renewable energy Philippines

Renewable Energy Development Crucial to Powering the Philippines

  • Current plans call for renewable energy in the Philippines to make up 35 percent of the power generation mix by 2030 and 50 percent by 2040
  • BloombergNEF’s Climatescope 2024 report named the Philippines as the second most attractive emerging market for renewable energy investments
  • The Philippine Department of Energy allows for 100 percent foreign ownership of renewable energy projects

Efforts to incorporate renewables into the energy mix in the Philippines are picking up steam. Aggressive clean energy targets and increasing liberalisation regarding foreign investment are among the factors that make this one of Asia’s most promising markets. Asian Insiders Philippines Partner Germain Thomas provides an overview of the current situation and the opportunities that exist for overseas entities. 

Renewables are vital for the Philippines if the country is to decarbonise the domestic economy and reach current emission reduction targets. The Philippine Energy Plan 2023-2050 calls for renewable energy to make up 35 percent of the power generation mix by 2030 and 50 percent by 2040.

This will include scaling up offshore wind, solar and hydro projects. The country is also exploring more large-scale geothermal developments as well as how hydrogen can be incorporated into the clean energy transition. Additionally, energy efficiency technologies are expected to be in high demand.

Presently, almost 60 percent of the country’s overall carbon emissions come from power generation with coal and oil being the two largest sources. The Department of Energy (DOE) has placed a moratorium on new coal power projects to support green energy transition efforts.

There is a sense of urgency to make progress. Peak energy demand is projected to increase from 16.5 megawatts (MW) in 2023 to 68.4 MW by 2050. Tapping into renewables will allow the country to meet needs while keeping decarbonisation efforts on track.

Interestingly, the Philippines ranked as the second most attractive emerging market for renewable energy investments, according to BloombergNEF’s Climatescope 2024 report. A combination of opportunities, targets and incentives was highlighted as the reason why.

Offshore wind has enormous potential

With more than 7,500 islands and 17 thousand kilometres of coastline, offshore wind could have the most significant impact as it relates to renewables in the Philippines. The country boasts a technical offshore wind potential of 178 GW.

The DOE has approved more than 60 GW of offshore wind power applications. Additionally, the 5th Round of the Green Energy Auction will focus solely on offshore wind projects. It is tentatively scheduled to occur in the third quarter of this year.

A lot of activity can currently be found in the Camarines Sur province on Luzon Island. A total of 16 projects across the region’s coastline have received government approval. It is here where a Copenhagen Infrastructure Partners (CIP) subsidiary is building the largest offshore wind farm in the Philippines. The firm is working on another development in Luzon and one on Samar Island as well.

Other clean energy options

Offshore wind will be a large part of the Philippines’ energy transition, but it is not the only source utilised. Geothermal, solar, hydropower and onshore wind boast a lot of potential. In addition to meeting emissions targets, these can assist efforts to ensure rural areas or locations where infrastructure development remains limited have access to stable power.  

Given the Philippines’ location along the Ring of Fire, it should come as no surprise to learn it is among the largest geothermal energy producers globally. This accounts for almost 15 percent of power in the country. Yet, significant room remains for growth with the government looking to double installed capacity.  

Hydropower is another source that has room for growth. In particular, smaller hydroelectric facilities connecting to microgrids are being leveraged to serve rural areas which otherwise rely on polluting sources. There are 24 hydroelectric plants in the Philippines currently generating more than 10 MW of electricity.

In terms of solar, a record high capacity was installed in 2024. This total exceeded the combined amount to come online during the previous three years. Given space constraints in the Philippines, rooftop solar and floating solar are both of interest.

Finally, the country has created a Hydrogen and Fusion Energy Roadmap to see how hydrogen and ammonia can potentially be used in energy applications. The DOE is hoping blue hydrogen can replace natural gas at power plants. Other opportunities are being explored.  

An improving environment

Understanding the role overseas firms can play in the energy transition, as well as the sense of urgency now required, the Philippine government has worked toward improving the investment environment. Most notable was the DOE permitting 100 percent foreign ownership of renewable energy projects.

Other incentives are on offer to businesses entering the country, such as a seven-year income tax holiday and tax exemptions for carbon credits generated from renewable energy. The Green Energy Auction Program continues as well. This scheme promotes renewable energy investments through a competitive bidding process and 20-year fixed tariffs.

Challenges remain

The Philippines has rolled out several initiatives to entice foreign investment in renewables, but obstacles still remain. For starters, regulatory bottlenecks and a sometimes-challenging permit process can be a deterrent for companies.

Meanwhile, the Philippine power sector, like many industries, is dominated by a small number of players. This makes selecting partnerships extremely important. Simply put, firms won’t be able to work with everyone.

Another difficulty is lagging infrastructure. While the government continues to emphasise development, the Philippines trails several Asian countries. Grid development has been uneven and can hinder renewable energy projects.

Final thoughts on renewable energy in the Philippines

Renewables in the Philippines offer massive investment opportunities to foreign firms. The country’s stated targets and vast potential for offshore wind, geothermal and hydropower are nearly unrivalled in Asia. A desire to embrace hydrogen into the energy mix creates opportunities unavailable elsewhere.

The country also realises the need for overseas investment. A desire to bring in established technology, knowledge and tools lead to favourable conditions, including complete foreign ownership of renewable energy projects.

However, the market has challenges that must be addressed. Working with a local partner, such as Asian Insiders, who understands the complexities and nuances of entering the Philippines is strongly advised. This can ensure you avoid difficulties, access the best opportunities and hit the ground running.

Renewables in the Philippines are an area of immense potential. To learn more, please get in touch with Germain Thomas, Philippines Partner: germain.thomas(at)asianinsiders.com or Jari Hietala, Managing Partner: jari.hietala(at)asianinsiders.com.

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