By Fitch Solutions
- The Philippines’ wind and solar sectors will lead renewable capacity growth over the coming 10 years following robust governmental support and investor interest.
- We expect the government to go through with its policy of allowing foreign companies full ownership of renewable power projects, attracting more foreign investment for the development of the sector.
- Increasing investment into improving and expanding the Philippines’ grid network will present further upside risks for renewables growth over the long term, offering more grid connection opportunities.
The Philippines’ wind and solar sectors will lead renewable capacity growth over the coming 10 years following robust governmental support and investor interest. From 2022 to 2031, we expect the Philippines’ non-hydropower renewables sector to experience the greatest expansion. It will grow by 6.8GW and at an annual average rate of 10.4%, surpassing conventional thermal’s increase of 5.8GW. About 86% of this net non-hydropower renewables capacity growth will be from the solar photovoltaic (PV) sector, while 10% will come from the onshore wind power sector. Within our Key Projects Database, there are already 127 non-hydropower renewable power projects in development, totalling 21.4GW in capacity, 78 of which are solar PV projects. Tailwinds for the sector’s growth will largely come from strong governmental support to meet its ambitious targets of 35% renewable electricity and 15.3GW of renewable capacity by 2030 (including hydropower). In June 2022, the market’s Department of Energy (DOE) launched its first round of renewable project tenders, totalling about 2.0GW and encompassing solar PV, wind, hydropower, and biomass and waste power projects (in order of capacity allocated). We expect more such tenders to be launched whilst increasing demand for renewable power projects is signalled by interest from the domestic and international private sectors.
Robust Growth In Non-Hydropower Renewables To Shift Capacity Mix
Philippines – Net Installed Capacity By Type, MW & share of capacity mix
*includes pumped hydropower storage. e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, National sources, Fitch Solutions
We expect the government to go through with its policy of allowing foreign companies full ownership of renewable power projects, attracting more foreign investment for the development of the sector. In September 2022, the Philippines’ Department of Justice proposed that renewable power projects should not be subject to the limitation of 40% foreign ownership. This opens up the renewables sector to larger ownership by foreign companies. There is a potential this could reach 100%, which the DOE has indicated they are in favour of. At the start of November 2022, the DOE announced that it is aiming to open the sector to full foreign ownership by the end of November after gathering public consultation for amendments to the Renewables Energy Act. We expect this legislation amendment to go through, attracting more foreign investment into the sector, either through consortiums, single-owners, or even cooperation with local companies. Earlier in February 2022, the Philippines also passed the Senate Bill (SB) 2094, allowing 100% foreign ownership of public utilities including electricity transmission and distribution. This will promote private sector involvement and foreign direct investments (FDIs) in the Philippines, further diversifying the competitive landscape and providing much-needed capital to improve the power sector. 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 privatisation of the power market, which started with the Electric Power Industry Reform Act in 2001.
Increasing Competition In Philippines’ Renewables Sector To Present Tailwinds For Growth
Philippines – Non-Hydropower Renewables Capacity by Type, MW, & Growth Rate, %
e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, National sources, Fitch Solutions
Increasing investment into improving and expanding the Philippines’ grid network will present further upside risks for renewables growth over the long term, offering more grid connection opportunities. In 2022 alone, the Philippines experienced key development of its grid network. In April 2022, the National Grid Corporation of the Philippines (NGCP) allocated PHP160bn (USD2.81bn) in capital expenditure for the Fifth Regulatory Period (2021 to 2025). NGCP notes that PHP111.4bn (USD1.96bn) of this expenditure is for transmission projects, including those that have already been completed in 2021 and 2022, and funding those that are in construction and pre-construction stages. Capital expenditure of PHP22.3bn (USD392mn) is also allocated to the operation and maintenance of existing grid infrastructure from 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. In June 2022, the NGCP 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 (HVDC) system. This marks a key development of the government’s plan to unify the Philippines’ grids across its many islands.
National Integration Of Electricity Grids Will Unlock Areas For Power Project Development
Philippines – Existing & Proposed Transmission Network Projects (2022)
Source: DOE, NGCP, Fitch Solutions
This article has been sourced from Fitch Solutions and can be accessed here.