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Key clean energy opportunities included in the energy transition strategies are:
The Philippine Energy Transition Strategy will promote a range of export and investment opportunities across the clean energy sector including future civil nuclear and hydrogen generation. The country is driven by the private sector with top energy conglomerates announcing individual decarbonization, sustainability and energy transformation projects.
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The Philippines is faring well in achieving its goal to ramp up the share of renewable energy (RE) in its generation mix, but could be "more aggressive" in its targets, according to a climate and clean energy expert must be pointed out that the Philippines is abundant in resources and would do well to drive policies that further encourage investors, particularly from the "vibrant" private sector, said Ramnath Iyer, the research lead on Climate & Renewable Energy Finance for Asia at the Institute for Energy Economics and Financial Analysis (IEEFA).
Iyer said the Philippine government has taken significant steps to drive its goal to reach 35% renewable energy share by 2030 and 50% by 2040 with policies that include active participation in the Green Energy Auction Programme (GEAP).
"The Philippines is on track, for now," Iyer said. "The Philippines is doing pretty well because the policies are being implemented."
"There are no restrictions on foreign ownership, which means that the sector is open for investment These kinds of policies, the fact that investors can own the companies, are very positive for investments," he added.
In the Bloomberg New Energy Finance (BNEF) Climatescope 2023 report, the Philippines was ranked fourth amongst the most attractive emerging markets for renewable energy due to its auctions, feed-in tariffs, net-metering schemes and tax incentives.
The report also noted that the Philippines has awarded 3.4 gigawatts (GW) of renewable energy capacity out of the 11.6 GW offered in its second green energy auction, of which 1.2 GW are scheduled for 2024 to 2045 for ground-mounted and rooftop solar as well as onshore wind power, whilst 2.2 GW are expected by 2026. The country''s installed renewables capacity currently accounts for 18% of the total.
Due to limited restrictions on foreign ownership, the investment in clean energy saw a significant 41% year-on-year increase to $1.34b (P74.57b), according to BNEF.
However, Iyer said that whilst the Philippines is on track for its targets, the country would still have to accelerate the pace of RE adoption and ensure better performance annually. Considering that the country has abundant resources in offshore wind, solar, geothermal, and hydro, its targets do not seem to be the "most aggressive," he said.
"Given the entire range and the diversity of renewable resources available for the Philippines, it really can be pushing the envelope further and going for a more aggressive phase-out of fossil fuels and thereby improving their energy security, because a lot of these fossil fuels are imported," he said.
"So in some ways, the programme is not ambitious enough, and could be more ambitious," he added.
Marko Lackovic, managing director and partner at Boston Consulting Group (BCG), said the share of renewable energy generation currently stands at 22%, based on data from the Philippines'' Department of Energy.
Despite this, there is still a reason to be "optimistic in the short to medium term" citing the increase in renewable portfolio standard to 2.52% in 2023 across distribution utilities, retail electricity suppliers, and generation companies, as well as the foreign ownership allowed for renewable energy projects.
Unlike its neighbouring countries such as Malaysia, Indonesia, Vietnam, and Thailand where state-owned companies dominate the market, the private sector plays a bigger role in the Philippines.
Iyer said that this is a positive development as the government could not shoulder the projects for the energy transition due to the scale of investments needed.
"Given this constraint, it''s positive that the Philippines has a vibrant private sector. It also has a very vibrant and well-capitalised banking sector, which can help in financing and knows these private sector players pretty well. And they have had good banking relationships," Iyer said.
"The private sector has a very key role to play in the energy transition. It''s already playing it, [and] I think the private sector is doing a good job of playing it," he added.
One of the leading private players is ACEN, which operates over 600 megawatts (MW) of wind and solar generation capacity in the Philippines and has operations in Australia, India, Laos and Vietnam.
A major step that it took was the exit from its largest coal-fired plant with a total capacity of 246 megawatts (MW) run by South Luzon Thermal Energy Corporation through a privately financed transition mechanism, according to an IEEFA report.
Iyer also noted the Citicore Renewable Energy Corporation which is a leading player in the local solar energy space with 163 ME and over 300 MW of renewable energy in various development stages. It is also the first company to raise a real estate investment trust based on its solar power asset.
Energy Development Corporation, meanwhile, is the leader in domestic geothermal energy with a 1,188 MW capacity. It is a subsidiary of First Gen, the third-largest independent power producer in the country, which owns 30 power plants, none of which are coal-based, with a total capacity of 2,721 megawatts.
Aboitiz Power, meanwhile, is the second-largest producer in the country with 3,495 MW in coal, oil, geothermal, and hydropower. Whilst coal accounts for 60% of its mix, the country plans to achieve a 50:50 clean energy and thermal power by 2030.
Solar Philippines, which started in 2013, operates 183 MW of solar generating capacity and won large bids on the first round of the auction programme.
"A lot of these companies are relatively young. It also shows there is a thriving private sector in the Philippines, which can take advantage of these if the government sets the right incentives and makes the playing field level for all the players," Iyer said.
For wind projects, which usually take five years to finish, a 5% interest rate raises the project costs by around 25% to 30%, making the project uncompetitive.
"At the end of the day, the global interest rate environment has gone up. We need new financing mechanisms to be able to finance some of these things," Iyer said.
He also raised concerns about the permit requirements at both the macro and micro level as the unclear processes lead to delays. Such problems are found in four specific areas such as defining the allowable areas for development, environmental studies, soil studies, and social studies of people who might be affected by the development.
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