$5 billion surge for mega-hydro: Philippines ramps up pumped-storage project financing to power renewable era

Manila: The Philippines is accelerating one of its most ambitious energy transitions yet.

It involves two additional multi-billion-dollar pumped-storage hydropower projects (PSHP).

As of Friday (March 13), funding has been reportedly secured for the twin PSHPs, which could help bolster the Asian country's energy security, stabilise its rapidly-growing renewable electricity sector, and move away from coal.

Infrastructure firm Prime Infrastructure Capital Inc., controlled by billionaire Enrique Razon Jr., has secured ₱273.5 billion (about $5 billion) in financing to activate 2,000 megawatts of pumped storage capacity — involving two of the largest water-based power storage investments in Southeast Asia.

The funding includes ₱214.87 billion (about $3.9 billion) from a consortium of Philippine banks, including:

Another ₱58.6 billion ($1.05 billion) dual-currency "standby credit" facility was also arranged with Japanese lenders:

Prime Infra president and CEO Guillaume Lucci said the financing reflects strong confidence from both local and international banks in the company’s ability to deliver large-scale energy infrastructure.

The funds will bankroll two major pumped storage hydropower plants:

Both projects are classified by the Philippine government as energy assets of "national significance".

Both are targeted for completion by 2030.

Meanwhile, First Gen Corp, led by the Lopez group, plans to acquire a 33% stake worth ₱61.87 billion (about $1.11 billion) in the hydro portfolio.

Together, these twin projects could help usher in a new energy calculus, away from coal.

Pumped storage hydropower works like a giant battery.

Electricity is used during off-peak hours to pump water into an elevated reservoir. When demand surges, the water is released to generate electricity.

The technology is becoming essential as solar and wind power expand, since it allows excess renewable energy to be stored and dispatched when needed.

With such pumped hydro-storage power, the need for grid-scale batteries is minimised: power is stored in the form of water (in the upper reservoir).

When the tap is opened, water gushes down to drive grid-scale turbines that produce electricity almost immediately, allowing the grid to cope with peak hour demand.

The Philippines already has long experience with pumped storage through the 728-MW Kalayaan Pumped Storage Power Plant, operated by CBK Power Company in Laguna.

Commissioned in 1984, the facility has been operating for more than four decades, helping balance the Luzon grid during peak demand.

It's the Asean region's first PSHP project and remains the country’s largest and sole operating pumped storage plant, thus proving the reliability of the technology in the local scene.

CBK is currently one-of-a-kind engineering marvel in the Philippines: it features two giant "penstocks", each with a 6-metre diameter. Penstock-I is situated within an excavated trapezoidal trench.

Starting with a diameter of 6 metres, it tapers down to 5.5 metres. The penstock is anchored by six concrete blocks for stability at slope changes and supported by saddles.

CBK has been quietly working, the key to stabilising the Luzon grid since 1984.

By comparison, the $2-billion Bataan Nuclear Power Plant (BNPP, construction started in 1976, completed around 1984) was designed with a peak capacity of 620MW.

BNPP was never energised due to reported kickbacks, a US court case (settled by Westinghouse) as well as quality and safety concerns (did not produce as single watt of electricty). The loan provided by the US Export-Import Bank for BNPP was already paid by Filipino taxpayers in full only in 2007.

In January, Nikkei Asia reported that Prime Infrastructure Capital was looking to invest close to $9 billion over the next five years in hydropower and gas projects.

The country now has over a dozen pumped storage projects in various stages of development, with planned capacity exceeding 8,000 MW.

These projects are being driven by the rapid growth of renewable energy and the need for large-scale storage to stabilise the grid.

The government, through the Department of Energy, has been promoting pumped storage as a cornerstone technology for achieving the Philippines’ renewable energy targets, via the public-private-partnership (PPP) model, where private money is used to fund government priority projects.

With billions in new financing and a growing project pipeline, pumped storage hydropower could emerge as a critical backbone of the country’s future power system — linking decades of experience from the Kalayaan facility to a new generation of mega hydro “batteries” designed to power the clean energy transition.