 2027, which seeks to attract private sector investments in renewable energy projects and reduce dependence on costly diesel generation.

The initial auction will cover 20 major islands served by the National Power Corp. (NPC), with combined annual electricity demand of approximately 367,000 megawatt-hours.

According to APVIA, the DOE estimates that deploying solar and battery storage systems across all NPC-served islands could reduce the UCME by half.

“Every peso spent hauling diesel to an island is a peso that comes back to Filipino households through the UCME, or to the government through the budget,” APVIA’s Tetchi Capellan said. “Solar and battery break that cycle.”

APVIA made the recommendation following a technical workshop with the DOE, NPC and Philippine Solar and Storage Energy Alliance (PSSEA), which examined financing and regulatory measures needed to accelerate renewable energy deployment in off-grid communities.

Citing DOE data, the group said electricity generation in NPC-served islands costs an average of P18 per kilowatt-hour (kWh), compared with P5 to P8 per kWh on the main grids.

In some remote islands, generation costs reach P62 per kWh due to additional fuel transportation expenses.

APVIA also cited a Philippine study showing that optimized solar-battery-diesel hybrid systems could reduce electricity generation costs by approximately 20 percent compared with diesel-only facilities.

Meanwhile, the Energy Regulatory Commission authorized P30.77 billion in missionary electrification subsidies for 2026, up from approximately P7 billion in 2020.

NPC is seeking P44.2 billion for 2027, equivalent to P0.4405 per kWh, which could raise the monthly UCME contribution of a household consuming 200 kWh to about P88.

The UCME increased by approximately 23 percent in October to P0.3397 per kWh from P0.2763 per kWh, bringing the monthly contribution of a household consuming 200 kWh to P67.94.

The national government has also allocated nearly P2 billion in direct subsidies to NPC under the 2026 budget.