Philippines

Risk mitigation elements in the design of power purchase agreements

Related policy guide sections

• Power purchase agreements
• Direct power purchase agreements
• Off-taker risk mitigation

The Philippines has the Green Energy Auction Program, which are renewable energy auctions that award 20-year bankable Power Supply Agreements. Still, the auctions have certain design issues, particularly with the GEAR price (i.e., the ceiling price for all technologies participating in the bidding), which is often set too low, leading to an undersubscription of the auction. This is an area of significant concern as this is currently the main mechanism for RE demand given that outside of the GEAP and FIT (government-led), there are not many private sector-led PPAs.
 
Another key area of concern is the limited understanding and leverage for approaching power procurement strategically among notably the smaller Distribution Utilities (DUs). Many DUs are still drafting terms of reference that target baseload capacity, in some cases even when they have already contracted baseload capacity equal to or exceeding their peak demand.
The resulting PPAs also included a range of clauses that are financially negative for DUs. There is room here for government intervention, for example by setting legal limits on for fuel pass through. This area of issuesis one of the key drivers behind the current lack of solar and wind PPAs in the country, particularly outside of Luzon.

High Barriers

Large offtakers such as distribution utilities Meralco and Aboitiz Group are considered creditworthy, although there is some investor concern about the large market concentration around these big distribution utilities.
Creditworthiness is an issue for several of the smaller distribution utilities (DUs) and cooperatives. According to the NEA Q2 2024 Compliance report, looking at financial and operational conditions only, out of the 121 being monitored by NEA, 89 had a positive income and 108 had a positive net worth. However, more important than this financial capability issue is the issue of negotiation capability/leverage to undertake contracts for smaller DUs, including those who have a AAA NEA rating. DUs have limited understanding and leverage for approaching power procurement strategically. There is room here for government intervention, for example by setting legal limits on for fuel pass through. These challenges could seriously hinder renewable development, particularly outside of Luzon.

Medium Barriers

Inflation in the Philippines, high in recent years, slowed down this September (2024) to 1.9%, its lowest point since mid 2020. Interest rates have been increased as one of several government measures to attempt to manage inflation. This has a negative effect on private investment growth, and the countryʼs GDP growth. PPAs are also usually indexed to the consumer price index (CPI), which is related to inflation (note: if the contractual currency is a foreign currency, then the foreign CPI is used).
These are usually seen in geothermal PPAs. As there arenʼt many solar and wind PPAs thus far, it is har to evaluate the effect hereof for those technologies. The ERC has disallowed inflation adjustments for plants under the FIT scheme. Still, this is not perceived as a key bottleneck for RE development in the country at the moment.

Low Barriers

While there is good domestic financing for RE projects, access to international finance (welcome to scale up RE deployment) is limited, in part due to high FX risk. Capital recovery costs in some projects are expressed in USD, and this currency is also reflected in the PPA itself. Still, this is not a key bottleneck in RE development in the country at the moment.

Low Barriers

The Philippines has a renewable preferential dispatch regulation. As such, RE plants are first in line in the dispatch. However, for RE plants still being built or in the pipeline, the main bottleneck is the system impact study that has to be conducted before plants are allowed to connect to the grid. The result of this is that some RE plants have finished construction and are ready for operation, but are not yet allowed to connect to the grid, hence effectively being curtailed. RE plant operators faced with this issue do not receive compensation, nor does the grid operator face penalties for the delay in implementation of new grid connection. Some of these aspects are discussed further under the grid-related indicators.

Medium Barriers

Since November 2022, the Philippines no longer has any Filipino ownership requirements for the exploration, development and utilization of solar, wind, hydro and ocean or tidal energy resources, i.e., allowing full foreign ownership. Full foreign ownership of other renewables, like biomass, waste and geothermal, has already been possible since 2020. Note that foreign ownership requirements are not fully relaxed in hydroelectric power plants. As such, appropriation of waters direct from the source shall continue to be subject to foreign ownership regulations in the Water Code.

Low Barriers

The Green Energy Auction Programme has a transparent schedule and clear capacity targets per technology, so this is not a key bottleneck for RE deployment in the Philippines at the moment.

