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Scaling Up Renewable
Energy Investment in
the Philippines
As a hub of economic activity and urban growth in Southeast Asia, the Philippines has the opportunity to
take the lead in the region’s transition to a renewables-based energy system. The country holds several
advantages in the development of renewables, including excellent resource potential and a strong
financing environment, with public and private sector interest in renewables investment.
The case for renewables in the Philippines is undeniable. In addition to the urgent environmental case for
the energy transition, scaling up renewable energy deployment can deliver significant socio-economic
benefits and increase the country’s energy access, energy security and self-suciency, while also
improving climate resilience.
As of the end of 2020, the Philippines had an installed capacity of 3 779 megawatts (MW) of hydropower,
1 928 MW of geothermal power, 1 019 MW of solar power, 443 MW of wind power, and 483 MW biomass.
Renewable energy only makes up about a fifth of the country’s power generation mix, with the remaining
being accounted for by coal and natural gas. Renewable energy growth has stagnated in recent years,
and a dramatic acceleration of renewable energy deployment is needed to reduce reliance on imported
commodities like coal and oil.
The Philippine Energy Plan (PEP) 2020-2040, last revised in 2021, sets a target, under the Clean Energy
Scenario, for renewable energy to provide 35% of the power generation mix by 2030 and 50% by 2040.
Given the evolving demand for renewable electricity from industry and from heating and cooling,
residential, and transport sectors, the PEP’s Clean Energy Scenario could be even more ambitious.
To achieve the PEP’s 2040 Clean Energy Scenario Target, an additional 73 868 MW of renewable
energy capacity will be needed over the next two decades, as well as pre-development investments
(infrastructure, resource assessment, etc.) of more than USD 485 million (PhP 25.3 billion). Progress
in deploying this volume of renewables will also be crucial to supporting the Philippines’ nationally
determined contribution under the Paris Agreement, which commits to a 75% reduction in greenhouse
gas emissions from 2020 to 2030, compared with a business-as-usual scenario.
Delivering the PEP, the nationally determined contribution and the Philippines’ wider energy security
goals will require a robust policy framework and enhanced access to finance, including climate finance.
These factors can, in turn, unlock a wave of private sector investment in the country’s energy transition
and sustainable economic growth. Policy mechanisms like the Renewable Portfolio Standards (RPS)
and the near-finalised Green Energy Auction Program (GEAP), as well as the recent moratorium on new
coal power plants,
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will be important mechanisms for promoting public and private investment. Enabling
policies and regulatory frameworks for renewables will also be critical to deploying projects at pace in
order to meet the country’s fast-growing electricity demand.
1 New coal projects will no longer receive permits from the Department of Energy.
BUSINESS AND INVESTORS GROUP
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The IRENA Coalition for Action’s Business and Investors Group, which brings together leading renewable
energy players, sees tremendous potential for investments in the Philippines. The group represents
a sizeable portfolio of renewable energy assets worldwide and is planning to contribute substantial
additional investments for a green and resilient economic recovery post-COVID-19 and to reach global
climate objectives. From an industry point of view and based on its engagement in the Philippines, the
Business and Investors Group has put together the following key recommendations that the government
may wish to consider to reach higher shares of renewable energy.
1. Strengthen the political commitment and ambition for renewable energy in the
PEP through higher capacity targets and comprehensive assessments of the
techno-economic potential of renewable energy.
The PEP includes two scenarios: the Reference Scenario and the Clean Energy Scenario. In both
scenarios, additional capacity targets for most renewable technologies remain conservative compared
with technical resource potential and investor interest. For instance, while the Clean Energy Scenario
sets an additional power capacity of 18.6 gigawatts (GW) for solar energy by 2030 compared with
2020, only 0.77 GW of additional wind power capacity is indicated for 2030 (443 MW installed today),
together with 1.99 GW of hydropower, 0.4 GW of geothermal power, 0.22 GW of biomass energy, and no
reference target for ocean energy. In addition, the Philippines remains the only member of the Association
of Southeast Asian Nations (ASEAN) not to have committed to achieving net-zero emissions by 2050.
