Article
Key considerations for renewable energy investments in the Philippines
11 June 2024 | 4 minute read
The Philippines, a thriving hub in Southeast Asia, is rich in renewable energy sources and led by a government eager to leverage these assets. These factors create an exceptional opportunity for investors looking to make a mark in the region’s renewable energy sector.
In this article, we explore the opportunities and supportive policies that make the Philippines a prime destination for renewable energy investments.
A powerhouse of potential
Geographically located within the Pacific Ring of Fire, the Philippines is abundant in renewable energy resources. While the Philippines already ranks as the third largest power producer of geothermal energy, the Philippine Department of Energy reports that the country still has a remaining geothermal potential capacity of 981 megawatts.
With respect to solar energy, the country has a potential commercial capacity of 31,301 megawatts, with only an installed capacity of 1,443 megawatts as of date. The story is similar for wind energy, with an exploitable potential of 89,357 megawatts, but only 443 megawatts currently harnessed. Hydropower also presents vast untapped potential, estimated at 12,742 megawatts, with only 1,190 megawatts developed.
Legislative support and investment incentives
The Philippines government has introduced several policies aimed at attracting and simplifying investments in the renewable sector.
In 2022, nationality restrictions on renewables were lifted such that a 100% foreign owned entity may now engage in projects that utilize solar, wind, hydropower, and ocean energy. Notably, entities looking to develop geothermal resources remain subject to the 40% limit on foreign capital, except for those acting pursuant to financial or technical assistance agreements covering large-scale projects. More about this topic as well as the easing of nationality restrictions in other key industries may be read here.
Moreover, the administration has implemented policies under its "National Renewable Energy Program" to achieve a 35% renewable energy power generation mix by 2030, and 50% by 2040. These include the "Feed-in Tariff" program, providing guaranteed twenty-year fixed payments for electricity produced from renewable energy resources, and the "Renewable Portfolio Standards" program, requiring electricity power industry participants to source or produce a minimum portion of their electricity requirements from renewable energy.
In addition, programs dubbed as "renewable energy transition enablers" have been rolled out to complement renewable energy-focused policies. These include the implementation of the "Ease of Doing Business Law", legislation that institutes reforms to promote greater efficiency in government processes, and the creation of the "Energy Virtual One Stop Shop", a web-based filing and monitoring system that provides a single decision-making portal for applications of new national power projects in the Philippines. We discussed these programs in more detail here.
Projects underway
In 2022, nationality restrictions on renewables were lifted such that a 100% foreign owned entity may now engage in projects that utilize solar, wind, hydropower, and ocean energy.
In May 2023, the Philippine government awarded to Singapore-based Blueleaf Energy of the Macquarie Group and its local partner SunAsia Energy the right to develop the world's largest floating solar project, which will have a cumulative capacity of 610.5 MW.1 Operations are expected to begin between 2026 and 2030. Blueleaf Energy CEO Raghuram Natarajan said that his company intends to build two to three GW of renewables in the country over the next 5 years.
In March 2024, Mainstream Renewable Power signed service contracts with the Department of Energy for the development of 2 onshore wind projects in Luzon and Visayas.2 Mainstream's majority stake is held by Aker Horizons, a Norwegian entity, while Mitsui & Co., Ltd. of Japan is a strategic investor of Mainstream. The wind projects, which are one of the first renewable projects to be undertaken by a 100% foreign-owned entity, will have a combined capacity of 440 MW and will each have a 25-year operating period.
Looking ahead
In January 2024, a bill proposing the creation of a state-run corporation tasked with undertaking the research and development of renewables, and the construction and operation of renewable generation facilities was filed in the lower house of Congress. At the same time, Senator Sherwin Gatchalian released a statement urging lawmakers to pass his proposed "Energy Transition Act", which creates a transition plan to achieve phaseout of fossil fuel plants and net zero emissions by 2050.
Our team, led by Yutaka Sakashita and Luis Seña, who is qualified in the Philippines, is adept at navigating the legal landscape to maximize your investment’s potential. Whether you’re looking to initiate a new project or expand an existing one, Withers is your partner in harnessing the rich renewable energy opportunities in the Philippines. For more detailed and curated advice regarding any of the matters discussed in this article, you may contact Luis.
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