Renewable Energy in the Philippines – Current State and Future Roadmap
23 February 2021 – by Viktor Tachev
Similar to many countries in the South East Asia region, the Philippines faces the challenge of a rapidly growing population and rising energy demand. The difference, however, is in its response. Today, the Philippines is considered among the world leaders in renewable energy, with over 47% of the total final energy consumption coming from green sources.
What are the Renewable Energy Resources in the Philippines
The Philippines, alongside Indonesia, are the countries with the highest concentration of geothermal power generation in Asia. It has the world’s third-largest installed geothermal power capacity with a total of 1,918 MW as of June 2018.
As per REN21’s report, in 2018, the Philippines had 7.1 GW of renewable energy capacity, with 4.3 GW attributed to hydropower and 896 MW to solar PV. The latter is a field that is expected to see notable growth in the upcoming years, thanks to a significant pipeline of projects approved or currently under development. By 2022, the country aims at an estimated 3 GW of installed solar PV capacity. The wind power capacity in 2018 was 427 MW. Despite having an estimated potential of 76 GW, the Government’s plans are targeting just 2.3 GW by 2030.
Philippines’s Renewable Energy Potential
- Increase geothermal capacity by 75% (target – 2027)
- Increase hydropower capacity by 160% (target – 2023)
- Deliver additional 277 MW biomass power capacity (achieved in 2015)
- Add additional 2,345 MW wind power capacity (target – 2022)
- Develop an ocean energy facility (target – 2025)
But according to the WWF-Philippines’ Building Momentum for Low Carbon Development study, an even more ambitious scenario of 100% renewable energy is feasible. The reason for optimism is rooted in the country’s vast potential. The report suggests that the Philippines can further develop 1,200 MW geothermal, 2,308 MW hydropower, 235 MW biomass, and 7,404 MW wind generation capacity before 2030.
Advantages and Challenges in front of the Renewable Energy Sources Transition
The Philippines’ ambitious renewable energy transition will guarantee energy security and self-sufficiency, accompanied by reduced reliance on imports. It will boost the local economic development and promote a favorable investment climate. Naturally, this will lead to more jobs and will reduce the health and welfare costs.
Currently, the country has some of the most lucrative government incentives for rural electrification. At least on paper, these should turn it into an attractive opportunity for private investments. However, private companies are yet to show a strong interest in energy access initiatives.
Access to financing remains a massive problem. Currently, only a few domestic banks support renewable energy projects in the region. Furthermore, recent years saw significant downturns in investments. In 2019, they were down 77% to USD $300m.
According to the Government, the main challenges include high upfront and technology costs, inaccessible financing and lack of competitiveness in the market.
The Enablers for the Philippines’s Renewable Energy Transition
To overcome those challenges and capitalize on the opportunities, the Government has developed a framework of fiscal and non-fiscal incentives. Among these are an income tax holiday, a duty-free importation of equipment and VAT-zero rating, tax credits on domestic capital equipment, tax exemption on carbon credits, priority connection to the grid, Green Energy Option Program (GEOP), and more.
The Philippines discontinued its Feed in tariff (FIT) program and instead switched to reverse auctions. The goal is to ensure better support for large-scale solar projects. This strategy resulted in more competitive costs for solar and wind generation at a grid-parity level. Currently, the country has the lowest bid within the region (USD $0.044 per 50 MW solar plant).
To accelerate renewables adoption, the country is also looking for alternative financing models. These include crowdfunding through platforms like Kiva, which has helped raise over $250 000 for renewable energy projects development in the Philippines and India.
The Department of Energy (DoE)
In 2018, the Department of Energy issued guidelines for the establishment of a Renewable Energy Trust Fund. Its goal is to accelerate the renewable energy transition through R&D. The scheme is funded through various sources, including grants, donations, emission fees, and contributions.
The Department of Energy also has other on-going initiatives to support the adoption of smart grid technologies across the country’s islands. Currently, the Philippines, alongside Myanmar, are the largest markets for off-grid solar in Southeast Asia. The countries have sold between 30,000 to 40,000 units only in the second half of 2019.
Local and international initiatives
Тhe country’s goal is to achieve mass electrification by 2022. The main enablers for this include international donor funding for solar home systems, grants for electricity cooperatives, private sector incentives for projects in collaboration with local communities, and more.
The Philippines relies on solid international support. Currently, it runs the “Access to Sustainable Energy Project” in cooperation with the World Bank ($23m). Recently, it concluded the “Market Transformation through Introduction of Energy-Efficient Electric Vehicles Project” in partnership with the Asian Development Bank ($405m).
The country also focuses on promoting renewables within specific sectors. With the Renewable Energy Program for the Agriculture and Fishery Sector (REP-AFS) introduced in 2020, it aims to promote solar, wind, hydro, small-scale geothermal, and biomass for fuel and power generation within the agricultural and fishery sectors.
How Renewable Energy Transition Affects the Coal Industry in the Philippines
The country has minimal fossil fuel resources. That is why, over the past decades, the Philippines has been heavily dependent on oil and coal imports for power generation.
This means it is highly exposed to oil price volatility and supply constraints. Besides, the continued dependence on imported fuel has made Philippine electricity rates among the highest in Asia.
The strive for self-sufficiency, combined with the adverse impact of global warming (rising sea levels and extreme weather events), have determined the faith of the country’s fossil fuels industry.