Actions
» Increase the overall renewable energy targets for 2030 and 2040, as well as for all renewable
energy technologies, to reflect the high resource potential of the Philippines and account for
electrification of end uses.
» Commit to targets across a 10-year time horizon, at least, accompanied by short- and
medium-term targets, to take into consideration future energy demand in power and end-use
sectors and provide industry with the necessary time to anticipate large-scale investment.
» Create a schedule of continual and regular capacity procurement for all types of large-scale
projects to attract sustainable investment, encourage local value chains and support socio-
economic development; in addition, introduce policy instruments in support of decentralised
renewable energy solutions (e.g. capital subsidies, net metering).
» Design resource-specific programmes for the highest potential renewables and promote
renewable hybrids to enable their market readiness.
» Commission updated feasibility studies, measurement campaigns and ground validation,
using the latest technology, to reflect clean energy technical resource potential. This
information is required to critically assess the resources needed to realise renewables projects,
including appropriate policy schemes, investment, human capital, and related infrastructure.
Such studies should also cover new renewable energy technologies in the Philippines, such
as floating oshore wind technical resources.
» Strengthen the evidence-based socio-economic and environmental benefits of renewable
energy, including job creation, increased energy security due to reduction of imported fossil
fuels, and local industry development, to increase the demand and appetite for renewables.
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2. Promote renewable energy technologies over non-renewables.
The Philippines’ technology-neutral stance has resulted in renewable energy technologies not being
promoted and fossil fuel technologies, such as coal-fired plants, not being discouraged. This has led to
an increase in coal-fired plants, thus jeopardising eorts to boost renewable energy deployment and
ensure energy security.
3. Implement annual increments for the minimum RPS requirements to meet
2030 and 2040 renewable energy targets in the power generation mix, and to
promote planning and procurement.
Since coming into force at the beginning of 2020, the RPS has emerged as an important driver of
renewable energy procurement. The RPS requires more than 140 distribution utilities to source or
produce a share of electricity from eligible renewable energy resources through 2030. Following public
consultation, the Department of Energy (DOE) has expressed support for expanding the annual minimum
increase in the share of renewables-based electricity from 1% to 2.52% from 2023 onward.
Actions
» Increase political commitment to the renewable energy sector by creating ambitious policies,
an enabling regulatory framework, and incentives that favour the development of renewables.
» Eliminate all government support for coal and non-renewables, and restrict the
development of new fossil fuel projects to reduce uncertainty for renewable energy investors
and redirect existing investments towards renewables.
» Develop an exit strategy for non-renewable capacity to avoid stranding assets, and
commercialise decommissioning activities.
Actions
» Ensure implementation of an annual increase in the share of renewables-based electricity in
order to meet the PEP target of renewable energy supplying 35% of the country’s electricity
by 2030.
» Continue to engage in public consultation between the DOE, distribution utilities and
developers of renewable energy projects to ensure the RPS scheme is complied with and
eective in securing power supply agreements.
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4. Provide greater transparency in GEAP design and implementation.
The first GEAP auction for 2 000 MW was delayed in 2021, while the rules were being finalised. Given
the stagnant growth of renewables in the Philippines in recent years, it will be important for the auction
to oer enough volume to generate developer interest and to eectively award projects that can be
developed on schedule.
5. Upgrade grid distribution and transmission infrastructure.
Countries seeking to accelerate renewable energy deployment frequently face challenges in grid and
transmission infrastructure. Transmission upgrades should be developed at a pace that can accommodate
greater and more diversified generation resulting from the RPS and the GEAP. Authorities should also
introduce flexibility into the grid to make optimal use of the potential complementarity of dierent
renewable energy technologies and match load profiles where possible.
Actions
» Clearly define the “pre-determined exclusive demand bands” to foster development
of specific renewable energy technologies. Demand should be based on dierent criteria
(technology, size, location and other factors) to determine the most appropriate source of
energy.
» Commit to systematic rounds of auctions under the GEAP on a transparent schedule, such
as on an annual basis.
