The Hormuz crisis exposed the Philippines’ longstanding vulnerability to energy price shocks. With electricity prices already among the highest in Southeast Asia and a heavy reliance on imported fossil fuels, the country entered the crisis with limited room to absorb further increases in energy costs. As a result, the crisis accelerated decentralized solar adoption without significantly altering the country’s structural dependence on fossil fuels.
Key takeaways:
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The Hormuz crisis accelerated the Philippines’ rooftop solar boom but has not yet changed the country’s fossil-fuel-heavy energy mix. As fuel and electricity prices surged, households and businesses turned to solar to reduce their exposure to volatile energy costs. At the same time, the government relied on coal to manage the immediate supply shock.
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The solar surge has exposed a new set of dependencies. The Philippines relies heavily on Chinese solar panels and faces shortages of qualified installers, limiting how quickly demand can be translated into new capacity.
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Faster permitting and net metering have accelerated solar adoption, but transmission bottlenecks and limited grid capacity constrain further growth.
When the United States and Israel launched strikes on Iran on February 28, 2026, the resulting disruption to shipping through the Strait of Hormuz exposed Southeast Asia’s dependence on imported fossil fuels. Roughly one-fifth of global oil and liquefied natural gas (LNG) trade passes through the strait.
Before the crisis, the Middle East supplied around 60% of the region’s crude oil imports and a third of its natural gas. No Southeast Asian country was more exposed than the Philippines. The country sources roughly 98% of its crude oil from the Gulf, while 97% of its refined petroleum products and 91% of its liquefied petroleum gas (LPG) come from Asian refineries that themselves depend on Gulf feedstock. This dependency turned an external shock into a domestic crisis within weeks.
The consequences quickly reached consumers. At the height of the crisis, fuel prices in Manila more than doubled, diesel surpassing ₱ 114 (€1.57) per liter, equivalent to roughly a sixth of the minimum daily wage of workers in the city. Four days after the crisis began, Philippine President Ferdinand Marcos Jr. sought to calm markets by citing reserves then estimated at 50-60 days and urging citizens to conserve energy. On March 24, Marcos declared a national energy emergency, making the Philippines the first country in the world to do so in response to the war.
The crisis hit a country already exposed to high energy costs. Electricity prices in the Philippines were among the highest in Southeast Asia, at 131% of the global average and 265% of the Asian average. More importantly, the country’s energy vulnerability was structural, not temporary.
Coal accounted for around 58% of the Philippines’ power generation and natural gas for a further 17%, while renewables supplied roughly one-quarter. Hydropower made up the largest renewable source at 10%, while solar and wind each accounted for only around 1-1.5%. Close to half of the coal burned for power generation is imported. On the oil side, the country has a single domestic refiner, Petron. This leaves both the power grid and the transport sector dependent on imports from other Asian refineries. Domestic gas production, concentrated in the aging Malampaya field, was projected to run dry by 2027 without further development. That decline forced LNG imports to begin in 2023. Even though New Phase 4 wells are expected to deliver first gas at the end of 2026, original production continues to fall, leaving the domestic buffer limited.
The result was paradoxical. The declaration of energy emergency did not produce a single policy direction. Instead, it pushed the Philippines in two directions at once: towards more fossil fuels in the short term and towards faster deployment of rooftop solar.
Two responses to the same crisis
The government’s immediate priority was to keep electricity and fuel supplies available. On the day energy emergency was declared, the Energy Secretary Sharon Garin announced that the government would negotiate with coal plant operators to increase output temporarily and hold down electricity prices as LNG import costs spiked. Given that coal already supplied 58% of the country’s power, one of the highest shares in the region, the immediate response to a fossil-fuel shock was to lean further into a different fossil fuel rather than away from it. Indonesia, the Philippines’ main coal supplier, confirmed it would not restrict the Philippines’ additional orders.
At the same time, the emergency triggered the opposite policy response. Within a week, the Department of Energy began accelerating rooftop solar reforms. Under the declaration of national emergency, new rules shortened the process for connecting solar systems to the grid, eventually cutting net metering—a system that allows solar owners to receive credits for electricity they send to the grid—processing time from 45 to 10 days, alongside issuing faster permits at the local government level. Confronted with the crisis it could not solve through fossil fuels alone, the state reached for every option available, including the one that reduced fossil-fuel dependence.