Low Barriers

There are a range of procurement mechanisms in the Philippines,
discussed in the other sub-indicators in more detail, including the GEAP, net-metering and RPS.

Low Barriers

The Philippines has the Green Energy Auction Program, which are renewable energy auctions that award 20-year bankable Power Supply Agreements. The auctions have technology-specific targets and region- specific targets. There are different auctions for ground-mounted solar, roof-mounted solar and onshore wind. While there is no auction yet for offshore wind, there is one planned soon. There are also certain auction
design issues - discussed elsewhere - that should be addressed (notably the low GEAR prices).

Low Barriers

For small-scale RE systems, there is a net metering scheme. For large- scale RE systems, prices are set via the GEAP. The costs of GEAP are socialized via the FIT-all component of the electricity tariff.

Low Barriers

The Philippines introduced a FIT for RE in 2012 that was discontinued in 2019 (except for run-of-river hydropower) and succeeded by the Green Energy Auction Program (GEAP) in 2021. The cost of the GEAP is recovered through the old FIT-All component of the electricity tariff.

Low Barriers

The Philippines has a “Green Energy Option Programˮ allowing consumers with an average peak demand of 100 kW or more to voluntarily source their electricity from renewable sources and negotiate electricity prices directly with RE suppliers. While the program is a good start, it should be scaled and permitting constraints eased. One of its key challenges today is that there is simply not enough RE deployment to support the increasing needs for the contestable market (private sector).

Low Barriers

There are several fiscal incentives in the Philippines aimed at promoting investment and development in the renewables sector, e.g., a 7-year tax holiday and net operating loss carry-over provisions.

Low Barriers

Financing from domestic banks in the form of loans is widely available for larger, established actors. Smaller actors, like newer small project developers, have a harder time accessing financing from those same sources. This financing would benefit from complementing by grants and rebates through international climate finance.
 
Furthermore, while lending for PPA-based projects is relatively easier to find, getting finance for projects selling electricity to the Wholesale Electricity Market (WESM) is harder. This is because of banksʼ limited understanding hereof. The same is true for projects utilizing newertechnologies, like offshore wind.

Medium Barriers

There are several programs to facilitate access to capital:
- Energy Efficiency Savings (E2SAVE) Financing Program by DBP
- Financing Utilities for Sustainable Energy Development (FUSED) by DBP
- Solar Merchant Power Plant (SMPP) Financing Program by DBP
- Renewable and Efficient Alternative (REAL) Energy Financing Program by Landbank
- Other programs by BDO, PSCOM, etc.

Low Barriers

There are fiscal incentives for RE-related activities, e.g., 0% VAT for electricity and carbon credit sales and the purchase of goods and services necessary for RE development and installation.

Low Barriers

The Philippines has a net metering scheme for end-users that adopt behind-the-meter RE systems 100 kW. Under this scheme, end-users are allowed to self-consume their locally generated power. It is also allowed to self-consume electricity from larger systems. If these systems are set up to export excess electricity to the grid, they can have a nameplate capacity of up to 1 MW and are governed by the so-called “DER rulesˮ. If all local generation is intended for self-consumption and there is no export to the grid, than there are no such capacity limits.

Low Barriers

Systems 100 kW under the net-metering schema export excess power to the grid. Systems 1 MW falling under the DER rules exporting excess power to the grid can do so up to 30% of their nameplate capacity.

Low Barriers

Under the net metering scheme, end-users with systems 100 kW can sell surplus power to the grid. Payment is based on the fraction of cost of the previous monthʼs generation costs. For on-grid DER assets falling under the DER rules, assets of 100kW to 500kW receiving 75% of the blended generation rate and assets of 500kW to 1MW receiving 60% of the blended generation rate. These payments do not reflect the full value that these assets are generating for distribution utilities as the DUs further benefit from savings on transmission costs and VAT on generation and transmission. This could be reconsidered to further encourage DG investment.

Low Barriers

There are no existing carbon tax or pricing mechanisms in the Philippines. However, given the high share of coal-fired power generation, introducing such a tax would result in an important increase in the cost of electricity for end-users, potentially sparking a backlash. As such, it seems more prudent to pursue the transition through other means, e.g., by demonstrating how the large-scale deployment and use of renewable energy could reduce electricity prices compared to todayʼs levels.