» Ensure that qualification requirements are rigorous to attract a large number of high-quality
bidders who can establish a track record of project execution.
» Integrate non-financial selection criteria – including socio-economic benefits, location
(e.g. remote or underserved areas), developer experience, and technical and financial
conditions – alongside assessment of lowest bids.
» Appoint a well-resourced institution to manage the GEAP, including oversight of price-
setting, contract settlement and conduct of auctions, to minimise administrative bottlenecks
and red tape.
Actions
» Prioritise grid augmentation and construction of additional transmission and substation
infrastructure in advance of the scheduled buildout of renewable energy projects under the
GEAP.
» Study technical feasibility of forecasting and smart distribution systems on the national
power grid to support balancing with larger shares of renewable energy.
» In the draft PEP, address energy storage systems, such as utility-scale battery systems and
heat storage, for use by the DOE, considering the rapidly declining costs of batteries and their
role in creating a flexible and reliable clean energy supply.
» Consider decentralised renewable energy infrastructure to improve access to electricity in
remote areas and islands.
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6. Streamline permitting and planning requirements for renewable energy
projects under the Energy Virtual One-Stop Shop (EVOSS) programme.
To kickstart renewable energy deployment, it will be imperative to streamline permitting and licensing
processes for projects awarded under the GEAP. The convening of a task group to oversee the
implementation of EVOSS is a positive step to ensure the programme can be eectively operationalised
and supported by various government agencies.
7. Re-examine ownership rules for renewable energy projects.
The Philippines has currently set regulatory requirements on foreign ownership of renewable energy
projects, by which foreign companies wishing to invest in the Philippines are subject to a foreign ownership
cap (40% to 60%). While exemptions exist for technologies such as hydropower and geothermal energy,
as they are not considered to be in their “natural state”, these exemptions do not apply to wind and solar
power.
Actions
» Solicit and formalise regular industry input to the EVOSS task group, which could provide
ground-level perspectives of technical, operational and administrative barriers and avoid
slowing down project development.
» Streamline licence and permit processes and enforce a reasonable time by which they must
be provided to shorten permitting time frames.
» Provide institutional support and training to renewable project developers in their
application process for permits.
Actions
» Reconsider foreign ownership rules for all renewable energy to help decrease risk for
renewable energy projects, attract more foreign direct investment and boost competition.
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8. Improve use of public finance to crowd-in private investment.
The Philippines has demonstrated a good track record in the use of public finance to promote the use
of renewable energy, encourage energy eciency and mitigate climate change. For instance, public
funding and public-private partnerships have been widely used to finance green infrastructure in the
Philippines, such as the Clean Energy Finance Investment Mobilisation Programme, together with other
public finance measures such as green debt (e.g. green bonds), equity instruments (funds for green
infrastructure) and credit enhancement mechanisms (e.g. credit guarantees). Nevertheless, additional
public finance policies could further reduce risks in investing in renewables, remove the barriers to
private finance and increase overall investor appetite.
9. Strengthen dialogue between investors and the government.
Increased dialogue between industry and the government can help formulate more eective policies
and ensure successful implementation of the Philippines’ renewable energy targets and broader climate
objectives.
The Business and Investors Group, and the wider IRENA Coalition for Action, stands ready to provide
co-ordinated input and support to advance the Philippines’ energy transition.
Actions
» Increase the issuance of sovereign green bonds to indicate the political commitment of the
government to renewable energy deployment and attract more investment from the private
sector.
» Provide incentives such as credit enhancement, grants, subsidies, and tax exemptions to
increase attractiveness for private investors.
» Provide risk mitigation measures such as sovereign guarantees, political risk guarantees and
foreign exchange products.
Actions
» Strengthen consultation processes that feed into the PEP and the National Renewable
Energy Program to allow for greater transparency and buy-in.
» Reinforce engagement with industry when formulating new policies.
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AbouttheIRENACoalitionforAction
TheIRENACoalitionforActionbringstogetherleadingrenewableenergyplayersfromaroundtheworldTheCoalitionfacilitates
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