Sourcing clean, affordable energy
President Marcos has laid out an ambitious roadmap toward an “energy-secure future” for the Philippines at the beginning of his term, promising in his State of the Nation Address (Sona) last year to “increase our use of renewable energy sources such as hydropower, geothermal power, solar, and wind.” He doubled down on that directive this year, telling the public that “renewable energy is the way forward,” thus his administration was “aggressively promoting renewables” so that these will account for 35 percent of the country’s energy requirements by 2030, with the target cranked up to 50 percent by 2040, from the current level of just 23 percent.
This is a radically different picture from today’s energy mix, which is dominated at about 60 percent by coal, an energy source the Marcos administration wants to wean away from, given its adverse impact on the environment and the growing aversion of the global financial community to funding coal-fired plants.
So far, the government’s policies seem to be on the right track, giving the public reason to believe that the goal to use more clean energy will actually be attained. In November last year, for example, the Department of Energy (DOE) issued a circular that removed the stipulation of Filipino ownership over certain renewable energy resources. Foreign investors can now own all of the equity in projects involving the exploration, development, and use of solar, wind, hydro, and ocean or tidal energy sources, making the Philippines the “most exciting” renewable energy market in the region for the next five to 10 years, according to Erman Akinci, a partner in Malaysian investment firm Emissary Capital. Indeed, Copenhagen Infrastructure Partners’ New Markets Fund, a wholly owned foreign company, has come in and secured contracts to develop three offshore wind projects with a combined capacity of two gigawatts.
The government has also dangled new incentives for investors in renewable energy, energy storage, and other green economy industries under the 2022 Strategic Investment Priority Plan, including income tax holidays and preferential tax rates, in a bid to add momentum to the country’s pursuit of climate change goals and transition to a greener energy mix.
The DOE is also integrating different government agencies such as the Department of Environment and Natural Resources, Energy Regulatory Commission (ERC), and even the Philippine Coast Guard into the Energy Virtual OneStop System platform to make it easier for project proponents to secure the array of permits and licenses needed to jumpstart their big-ticket renewable energy projects. The private sector has so far responded positively to the policy shift and its sweeteners, with government awarding since last year an additional 126 renewable energy contracts with the potential to produce 31,000 megawatts (MW).
“To date, we have over a thousand active projects spread all over the country, 299 of which are solar, 187 are wind, 436 hydroelectric, 58 biomass, 36 geothermal, and 9 ocean-powered,” Mr. Marcos reported during his second Sona. In July, the President managed to secure $50 million in investments in renewable energy following his state visit to Malaysia.
There remain, however, considerable barriers that the Marcos administration must overcome to translate into reality this dream of a more climate-friendly energy mix. Among the DOE’s priorities is getting the national transmission grid ready to accept the additional power from the renewable energy projects being developed across the country. The National Grid Corp. of the Philippines has already been called out for delays in several transmission line projects, with the DOE counting on their commitment to hasten the completion of these vital projects.
The government will also have to deal with the issue of pricing, as the average cost of producing renewable energy at current levels is higher than that of fossil fuels. This was made apparent during the last auction of renewable energy capacities under the Green Energy Auction Program, where only 3,580.7 MW—mostly ground-mounted solar—were committed to be in place within the next years out of the 11,600 MW of capacity auctioned off. That private firms largely shunned the auction deemed crucial in achieving the government’s goal of increasing renewable energy use was blamed largely on the “low” price caps set by the ERC, that would render these firms unable to recover costs. With the Philippines having one of the highest electricity rates in the region—a major turnoff for energy-intensive manufacturing companies—efforts must be taken to avoid any more additional costs.
There is no question that the Marcos administration has its work cut out for it. It is now up to the government and the private sector to work double time to achieve this worthy goal of securing the country’s energy needs from ideal sources, and at prices that Filipinos can afford.