The case for acceleration
The Philippine solar boom did not begin with the Hormuz crisis. Net metering had been expanding gradually for years. What changed was the speed of adoption.
Wholesale electricity prices spiked by as much as 58% in March, prompting a temporary suspension of the Wholesale Electricity Spot Market. These increases passed directly through Meralco, the sole power distributor for Metro Manila, under its regulated pass-through mechanism. Higher electricity and fuel prices created a strong incentive for households and small businesses to consider their own generation capacity.
The strongest evidence for a genuine break in trend lies in the pace of change. Between 2015 and 2024, the Philippines’ net metering program added cumulatively about 141 megawatts of capacity nationwide. Registered net metering participation, however, doubled in 2026, from 15,000 systems in early 2026 to 23,684 systems, amounting to 232 megawatts, by the end of June 2026.
Substituting one dependency for another
The rapid expansion of solar has nevertheless exposed another vulnerability: the Philippines controls little of the value chain behind its new energy technology.
China supplies about 98% of the Philippines’ solar panel imports, and the Philippines has become China’s second largest overseas solar market after the Netherlands. The shock did not produce a structural pivot away from fossil fuels, and the solar surge simultaneously revealed its own limits. Unlike the EU and the US, the Philippines has not imposed significant trade barriers on Chinese solar panels, which ultimately allowed households to respond right away. This openness has, however, left the country’s own solar manufacturing capacity stuck near the bottom of the value chain, capturing only a marginal share of the industry’s profits even as several assembly facilities have opened in the country’s economic zones. Installers have also struggled to keep pace with demand, as a limited pool of certified technicians has constrained further expansion.
The fossil-fuel side of the ledger has not moved at all. Coal still supplies most of the country’s power, the government negotiated for additional coal supply during the emergency itself, and the structural dependencies that produced the crisis (a single refiner, a declining domestic gas field and import-heavy coal supply) remain as they were in February.
The largest constraint may lie beyond the rooftop
The Philippines can install solar panels much faster than it can expand the transmission infrastructure needed to accommodate large volumes of new generation. Under the National Grid Corporation of the Philippines’ current build-out schedule, only 28% of committed projects have entered commercial operation, and roughly 30% of projects scheduled to come online between 2025 and 2027 lack the mandatory System Impact Studies, which determine whether the grid can absorb them.
The constraint is most prominent in Luzon, where most new solar capacity is being developed. When regulators approved the 240-megawatt Binalonan Solar project in March 2026, they simultaneously warned that the plant could face curtailment and dispatch prioritization until the Cabanatuan-Sampaloc-Nagsaag transmission line is upgraded, including a new Sampaloc 230kV substation not expected to be completed before June 2034.
This illustrates a distinction between the two responses to the Hormuz crisis. The decentralized part of the transition can move quickly because households can make decisions independently. The utility-scale part depends on infrastructure, regulation and investment that take years to develop.
The government’s Competitive Renewable Energy Zones (CREZ) framework was designed to address this problem. It prioritizes transmission investments in areas of high renewable potential, and aims to reduce barriers such as transmission access, curtailment, and land permitting. Its effectiveness depends on whether the transmission investment can keep pace with generation development.
Acceleration without structural change
The Hormuz crisis has genuinely accelerated the Philippines’ solar transition. However, it has not produced a broader shift away from fossil fuels. Coal continues to dominate the power mix; structural dependencies that made the crisis consequential for the Philippines remain largely unchanged, and transmission bottlenecks still limit solar expansion beyond rooftop installations.
Furthermore, the acceleration has not been distributionally neutral. Solar panel adoption has concentrated among middle-class households and businesses with enough capital to absorb upfront costs in exchange for a shorter payback period as electricity prices rose. Poorer households had no comparable mechanism through which to offset higher prices and simply absorbed them.
Whether this momentum survives beyond the crisis will therefore depend less on household demand and more on whether the institutional changes introduced under the state of emergency become permanent. Accelerated permitting, the higher net metering cap, and CREZ-driven transmission investment could provide the foundation for sustained growth if they are retained once oil prices normalize.
The Philippines’ experience suggests that an energy shock can accelerate a green transition without necessarily transforming it. The Hormuz crisis made solar more attractive; whether it becomes structural will depend on whether the reforms and infrastructure needed to support it survive the crisis itself.