Medium Barriers

In August 2024, The House Committee on Climate Change of the Philippine Congress passed the “Low Carbon Economy Investment Act of 2023ˮ. The bill is looking to impose an annual greenhouse gas emissions reduction targets and caps on emission-intensive industries (e.g., energy, transportation, construction, cement, steel, and more). The bill still has to pass into law, and the government will have to develop significant
monitoring and enforcement capacities, so it is too soon to assess its impact, but it is a move in the right direction.

Medium Barriers

The government of the Philippines had extensive analysis done to map the countryʼs renewable energy potential. This resulted in the publication of the RE Map (https://doe.gov.ph/renewable-energy?q=renewable-energy/re-map
doe.gov.ph/renewable-energy. It has also developed the Competitive Renewable Energy Zones as a way of accelerating RE development in certain zones, including by having transmission grid investments anticipate RE development, but grid infrastructure development is still lagging. Additionally, there are still important gaps in geospatial planning when it comes to offshore wind: questions remain around the conversion of fishing zones to energy zonesand the impact thereof, among other things.

High Barriers

The government of the Philippines, in cooperation with USAID and NREL, undertook work to identify Renewable Energy Zones, the results of which were published in 2020. However, projects in these zones still have to undergo clearance from the Department of Environment and Natural Resources and the National Commission for Indigenous People. This serves as one of the major bottlenecks in permitting today, as processing times can be long. A further bottleneck lies in the clearance permits from the Local Government Units (LGUs). There are already efforts to address this, such as the DOEʼs Energy Virtual One Stop Shop (EVOSS) program. Still, as there are over 1600 LGUs across the country, each one of which has to familiarize itself with and adopt the EVOSS process flow, these efforts are taking time to show improvements in processing times. A notable issue is that of land conversion: the costs associated with converting agricultural land into energy land can be higher than the price of the land itself; solutions are needed here, such as, e.g., designating the land for multiple uses (wind and solar, solar and agriculture, etc.).

Medium Barriers

At present, there remain challenges with the permitting and planning process for offshore wind development. Questions remain around the conversion of fishing zones to energy zones and the impact thereof, among other things. However, the government of the Philippines is making a concerted effort to accelerate offshore wind development, including the publication of a marine spatial plan planned for later this year.

Medium Barriers

The Philippines lacks national level legislation on land use planning and governance. A National Land Use Act has been proposed, but has not yet passed. The conversion of land to use for energy is one of the main issues encountered today by RE projects.

High Barriers

There have been issues around the conversion of agricultural into industrial lands. Even though some of these lands are considered non- productive (less or no agricultural yields), this is one of the main areas of resistance to RE projects as it is perceived to possibly have an impact on food security. The key issue here, however, are the high land conversion fees. There is a need to establish clear zoning and land conversion
processes.

Medium Barriers

The DOE is making continued efforts to streamline the permitting process, e.g., publishing in June of this year a revision of its omnibus guidelines, and most importantly through the Energy Virtual One Stop Shop (EVOSS; www.evoss.ph/). However, adoption of the EVOSS is still lagging atthe Local Government Unit level.

Medium Barriers

The Environmental Impact Analysis from the Department of Environment and Natural Resources is one of the key requirements for the RE plant to have clearance in its permitting processes, with the outcome of the assessment indicating how to address potential impacts and dangers of a project. The Social Impact Analysis could be strengthened. Social project impacts are currently primarily assessed through the evaluation by the National Commission for Indigenous People. The Department of Labor and Employment) is also included in the permitting, but this is mostly for permits to operate the plant premises.

Medium Barriers

Generally, there is a public acceptance of renewable energy projects. RE projects are sometimes even seen as tourist destinations in the Philippines, with the likes of Bangui in Ilocos and Pililia in Rizal being visited by tourists year-round. At the same time, some resistance remains related to fears of the harmful impact of such projects on (protected areas of the)
environment. There are also still misconceptions, e.g., that renewable energy is unreliable. Here, better public messaging could help establish that in recent times it have been mostly coal-fired power plants that have been a source of unreliability in the Philippine power system.

