Philippine President Ferdinand Marcos Jr. declared a state of "national energy emergency" on March 24, citing imminent risks to fuel supply and energy stability from the escalating Middle East conflict, as the government ordered a push to coal-fired power generation to contain electricity costs.

The executive order, issued just hours after Energy Secretary Sharon Garin announced plans to boost coal-fired plant output, authorizes the Department of Energy to make advance payments of up to 15% to secure fuel contracts and take direct action against hoarding or profiteering.

The declaration makes the Philippines the first country to formally invoke emergency powers in response to energy disruptions triggered by the U.S.-Israel war with Iran, which has severely restricted shipping through the Strait of Hormuz and driven liquefied natural gas (LNG) prices to their highest levels since 2022.

Coal steps in as LNG costs soar

With LNG prices more than doubling after Qatar, which supplies about a fifth of global LNG, halted production, the Philippines has moved to temporarily scale back gas-fired generation in favor of coal. Coal accounts for roughly 60% of the country's electricity mix, while LNG contributes around 15%.

Officials have reportedly talked to the coal-powered plants, checking how much generation they can increase, signaling the shift as a "temporary measure" that could begin as early as April 1.

President Marcos separately indicated he wants to expand the country's power plant fuel stockpiles from the current 30-day buffer to two to three months, acknowledging the conflict could persist longer than initially anticipated.

"We have already secured the Philippines' stockpiles abroad, and we have given permission to bring them back so that we can use them to extend our stockpile from 30 days up to two to three months," Marcos said in an interview earlier this week.

The government had signaled earlier this month that it would seek emergency powers to regulate electricity prices in one of Asia's few unregulated power markets. Power tariffs in the Philippines are already the second-highest in the region, behind Singapore.

"With the exaggerated increase in fuel transportation costs, there's a multiplier effect," Garin said, adding that some market rules may be temporarily suspended to provide relief.

Indonesia assurance & unclear outlook

The Philippines, which has Southeast Asia's most coal-dependent power grid, relies on imports for the vast majority of its fuel needs, and it has reportedly secured assurances from its primary coal supplier that shipments will continue uninterrupted.

Indonesia, the world's largest thermal coal exporter and the Philippines' leading coal source, has assured the Philippines of a steady coal supply, according to a March 20 report from Reuters, citing statements from Garin. The Guardian reported on March 25 that Garin confirmed "no restriction on their import of coal from Indonesia as of today".

However, the assurance coincides with the Southeast Asian nations grappling with export curbs, adding potential supply pressure and risks.

Indonesia has said it will prioritize coal output for domestic needs, since some power plants hold a low range of coal stockpiles, amid delays in RKAB mining quota approvals from the energy authority. While President Prabowo Subianto has signaled plans to boost coal production, it remains unclear when a meaningful supply increase will materialize. Additionally, Vietnam and Thailand have also imposed restrictions on certain outbound shipments.

Kpler's cargo-tracking data has yet to show any signs of an import surge in the country post-Iran conflict outbreak in late February. The predicted thermal coal imports by the Philippines stood at 2.65 million tonnes in March, marginally down from 2.70 million tonnes in February and marking the lowest monthly level in a year. The four-week moving average further headed south in the latest weeks, data showed.

Marcos has emphasized that the coal pivot is temporary, and his administration remains committed to expanding renewable energy's share in the power mix. However, the reversal of last year's first annual decline in coal-fired output in nearly two decades highlights the region's ongoing struggle with LNG price volatility and supply disruptions.

A natural gas discovery announced in January near the rapidly depleting Malampaya offshore field, which supplies 35-40% of power to the main island of Luzon, offers some long-term hope, but analysts caution it will take years to develop.