Philippines: 'Gold rush' in renewable energy projects

Manila: Malampaya, the Philippines’ biggest local source of natural gas off Palawan, is set to run out in five years.

This poses a threat to the country's energy security. Yet it also creates a fresh opportunity — to grow the multi-billion-dollar renewable industry.

Currently, wind and solar account for less than 3 per cent of the country’s installed power generating capacity. That is about to change, thanks to a major policy shift.

Major driver

Now, a policy change allows 100 per cent foreign ownership of renewable energy projects, kicking in a renewable energy gold rush.

It’s a game-changing shift in a country whose current energy landscape is dominated by fossil fuels.

The Abu Dhabi-based International Renewable Energy Agency (IRENA), recently reported that the Philippines has “excellent resource potential and a strong financing environment, with public and private sector interest in renewables investment.”

Of late, the country has seen a massive ramp up in solar and wind energy.

With 1.766 GW of installed capacity at the moment, versus to 12.4 GW in Vietnam, the Philippines currently stands a distant second in the region in terms of combined solar and wind power output, according to data from Global Energy Monitor (GEM).

New solar, wind projects

A provision in the 2008's Renewable Energy Act requiring Filipino ownership of certain renewable energy resources has been scrapped.

With the change, foreign investors can now hold 100 per cent equity solar, wind, hydro, and ocean or tidal energy projects.

In the last two years, new solar power projects with a generating capacity of 2.71-GW of power had been rolled out.

Investment in wind is also accelerating. Wind power generating capacity of the Philippines was approximately 427 megawatts (MW) in 2021, data from the Department of Energy (DOE) shows.

That’s a drop in the bucket compared to the estimated 76,600 MW total wind power potential around the country — especially in Ilocos, Southern Luzon (Bicol region), Visayas and Mindanao — due to the country’s long coastline and high wind speeds.

Fossil power

Despite its abundance in natural resources, the Asian country remains energy scarce, and spends an inordinate amount of money in fuel imports. In 2022, up to 55 per cent of the electricity produced in the country was coal-based.

This poses a challenge: emissions coal-fired plants have increased by more than 40 per cent since 2017. 

Amid the spectre of Malampaya gas field’s retirement and the economy growing in the post-pandemic recovery (GDP went up 7 per cent in 2022) — the government is now actively courting foreign investment in renewables. It is also considering nuclear power.

In 2021, the Philippines' net import bill of oil amounted to around $11.15 billion, nearly double the previous year's total and even surpassing the net import bill in 2019, according to Statista (where net import bill refers to the difference between oil imports and exports).

Opportunities

GEM estimates a huge spike in solar capacity would occur between 2025 and 2027, while the increase in wind capacity is anticipated to occur closer to the end of the decade.

In January, at least nine Chinese firms committed a collective $13.76 billion investment. Europeans are not far behind, with ENGIE Group already actively collaborating with Philippine companies.

There are signs this “gold rush” could usher in a change in the country’s power landscape, which had been suffering from decades of under-investment.

By 2030, the Philippines is expected to add an estimated 7.86 GW of wind power and 17.81 GW of solar capacity — thus becoming Southeast Asia’s top producer of renewable power in one of the world’s fastest-growing economic regions.