Philippine energy transition goals: Ambitious but doable

When we say we want to shift to clean energy sources, we have to understand that this is a process that takes years. The Philippines has set ambitious targets to make the transition from coal-powered to renewable energy.

According to the Philippine Energy Plan (PEP), we are aiming for RE to make up 35% of the power generation mix by 2030. By 2040, RE should account for 40% of our energy sources; by 2050, the share should be over 50%. 

The challenge is to make this ambition realistic and doable as well. This is the least we could do for the environment while also taking into consideration our country’s economic development needs. Both are essential to ensuring our people’s economic security and quality of life. 

What would it take to meet these targets?

We need a massive integration of our RE sources that, while currently available, remain expensive and inaccessible to many. These sources are in the form of geothermal, hydro, wind, solar and biomass.

In 2022, our RE sources had an aggregate capacity of 8,000 MW. But to be able to reach our target, we need to add around 100,000 MW – a staggering increase that translates to an investment requirement of P35 billion, or US$600 million. This amount excludes the costs of technology and expertise required. 

This amount also excludes the unquantifiable cost of addressing challenges such as regulatory hurdles, grid modernization and resulting insufficient transmission capacity, and energy storage. 

The next question is, can the Philippines do it? 

I firmly believe we can, provided there is genuine and sustained collaboration among the government, the private sector, and international partners.

In fact, according to Bloomberg NEF’s 2023 Climatescope report, the Philippines is the fourth most attractive emerging market for investments in the power sector. “The market stands out as one of the few that have implemented auctions, feed-in tariffs, net-metering schemes, tax incentives and a strong target for renewable energy,” the report said.

Toward this end, we at Stratbase, in partnership with the Embassy of Canada to the Philippines and with Natural Resources Canada, recently organized a Philippines-Canada Forum on Energy Transition.

This event coincided with Canada’s largest-ever trade mission to the Philippines. The presence of this mission reflects the growing recognition of the country’s immense potential as an investment destination.

The forum provided a platform for discussions on how the private sector is positioned to lead this transformation, with support from government and the international community.

For example, in addressing regulatory hurdles, Undersecretary Rowena Guevara of the Department of Energy highlighted the difficulty developers face due to inconsistent local government (LGU) permitting processes, which cause project delays. “LGUs in the Philippines are kingdoms… Our renewable energy developers really have a hard time coping with all these requirements,” she said. 

Janssen Dela Cruz, Market Sector Lead for Power at Prime Infrastructure, noted that streamlining the permitting process and integrating LGUs into the system could drastically reduce delays. “If that is done, then that will expedite a lot more of these [projects],” he said.

Other challenges that were identified were energy storage and grid transition. In addition to policy support, the private sector must drive advancements in energy storage and grid flexibility.

Dela Cruz added: “We used to connect 400 to 500 megawatts a year. That plan that was shown on the PEP requires us to connect 4,000 to 5,000 megawatts a year … [and] if you notice the VRE in 2022 is 6.5%. Our VRE will become 45%. So not only does the grid need to accelerate in the amount of stuff it can connect, it also has to transform itself from a thermal-based grid to a variable renewable grid, something more flexible and has that storage.” 

Integrating renewable energy resources into our power grid represents a big challenge, according to Jimmy Villaroman, President of Aboitiz Renewables. “Substantial investments in transmission and distribution infrastructure and advanced energy storage solutions are needed to ensure reliable and resilient energy systems.”

Meanwhile, Jonathan Back, Group CFO and Chief Strategy Officer of ACEN, said: “Storage is very, very important… Not just to make [energy] less intermittent, but also to make more efficient use of transmission lines.”

Undersecretary Analiza The of the Department of Environment and Natural Resources said we need international partnerships, bilateral partners, and development partners in terms of providing the experts, policy recommendations, and technical studies.

“Organizing the private sector is one area that we hope that the development partners can support countries to make sure that the private sector is aligned – with their goals with the government goals so that we can really work together and achieve sustainability,” she added. 

It was heartening to hear Canada’s commitment to this cause.

“You can definitely note Canada is leaning in and wants to be the government of the Philippines’ friend,” said Paul Thoppil, Indo-Pacific Trade Representative, Government of Canada.

He pointed to the largest-ever Team Canada Trade Mission with over 300 Canadians from 190 business organizations. Other indications include the launch of exploratory discussions with the government of the Philippines towards a bilateral free trade agreement, the opening of an office by Canada’s Export Credit Agency, Export Development Canada, and the announcement that there would be flights between Manila and Vancouver four times a week very soon. 

“We believe in capital and flow and technology transfer flow that is between the Philippines and Canada,” he added. 

As in many great endeavors, the Philippines will rely much on collaboration across stakeholders. The ambitious energy transition goals are doable, yes, but we cannot succeed without partnerships that align government policy, private sector innovation, and international support. 

Rupert Paul Manhit is the chief operating officer of think tank Stratbase Group.