Medium Barriers

The required permits are listed on:https://www.evoss.ph/Home/Requirements. However, it its not necessarily the number of permits that is the issue, but the lack of clarity around how to get them from the relevant agencies. Sometimes this is unclear, and even the agencies arenʼt always fully clear on what their role is.

Medium Barriers

In 2019, the DOE established the energy virtual one-stop-shop (EVOSS) to streamline permitting procedures. This has accelerated the processing of applications, but there are still improvements to be made in terms of consistency of permitting requirements, coordination across government institutions, etc. In 2023, the governement introduced Green Lanes, a “One-Stop Action Center for Strategic Investmentsˮ intended to attract more foreign investment in certain areas (including power) by simplifying and streamlining related government procedures down to the Local Government Unit level.

Low Barriers

The DOE has already issued two department circulars (2019, 2023) to advance the use of battery energy storage systems (BESS) in the Philippinesʼ power system. Presently, there is around 500 MW of BESS capacity installed in the Philippines, and around 4,000 MW proposed. It is also expected that in one of the next rounds of the GEAP, there will be a target for RE+BESS systems. BESS are allowed to participate in the WESM and are already delivering ancillary services, even if the scale thereof is
currently still limited.

Low Barriers

The Philippines has preferential dispatch. This means that once the must dispatch renewables have been accounted for in the net load, dispatchable renewables receive priority dispatch.

Low Barriers

There are no special incentives yet. There are some discussions at a policy level, but this is currently not a priority.

Low Barriers

The combination of the distortions of the mandatory gross-pool WESM and the bilateral PSAs, and the take-or-pay related clauses in those PSAs incentivize electricity production of baseload plants to over renewable energy and disincentivize flexible behavior. There are also signs that when coal-fired power plants in the Philippines have been required through market dispatch to behave more flexibly that they struggle to cope with this technically, as hinted at by the increasing number of unscheduled outages of coal plants in the country.

High Barriers

Captive consumers (i.e., the customers of Distribution Utilities) pay monthly average rates and are hence not exposed to time-varying price signals. Larger consumer, such as commercial and industrial players, can be eligible to be offered time-of-use rates. Within the Green Energy Option Program, consumers can also receive time-of-use rates. Large customers on the WESM are allowed to submit customer demand bids if the load has been certified as dipatchable. So overall there are some early signs of a demand-side flexibility incentive structure, but more work is still to be done.

Medium Barriers

Certain distribution utilities in The Philippines offer a peak/off-peak pricing option (e.g., Meralco). However, this is not a widespread practice. In terms of electric vehicle charging, discussions so far have been limited to where to locate the charging infrastructure, not how to use it flexibly. A Smart Green Grid Plan is supposed to be published this year, which could be the start of increased efforts in this area.

Medium Barriers

Forecasting is done on a power plant basis.

Low Barriers

The Philippines has a mandatory gross-pool market. All market
participants have to submit forecasts on a unit basis. Hence here, there is no role for aggregators. However, within the Green Energy Option Program, there is a role for demand aggregators as smaller players can pool their demand to meet the minimum demand requirements to participate in the program. These aggregators would then need to procure energy via a combination of bilateral contracts and purchases on the spot market to meet their contractual obligations as retail electricity suppliers to contestable consumers.

Low Barriers

The Philippines sets forecasting quality standards for its must dispatch renewables (e.g., solar and wind). Adherence to these standards is tested annually. Market players who fail to meet the standards receive penalties as described in the WESM Penalty Manual.

Low Barriers

Generation companies have to submit data to the market operator that allows to verify the validity of their forecasts. These forecasts have to adhere to certain quality standards.

Low Barriers

In 2021, an intraday dispatch at five-minute intervals was introduced, followed by the introduction of a reserve market in 2024. This should provide adequate short-term value signals to manage greater shares of VRE.

Low Barriers

The Philippines has a reserve market that came into operation this year. Scheduled generating units, battery energy storage systems and pumped- storage units are allowed to bid in. Variable renewables are not yet allowed to participate in this market.

Medium Barriers

Certain distribution utilities offer an optional peak/off-peak tariff plan. However, this seems limited, and more complex time-of-use rates will require advanced metering infrastructure that is not yet in place. A “Smart Green Grid Planˮ should be published early next year.

