For years, the solution to the Philippines’ electricity problems has often seemed straightforward: build more power plants.
When electricity demand rises and the grid experiences yellow or red alerts, additional generating capacity appears to be the obvious answer. More supply should provide a larger reserve margin and reduce the risk of shortages.
But Mike Thomas, co-founder of The Lantau Group, believes the Philippine power market may be facing a different problem.
During the AmCham Annual 9th Energy Forum: Powering Through the 2026 Energy Disruption: Strategies for Resilience, Recovery, and Transition, held on August 13, 2026, Thomas argued that the country may already have considerable generating capacity. The problem is that existing plants may not be operating as flexibly as the electricity market requires.
He summarized the situation in one striking observation:
“Too much capacity, acting with too little flexibility.”
If Thomas is right, the implications are significant. Instead of focusing only on building more power plants, the Philippines may also need to examine whether it can get more value from the generating assets it already has.
More Capacity, But Little Demand Growth
Thomas arrived at this question after examining unusual movements in Philippine electricity prices.
According to his presentation, there were about 564 megawatts to 617 megawatts of additional gas-fired must-run capacity in 2025 compared with 2024, even though demand did not increase correspondingly.
Gas plants are particularly relevant because they are generally capable of operating more flexibly than traditional baseload generation.
“Gas plants were supposed to be flexible,” Thomas said.
Flexibility means a generating plant can adjust its output as conditions in the electricity system change. A plant may increase production when demand rises, reduce output when cheaper generation becomes available, or shut down and restart when economics justify it.
This capability becomes increasingly valuable as more renewable energy enters the system.
Solar production, for example, rises during daylight hours and disappears after sunset. Wind generation can also change depending on weather conditions. The rest of the power system must therefore become more responsive to compensate for these variations.
Thomas’ concern is that some Philippine generating assets may not be responding to market conditions as dynamically as they could.
What If Existing Gas Plants Operated Differently?
To examine the question, Thomas and The Lantau Group conducted a series of simulations.
“We did 75 runs,” Thomas said, explaining that the purpose was not necessarily to produce a single correct forecast but to understand how changes in the system affected the outcome.
Among the scenarios, the model gradually increased the amount of dispatch flexibility available from gas plants.
The first change was relatively modest: just 250 megawatts.
Thomas said the effect was already visible.
“We’ve added 250 megawatts of gas flexibility, and the prices start to separate from the base case,” he said.
“Just 250 megawatts of more flexible gas operation.”
He explained that this could involve more cycling, adjustments in minimum load, or shutting down one generating unit while increasing production from another.
“There’s different ways that you can do this that we’ve seen anywhere else in the world,” Thomas said. “And it would start firming up the prices.”
The simulations then increased the amount of flexibility further.
When the model moved from 250 megawatts to 500 megawatts, Thomas said the effect became more pronounced, particularly during the third quarter, when flexibility was more valuable.
The important point is that none of these scenarios initially required the construction of another large power station.
They involved changing how existing generating assets operated.
Coal Could Also Play a Role
Thomas also tested what would happen if part of the country’s coal fleet operated more flexibly.
He acknowledged that this would be more difficult. Coal plants generally face greater technical and economic costs when they repeatedly increase or decrease output. They were traditionally designed to operate more continuously.
“We’re more skeptical there,” Thomas said.
Nevertheless, he suggested that obtaining around 500 megawatts or more of additional dispatch flexibility from the coal fleet did not appear unreasonable.
In another scenario, the model tested 1,000 megawatts of coal flexibility.
Thomas said the result brought prices toward a more familiar seasonal range that could provide a more workable balance between investors and electricity users.
This does not mean coal should replace renewable energy or that the Philippines should build more coal plants.
Rather, the analysis raises a different question: while existing thermal plants remain part of the electricity system, can they operate in ways that better complement renewable generation?
Flexibility Can Create Room for More Solar
Perhaps the most counterintuitive result of Thomas’ modeling was what happened to renewable energy.
Greater flexibility from conventional plants did not necessarily crowd out renewables. It could actually create room for more.
Thomas said that under one modeled scenario, the system could accommodate another 250 megawatts of solar by 2028 without another major intervention.
“There’s room for 250 more megawatts of solar without doing anything else,” he said.
The reason comes down to the economics of flexibility.
Solar itself is inexpensive once a project has been built, but its output depends on sunlight. If every additional solar project also requires dedicated battery storage to manage its variability, the effective cost of adding solar increases.
But if flexibility already exists elsewhere in the electricity system, some of that variability can be absorbed without immediately requiring an equivalent amount of new storage.
Thomas explained that solar can use flexibility already available elsewhere in the system.
“If you have to add the battery cost to the solar, it costs more,” he said.
That means improving existing generation could indirectly make it easier to add more renewable capacity.
Why Aren’t Plants More Flexible?
The obvious question is why power plants would not already operate this way if flexibility has economic value.
Thomas did not claim to have a definitive answer.
Instead, he identified several possible explanations, including contractual arrangements, market rules, technical costs and operating practices.
Long-term service agreements and equipment warranties may restrict how plants operate. Generators may also need time to learn how much additional cycling will cost or to renegotiate existing agreements.
“This never happens overnight,” Thomas said.
“People learn how much it will cost to operate their units differently. They may have warranties. They may have agreements. It will take some time to renegotiate.”
The issue may not simply be that generators are unwilling to operate differently. Contracts and technical limitations could make flexibility difficult or expensive.
Build More, or Use What We Have Better?
The Philippines will still need new power investments as the economy expands and electricity demand grows. Renewable energy, battery storage, transmission infrastructure and other generating capacity will remain important.
Thomas’ analysis does not argue otherwise.
What it challenges is the assumption that every reliability problem must first be solved by constructing more generating capacity.
There may be considerable value hidden inside the existing system.
“The prize is pretty big,” Thomas said. “The prize is actually really big.”
If existing gas and even coal plants can respond more efficiently to changing market conditions, the benefits could extend beyond those generators. Thomas’ modeling suggests that greater flexibility could improve price signals and create a more attractive environment for batteries, solar and other investments.
The Philippines therefore faces two separate questions. How much additional electricity capacity does the country need? And before billions of pesos are committed to building it, how much more can be obtained from the power plants that are already here?
