Renewable Energy in the Philippines – Current State and Future Roadmap
Photo by FreezingTime from Getty Images
12 May 2022 – by Viktor Tachev
Like other Southeast Asia countries, the Philippines faces the challenge of a rapidly growing population and growing energy demand. Yet, where it differs and stands out is in its response. Compared to its neighbours, the Philippines is considered a global leader in renewable energy. Over 47% of its total energy use comes from green sources.
The Current Renewable Energy Situation in the Philippines 2022
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 at 1,918 megawatts (MW) – with Indonesia coming a close second and the United States coming out on top.
The REN21 report identified 7.1 giga-watts (GW) of renewable energy capacity in the Philippines. Over half, or 4.3 GW, came from hydropower, with a further 896 MW sourced from solar energy. In the coming years, solar demand is expected to shoot up dramatically. This is thanks to a significant pipeline of projects approved or under development. By 2022, solar energy in the Philippines is expected to rise to 3 GW.
Solar energy’s renewable energy counterpart, wind, only makes up 427 MW. Despite having an estimated potential of up to 76 GW, the current administration targets just 2.3 GW by 2030.
Renewable Energy Potential in the Philippines
In 2011, the country adopted an ambitious plan aiming for 15.3 GW of renewable power capacity by 2030 and over 20 GW by 2040. To achieve this lofty goal, the National Renewable Energy Program (NREP) laid out a five-step plan to reach all targets by 2027.
- Raise geothermal capacity by 75%
- Expand hydropower capacity by 160%
- Add an additional 277 MW of biomass power capacity
- Extend an additional 2,345 MW of wind power capacity
- Develop an ocean energy facility
However, according to the WWF-Philippines Building Momentum for Low Carbon Development study, an even more ambitious scenario of 100% renewable energy is feasible. The reasons for optimism are rooted in the renewable energy potential in the Philippines. The report shows that the Philippines could aim higher. This would further add 1,200 MW of geothermal, 2,308 MW of hydropower, 235 MW of biomass, and 7,404 MW of wind, all before 2030.
Advantages and Challenges for the Renewable Energy Transition in the Phillipines
The Philippines’ ambitious renewable energy transition would guarantee energy security and self-sufficiency, accompanied by reduced reliance on imports. It would also boost local economic development and promote a favourable investment climate. Naturally, this would result in more jobs and reduce health and welfare costs.
Currently, the country has some of the most lucrative government incentives for rural electrification – at least on paper. These should transform into attractive opportunities for private investment. However, private companies are yet to show considerable interest in energy access initiatives.
Access to financing remains a massive problem. Today, only a few domestic banks support renewable energy projects in the region. Furthermore, in recent years there have been significant decreases in investment. For example, in 2019, they were down 77% by USD $300 million.
An International Renewable Energy Agency presentation showed that some of the main challenges revolve around high upfront and technology costs, inaccessible financing and a lack of competitiveness in the market.
The Enablers for the Philippines’s Renewable Energy Transition
Despite the challenges, there are opportunities to capitalise on renewable energy in the Philippines. For instance, 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, and the Green Energy Option Program (GEOP).
The Philippines discontinued its feed-in-tariff (FIT) programme and instead switched to reverse auctions. The goal of this is to ensure better support for large-scale solar energy projects. This strategy resulted in more competitive solar and wind generation costs at a grid level. Currently, the country has the lowest bid within the region – USD $0.044 per 50 MW solar plant.
Alternative financing models are sorely needed to accelerate renewables adoption. These include crowdfunding through platforms like Kiva, which has helped raise over USD $250,000 for renewable energy projects development in the Philippines and India.
The Department of Energy
In 2018, the Department of Energy (DoE) issued guidelines establishing a “Renewable Energy Trust Fund“. Its goal is to accelerate the renewable energy transition through research and development. The scheme is funded through several sources, including grants, donations, emission fees and contributions.
The DoE also has other ongoing 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 energy in Southeast Asia. They have sold between 30,000 to 40,000 units as of the second half of 2019.
Local and International Initiatives
Collectively, the country’s goal is to achieve mass electrification by 2022, with international support playing a pivotal role. As a result, international donors for solar home systems, grants for electricity cooperatives, and private sector incentives for projects collaborating with local communities are vital.
Currently, it runs the “Access to Sustainable Energy Project” in cooperation with the World Bank, a USD $ 23 million project. Recently, it concluded the “Market Transformation through Introduction of Energy-Efficient Electric Vehicles Project” in partnership with the Asian Development Bank – a USD $405 million project.
Additionally, there is a focus on promoting renewables within specific sectors. The Renewable Energy Program for the Agriculture and Fishery Sector (REP-AFS), introduced in 2020, aims to promote solar, wind, hydro, small-scale geothermal, and biomass for fuel and power generation within those industries.
How Renewable Energy in the Philippines Affects the Coal Industry
With minimum fossil fuel resources, the Philippines has been heavily dependent on oil and coal imports for power generation. Consequently, this subjects the country to price volatility and supply constraints. Due to this continued dependence on foreign fuel, the Philippines now has some of Southeast Asia’s highest electricity costs.
Importantly, however, the country needs to continue to strive towards moving away from import-dependence to one of domestic power production sourced from its vast renewable energy potential. Over time, this shifting energy situation in the Philippines, if sustained, will ultimately eat into fossil fuel’s dominance and dramatically reduce everyday energy costs across the island nation.
by Viktor Tachev
Viktor has years of experience in financial markets and energy finance, working as a marketing consultant and content creator for leading institutions, NGOs, and tech startups. He is a regular contributor to knowledge hubs and magazines, tackling the latest trends in sustainability and green energy.Read more