High Barriers

The Philippines has a preferential dispatch policy for all renewable energy resources in its Wholesale Electricity Spot Market. This consists of 2 elements: 

1.  Must dispatch: all qualified and registered intermittent renewable energy-based plants, whether or not under FIT system, such as wind, solar, run-of-river hydro, or ocean energy, must be dispatched whenever the plants have available generation.
 
2.   Priority dispatch: all biomass plants under the FIT system must receive priority in the dispatch to meet the residual load.

Low Barriers

The Philippines has a mandatory gross-pool spot market, the WESM, that schedules all generation in Luzon-Visayas-Mindanao in the most economic way based on the information in the submitted bids. However, many coal- fired power plants also have bilateral power supply agreements (PSA). This leaves baseload power plants with an incentive to bid below their marginal costs in order to be scheduled for dispatch and meet the commercial obligations of their PSA upon which remuneration depends.

Medium Barriers

PSAs for the captive market are designed to guarantee full cost recovery and hedge baseload producers and suppliers against market risk, which is passed on to consumers. They typically include several components that have averse affects for RE development in the country, e.g., automatic pass-through of fuel costs to consumers, mechanisms to increase capacity payments to baseload assets when these are utilised less, and minimum offtake obligations. A lot of Distribution Utilities (DUs) have such contracts in which they have already (over-) contracted coal-fired power plants for the next years and decades. This is a key challenge to increasing the RE share in a DUʼs portfolio (such that they can comply with their Renewable Portfolio Standards) as they simply cannot afford to contract more RE.

High Barriers

As part of the electricity sector liberalization, third party access to the grid has been established in the Philippines, called “Open Access Transmission Serviceˮ, a.k.a. the OATS Rules. These rules mandate the transmission network provider (TNP) to “provide open access subject only to the confirmation by the TNP that the Grid shall be adequate to accommodate all or part of the service application or if no costs are likely to be incurred for new Facilities or Grid upgrades.ˮ To this end, the TNP carries out a
System Impact Study and a Facility Study. This is where there have been issues, even if improvements were made lately, with timelines cited of 18 months for NGCP to execute a system impact study, causing bankability issues for RE project developers, among other issues. To some extent, distribution utilities could side-step this problem by increasing their use of embedded generation, which does not have to go through this process.

High Barriers

Developers are allowed to build, own and operate transmission lines. There are several examples in the Philippines of a generation plant (including some solar PV plants) supplying electricity directly to end-users. Nevertheless, there are challenges, for example with offshore wind projects, where developers may be required to finance, operate and maintain point-to-point transmission lines to connect their wind farm to the transmission system (e.g., a subsea cable to onshore the offshore wind generation). While this may expedite connection, it can represent a significant cost, and is overall an indication of the insufficient speed of grid enhancement by the grid operator. Once the line is used by other connected producers/consumers (e.g., a second offshore wind farm), TransCo buys the transmission line at a “fair priceˮ. However, there is uncertainty about how this fair price would be calculated.

Medium Barriers

The charges for using the grid are calculated following the Amended Rules For Setting Transmission Wheeling Rates issued by the ERC under Resolution No 8, series of 2022. Some questions have been raised around how the line rental charges are calculated (i.e., the cost of using the transmission grid for bilateral contracts concluded outside of the WESM). These costs have proven substantial for several distribution utilities.

Low Barriers

The Philippinesʼ grid operator releases a Transmission Development Plan with some regularity, the last one being published this year looking ahead from 2024 to 2050.

Low Barriers

The Transmission Development Plan indicates that it is anticipating the 35 GW of solar and onshore wind, and 61 GW of offshore wind that the DOE has announced, among other things through the development of the transmission backbone to accommodate the growth of VRE in the Competitive Renewable Energy Zones. However, NGCPʼs planning and grid development progress has not been aligned with DOEʼs envisioned renewable deployment. This, and the queue for system impact studies of RE plants wanting to connect, has been leading to serious delays in
connecting new RE projects.

