Wind, solar to lead RE growth in next decade

The wind and solar sectors are expected the charge for renewable capacity growth in the Philippines over the next decade given robust government support and investor interest, according to a unit of Fitch Group.

Fitch Solutions Country Risk and Industry Research said in a report that the Philippines’ non-hydropower renewables sector would grow by 6.8 gigawatts (GW) over the coming 10 years at an annual average rate of 10.4 percent, surpassing conventional thermal’s increase of 5.8 GW.

It said that accounting for about 86 percent of the net non-hydropower renewables capacity growth is the solar photovoltaic sector, while 10 percent would come from the onshore wind power sector.

“From 2022 to 2031, we expect the Philippines’ non-hydropower renewables sector to experience the greatest expansion,” Fitch Solutions said.

Within its key projects database, Fitch Solutions said 127 non-hydropower renewable power projects totaling 21.4 GW in capacity were in development in the country. Of these, 78 are solar PV projects, it said. “Tailwinds for the sector’s growth will largely come from strong governmental support to meet its ambitious targets of 35 percent renewable electricity and 15.3 GW of renewable capacity by 2030 (including hydropower),” Fitch Solutions said.

In June, the Department of Energy (DOE) has awarded 19 contracts to various renewable energy developers after conducting the first round of the Green Energy Auction Program (GEAP).

GEAP was undertaken to support and facilitate immediate and timely investments in new or additional renewable energy capacities to ensure provision of adequate supply and competitive rates of electricity in the country.

“We expect more such tenders to be launched while increasing demand for renewable power projects is signaled by interest from the domestic and international private sectors,” Fitch Solutions said.

The DOE earlier said the green energy auction would be conducted on a yearly basis, allowing renewable energy developers which were not able to participate in this year’s auction to file their intent in the succeeding rounds.

Fitch Solutions said opening the country’s renewable energy sector to full foreign ownership is expected to further attract more foreign investment into the sector, either through consortiums, single-owners, or even cooperation with local companies.

“By promoting competition in the power sector, domestic companies will face increasing pressure to innovate and adapt to compete with international peers. We believe this is part of the government’s plan to accelerate the privatization of the power market, which started with the Electric Power Industry Reform Act in 2001,” it said.

Meanwhile, Fitch Solutions said the increasing investment into improving and expanding the Philippines’ grid network would present further upside risks for renewables growth over the long term, as it will offer more grid connection opportunities.

The National Grid Corp. of the Philippines (NGCP) has allocated P160 billion in capital expenditure for the fifth regulatory period covering 2021 to 2025.

“We expect this funding to propel the expansion and improvement of the national grid, connecting islands in the Philippines with one another and unlocking areas for renewable power project development,” Fitch Solutions said.

The NGCP last June also announced that it completed the construction of key equipment for the Mindanao-Visayas Interconnection Project (MVIP).

Through the MVIP, the local grids of Mindanao, Luzon, and Visayas will be linked together via a high-voltage direct current system.

“This marks a key development of the government’s plan to unify the Philippines’ grids across its many islands,” Fitch Solutions said.