Philippines prodded on net zero commitment

MANILA, Philippines — The Philippines is urged to establish its net zero goal soon to attract more investments to support the country’s shift to renewable energy.

In a report, Global technology group Wärtsilä said that with a clear net zero target, the Philippines can begin to attract the needed outside investment to achieve this transition.

It said a net zero commitment in the Philippines’ would send a signal to investors and prevent continued investment in inflexible fossil fuel assets that will be stranded in a carbon-constrained economy.

However, without a clear net zero commitment, Wärtsilä said the country may not attract the inward investment it needs for the shift to renewable energy.

“As countries return to the climate negotiations table at COP27, it’s clear that a net zero commitment in the Philippines would send a strong signal to investors, helping the country attract the needed investment to achieve this transition,” said David Kayanan, financial and market analyst at Wärtsilä Energy said.

“On the flip side, without a net zero goal, the Philippines risks detaching itself from an increasingly climate-conscious global community and worsening its own exposure to climate change,” he said.

Wärtsilä said the national government has the opportunity to support the shift by setting a clear net zero target, placing itself on a pathway to transition toward renewable energy.

“Time is of the essence, the decisions made now will affect the Philippines’ power system for years to come,” it said.

The Philippines has not yet explicitly communicated a net zero target, but its National Renewable Energy Program (NREP) sets out plans to power the grid with a 35-percent share of renewables by 2030 and 50 percent by 2040.

Wärtsilä said that although the NREP represents an important step in the right direction, the country can benefit economically and improve energy security by going further to fully unlock its renewable potential.

More renewable capacity, plus the addition of flexible capacity to manage intermittency, is needed, it said.

A power system modelling by Wärtsilä revealed that renewable-based power systems, backed by grid balancing engines and energy storage, would enable the Philippines to reach net zero by 2050, while also cutting the levelised cost of electricity (LCOE) by more than 20 percent when accounting for likely future carbon taxes.

Two different scenarios were used in the modelling – the business as usual (BAU) scenario in which there are no emissions limit from the power sector, and a net zero scenario, where emissions were halved by 2040, before reaching net zero by 2050.

Wärtsilä’s modelling of the power system of the country’s largest island, Luzon, showed that a combination of renewables plus flexibility, provided by balancing engines and energy storage, can reliably meet the region’s increasing power demand.

In the net zero scenario, the study showed that Luzon could cut its LCOE by 23 percent and avoid $6.5 billion per year in forecasted carbon taxes, compared to the BAU scenario, by 2060.

With the right mix of balancing technology and renewables, Luzon can also double the renewable generation in comparison to the BAU scenario, from 34 percent to 67 percent by 2040.

By 2050, renewables is seen reliably providing 87 percent of Luzon’s total generation, up from 18 percent in 2020.

“The results of the study clearly show that the opportunity of a generation is in reach for the Philippines’ energy leaders. In the Philippines, renewables can be leveled up using flexible capacity to serve the current load, while comfortably meeting rising power demand, and decarbonising at the lowest cost,” Kayanan said.

“We hope that our report serves to assure energy leaders that, by creating a renewable and dynamic power system, the Philippines can increase energy self-sufficiency and mitigate climate risks, with the power sector continuing to support the economic development of the country,” he said.