High Barriers

The latest distribution development plan has no explicit mention of the energy transition. While some larger distribution utilities may anticipate this in their planning, there are many smaller distribution utilities (DUs) and energy cooperatives who do not have the required institutional capacity. This could become a real hurdle for the integration of distributed energy resources (e.g., roof-top PV, EVs and BESS).

Moreover, some small DUs perceive some RE programs as a threat, for example, net-metering. Distribution charges are computed based on the total kWh consumption of the end-user. If these users become prosumers, the DU would receive less income from those users while still facing similar grid management costs (the so-called “grid death spiralˮ). This has slowed down the rollout of the Green Energy Option Program. For this reason, it was decided that the RE certificates of all its connected prosumers will be awarded to the DUs for their compliance with the Renewable Portfolio Standards, the idea being that this would incentivize them to accelerate the roll-out of net-metering and DER sources within its franchise area.

High Barriers

Regional grid interconnection is not yet really relevant for the Philippines as an island country. At some point, the ASEAN Power Grid will play a role, but itʼs unclear when that will be. For now, this is not a key barrier for RE development in the country.

Low Barriers

Developers regularly face long connection delays, both during the permitting stage (NGCPʼs system impact study has been reported to take up to 18 months), and before and during the grid construction (if needed), with some stakeholders reporting that grid upgrades can take up to 10 years from the initial needs assessment to the commissioning of the new grid infrastructure. RE project developers are not compensated for any of these grid interconnection delays, introducing serious financial risk for RE project development in the country. At the smaller scale, RE connection is somewhat simplified, but the process can still take up to 6 months (see further under sub-indicator 4.3.2).

High Barriers

There are specific grid connection procedures for distributed generation. For smaller installations (e.g., end-user led rooftop solar PV projects) falling under the Distribute Energy Resources (DER) rules, the procedure is somewhat simplified relative to large-scale projects. However, there is still significant room for streamlining as the entire process, from the start of the distribution impact study to obtaining a bidirectional meter for the net metering scheme, can take up to 6 months. A key issue is that Distribution Utilities appear to be employing quite conservative limits for the maximum installed VRE capacity in their networks. For example, Meralco limits the installed VRE capacity to 20-40% of the transformer capacity. For other systems, falling under the DER rules, permitting requirements are the same whether a project is 1 MW or 1,000 MW, thus leading developers to prefer larger scale projects to mitigate permitting related risks and pursue economies of scale.

High Barriers

The grid connection cost sharing depends on the project, but sometimes developers are expected to finance (and operate and maintain) the transmission line that connects the project to the transmission grids. For certain projects, e.g. offshore wind projects, this can represent a significant investment.

Medium Barriers

The Philippines Grid Code (2016 edition) contains separate requirements for large-scale wind and solar generating units (as opposed to other “Large Generating Unitsˮ). VRE plants are not allowed to provide system services yet (although “new technologiesˮ like battery systems are).

Low Barriers

There are no programs as of yet promoting the large-scale deployment of smart grid infrastructure. However, according to the latest projections, the DOE is to publish a “Smart Green Grid Planˮ in April 2025 that is supposed to form the basis for the development of smart grids in the country and the achievement of related objectives and capabilities (e.g., full customer
choice, VPP roll-out).

Medium Barriers

NGCP reports that is has established an “Overall Command Centerˮ and is working on the establishment of a “National Control Centerˮ. Additionally, it reports to have a variety of systems (e.g., a Supervisory Control And Data Acquisition-Energy Management System and Microprocessor-Based Substation Control systems) that should enable real-time remote monitoring and control of various power system assets. It is not fully clear how advanced the progress is.

Medium Barriers

NGCP seems to have sufficient capabilities to monitor the real-time state of the grid, including the output of VRE plants, to manage the system as best as it can with the assets it can control.

Low Barriers

NGCPʼs transmission development plan does not mention the use of modern equipment, like phase-shifting transformers or high-temperature- low-sag lines. That being said, it seems to be undertaken substantial efforts to modernize its operations, particularly activities like the large- scale roll-out of fiber networks, the consolidation of substation control in regional control centres, etc.

Medium Barriers

The roll-out of smart meters has been limited to date. Meralco started a pilot project with 5,000 smart meters in 2023, and has worked with the DOE and ERC to develop the AMI implementation rules and policies. However, in general this is still in its infancy in the Philippines, and is also not one of the countryʼs main priorities now.

High Barriers

The Philippines has a moratorium on new coal plants. However, there is no clear plan for the phase-out of the existing coal power plants, which generated nearly 2/3 of total electricity supply in 2022, and DOE continues to take a technology-agnostic stance. Perhaps a politically more feasible
and fruitful way forward could be to simply force coal-fired power plants to compete in the spot market by addressing the minimum take-off clauses, among other things, which could by itself lead to a reduced reliance on coal and side-step challenges with having to repay the “remaining valueˮ of the coal PSAs.

High Barriers

The Philippines has a moratorium on new coal plants. However, there is no such ban on gas-fired power plants. Given the strong interest of several political actors in LNG, this could become an area of concern. Certain policy-makers want to impose LNG offtake requirement for Distribution Utilities (DUs), similar to the Renewable Portfolio Standards, requiring DUs to buy a certain portion of their energy needs from LNG. This should be strongly resisted as this risks locking in fossil fuel consumption and exposing end-users to global LNG price fluctuations as the LNG would be imported.

Medium Barriers

While under discussion, there are no carbon taxation or pricing mechanisms as of yet in the Philippines. The emission standards are also in serious need of revision, with the Philippines having some of the most lenient sulfur oxide and nitrogen oxide emission standards in the region. In 2022, one of the market players, ACEN, implemented the worldʼs first market-based “Energy Transition Mechanismˮ for the early retirement of a 246 MW coal-fired power plant. While a positive development, it is unclear how replicable this approach will be.

High Barriers

Currently, the only monitoring and tracking occurs through the Philippine Energy Plan and the National Renewable Energy Plan. These are supposed to be published annually, but that is not happening. There is space to engage PH DOE to encourage them to do more here, as they have access to quite detailed information through EVOSS, but they are not sharing this publicly at the moment.

Medium Barriers

National RE targets are reflected in the Philippine Energy Plan and the National Renewable Energy Plan. Some regions have their own sub- national targets, for example, Mindanao which has a 50% RE target by 2030.

Low Barriers

The renewable energy shares indicated in the Philippine Energy Plan are not binding (no penalties are involved if not met). Moreover, there are already hesitations from the DOE today that they might not reach the 35% by 2030, since even though RE installed capacity is increasing, the annual generation share is still stagnant as more coal is being dispatched. While this is thus an area of concern, it is unclear how best to proceed here
given the political aversion to adopt a net-zero target suggesting that pushing too strongly for binding targets may work counter-productively, e.g., leading to the adoption of a weaker target.

Medium Barriers

The Philippines has Renewable Portfolio Standard for all Distribution Utilities, for which they are penalized if they do not meet it. The current RPS percentage is very low: 2.52% (up from 1% since last year). However, the key challenge here is that there is actually a projected shortfall of renewable energy by 2026. Hence, it is key that renewable energy deployment increases.

Medium Barriers

The Philippines has set a target for REʼs share in the total primary energy supply (TPES) in the reference scenario of its PEP 2023-2050 of 33% by 2030, 37% by 2040 and 35.5% by 2050. This is concerning, as renewable growth tapers off while strong natural gas growth (from 2.6% in 2022 to 17.67% in 2050) and and oil growth (from 20% in 2022 to 31% in 2050) are indicated, and coal remains prominent (from 31% in 2022 to 16% in 2050). The Clean Energy Scenario of the PEP foresees a modest increase in REʼs share in the TPES to 41% in 2050. This notably concerning for RE ambitions outside the power sector.

High Barriers

There are overarching targets for RE in the energy sector, but there are no sub-sectoral renewable energy targets yet.

Medium Barriers

The Philippines has set a target for REʼs share in the power supply in its PDP 2020-2040 of 35% by 2030, 50% by 2040, and 50% by 2050. This is not a priority concern for RE development in the Philippines at the moment.

Low Barriers

Yes, through the GEAP

Low Barriers

There are currently no targets for RE in the heating & cooling sector and no significant public discussions on the topic.

High Barriers

The country is pursuing the implementation of the Comprehensive Roadmap for the Electric Vehicle (EV) Industry, which sets a target of a 50% EV share in the vehicle fleet by 2040 in the Clean Energy Scenario (vs. a 10% share in the Business-as-Usual Scenario). However, there is currently no discussion on whether the electricity powering these EVs should come from RE or not.

Medium Barriers

As of now, there are no targets RE related to green hydrogen production. There are ongoing discussion about how offshore wind and green hydrogen production can be used together to ease some of the offshore wind grid integration concerns.

Low Barriers

The Philippines has not yet adopted a net-zero target, and there seems to be strong political opposition to doing so. The political stance in the country seems to be that the government can only set the direction for the energy sector, and it is up to the private sector to implement appropriate initiatives. There is also a general fear of the impact of a net-zero commitment on the affordability of electricity suggesting that this could be a politically difficult area to progress in, particularly given that the Philippines already has high electricity prices compared to its neighbors.

High Barriers

As it has no net-zero target, there is no implementation to evaluate.

High Barriers

Yet to develop comprehensive transition plans for regions with high fossil fuel value creation, such as coal-heavy areas. Some localized initiatives, like those on Semirara Island, focus on alternative livelihoods and worker training, but there are no formal national strategies addressing the broadersocio-economic impacts of transitioning

Medium Barriers

Targeted strategies to deploy renewable energy projects specifically in coal or gas phase-out regions not yet in place.

Medium Barriers

Public consultation and community engagement are legally mandated in the Philippines for renewable energy project development. Key mechanisms for engagement include:
 
• Environmental Impact Assessment (EIA) and Environmental
Compliance Certificate (ECC): Developers must conduct consultations to address community concerns as part of the Environmental Impact Statement System.
• Free, Prior, and Informed Consent (FPIC): Indigenous communities must provide consent for projects affecting ancestral domains, ensuring respect for cultural and territorial rights.
• Local Government and Barangay Consultations: The Local Government Code requires consultations with barangays and LGUs during project planning to ensure local participation.
• Public Hearings: Required under the Renewable Energy Act of 2008 todiscuss project impacts and incorporate community feedback

Medium Barriers

• The Renewable Energy Act provides a framework to encourage
community participation in renewable energy projects through Feed-in Tariffs (FiT), which guarantee fixed revenues for developers, including community-led initiatives, via long-term purchase agreements at premium rates.
• The Net Metering Program supports small-scale renewable energy systems by enabling communities to sell excess electricity back to the grid, promoting grassroots involvement in energy generation.
• The Development Bank of the Philippines (DBP) supports RE development through its Green Financing Program, which supports cooperatives and local organizations. Grants from the Global Environment Facility (GEF) and USAID provide additional funding for community-basedrenewable projects.

Low Barriers

As per Department of Energy (DOE) guidelines, project developers must include Community Development Plans to provide financial or material benefits to host communities. While there is no formal requirement to source a fixed percentage of project financing from local communities, local communities can
participate in renewable energy development through energy
cooperatives. These are eligible for tax incentives and grants under the Renewable Energy Act. However, communities often lack the capital required to invest in projects, even with incentives in place. Some projects such as The Bangui Wind Farm in Ilocos Norte allocate aportion of their revenue to community organizations.

Low Barriers

Several studies have been conducted to assess the socio-economic benefits of renewable energy deployment in the Philippines, focusing on areas such as job creation, improved electricity access, and value creation. Notable examples include the Socio-economic Footprint of theEnergy Transition in Southeast Asia by IRENA. Additional examples include reports from the Philippine Institute for Development Studies (PIDS) on renewable energyʼs role in inclusive economic growth and employment.

Medium Barriers

National procurement mechanisms provide limited but notable incentives for socio-economic benefits, such as the Renewable Portfolio Standards (RPS) and feed-in tariff (FiT) schemes, which promote RE projects in rural areas. However, these incentives are not systematically integrated into procurement policies, and the absence of robust monitoring and reporting mechanisms hampers accountability and scalability.

Medium Barriers

While the Philippines offers skills development opportunities through the Green Jobs Act, Technical Education and Skills Development Authority (TESDA), and the Department of Energy, there is a no cohesive national re- skilling strategy tailored specifically to fossil fuel workers transitioning tothe clean energy sector.

Medium Barriers