With a power score of 2.25, the Philippines ranks number 10 among emerging markets and number 27 in the global ranking.
- Emerging markets
2.25 / 5
Net-zero goal and strategy
The Philippines has a goal for reducing carbon emissions but stopped short of instituting a net-zero goal. The updated Philippine Energy Plan follows two main scenarios in the country’s plans in achieving carbon emissions reduction – the base case reference scenario and the more aggressive clean energy scenario, which incorporates a higher renewable energy share in the electricity mix.
Nationally Determined Contributions (NDC)
The Philippines submitted its Nationally Determined Contribution, or its official plan to help achieve the goals of the Paris Agreement, to the UN with a target of about 75% reduction from 2020 to 2030 relative to its business-as-usual scenario for the same period. The reduction in emissions will come from energy, transport, waste, forestry, and the industry sectors. While agriculture is not explicitly stated, this is assumed to be included in industry.
Fossil fuel phase-out policy
While the Philippines has no definite fossil fuel phase out policy, the government has set a moratorium on approving fossil fuel power plants in 2021. Plants that have already been approved will be allowed to proceed. Several companies engaged in coal generation, either directly or indirectly, have planned to divest from coal assets within the decade.
The Department of Energy (DOE) has an expansive process on project application, interconnection and reporting to stay within compliance. The original feed-in tariffs (FIT) scheme, called FIT and FIT-All, was officially suspended in 2019. The updated policy for green energy tariffs will be included in the Green Energy Auction Program, officially launched in November 2021. Draft rules are available but no official published rules are out yet.
The Green Energy Auction Program (GEAP) is a policy that includes a renewable energy auction to be administered by the DOE. The program has a target of 2 gigawatts of new installed capacity equivalent to $2 billion of investment value. Guidelines were issued in November 2021 and missed the target auction launch date of June 2021. An actual tender was raised in March and contracts were awarded in June. Winning bids will start around 2023 to 2025 and will be given a 20-year power purchase agreement with Meralco, the country’s largest utility company.
The DOE released an updated Philippine Energy Plan which now covers 2020 to 2040. The previous version introduced two scenarios in power supply and demand outlook. The reference scenario (REF) is considered as the business-as-usual case, while the clean energy scenario (CES) is defined as the alternative and incorporates higher renewable energy share in the electricity mix. Peak electricity demand in the Philippines is forecast to increase almost four times from 15,282MW in 2020 to 54,655MW in 2040 under the REF scenario, based on the updated report. These estimates are lower than previous releases.
Deregulation removed all forms of subsidies that influence fossil fuel prices. Excise taxes as part of the new tax regime, known as Tax Reform for Acceleration and Inclusion (TRAIN) Law, have been imposed and impacts overall prices. The Power Development Program is the only explicit fleet 'modernization' program in the Philippines. It states that 9,000 megawatts of new-build capacity is expected over the next decade and that of the 1,868 megawatts of planned oil-based thermal plants shortlisted for retirement, some will be considered for rehabilitation and conversion to gas-fired power plants.
Power prices and costs
Power pricing varies depending on the end user. Meralco employs a peak/off-peak program for its corporate clients and partners, while the Energy Regulatory Commission (ERC) has time-of-use (TOU) pricing, which charges customers based on when actual energy use has taken place. The aim is to replace electricity meters with TOU programmable meters with stamping capability. This is designed to reflect the cost of electricity at any particular time of the day. Subsidies are provided for low-income electricity consumers with consumption of less than 100kWh.
In terms of fuel pricing, the Philippines deregulated the downstream oil sector in 1998 to foster a competitive market for fossil fuel subsidy reform. This meant that petroleum products are subject to taxes including a uniform value added tax rate of 12%. Deregulation removed all forms of subsidies that influence fossil fuel prices.
The TRAIN law implemented in 2018 has a trigger for a suspension of fuel excise taxes if prices rise to certain limits but it has not yet been implemented. The excise taxes are due for another round of reviews and changes in 2023.
The Philippines still has no plans for implementing a form of carbon tax or pricing.
The power sector has been reformed and is somewhat deregulated. Independent power producers (IPPs) still need government approval from the ERB regarding changes in price and other aspects of the industry.
The Philippines is one of two countries in the Southeast Asia region to have a liberalized electricity supply industry through the comprehensive Electric Power Industry Reform Act (EPIRA). This law allowed for the liberalization and demonopolization of electricity distribution. Power supply agreements (PSA) are reached between a distributed utility (DU) and a generation company (GenCo) for the supply of capacity and/or energy intended for the DU's captive market. Power supply agreements in general can span 10 to 25 years.
There are very few actors in the Philippines energy industry. The majority of generation is owned by three main players, namely, Firstgen which owns 17%, Abolitz Power with a 15% share, San Miguel Energy Corp. at 24% market share and AES, which sold its 6% share to San Miguel. Generation is handled and managed by IPPs while grid operations are handled by the National Grid Corporation of the Philippines (NGCP). The wholesale market is under the jurisdiction of the Wholesale Electricity Spot Market (WESM) as mandated in the EPIRA law. WESM is the centralized venue for trading electricity as a commodity in the Philippines, based on actual demand and availability.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
Renewable project development in the Philippines has been stalled by political red tape that prevents the timely passing of policies within the RE Act of 2008. The on-going Covid-19 pandemic and the response of the government also caused the strict lockdowns to delay projects and implementation of several programs. The updated Philippine Energy Plan (2020 to 2040) has provided new focus to include renewable energy development in economic recovery, but has in turn lowered targets and estimates for RE growth and capacity by 2040 compared to pre-pandemic plans.
Several development plans are available in the form of the distribution development plans, transmission development and electrification development plans from the DOE, which outlines long-term development action plans to 2025. IPPs develop most, if not all, new-build projects today. Transmission is handled under Transco, and the Wholesale Electricity Spot Market was established in 2015. Distribution is handled under 20 private distribution utilities and sales/retail is open now to new retailers (retail electricity suppliers) and the distribution utilities.
Mini-grids and SHS are actively promoted and implemented through various programs which are foreign assisted such as the EU-assisted Access to Sustainable Energy Program (ASEP). The SPUG is focused on providing electricity access through the missionary electrification program in rural areas and includes programs on grid expansion. The country currently has no pay-as-you-go (PAYG) services, but SolarHome plans to expand its PAYG services in Southeast Asia, including the Philippines.
Offtaker risk remains low, although the changes in the feed-in tariff program may result in some risks. The FiT is backed by the government (paid for by rate payers) and PSAs with distribution utilities tending to be low risk due to positive historical payment capabilities. PPA payment delays are covered by warranties, but no in-depth information is available in terms of actual delays, if any.
The inter-agency review conducted when EPIRA was enacted resulted in PPA renegotiations, but no further information is available for more recent renegotiations conducted. The country has previously absorbed some form of debt following some changes in the mandate. No in-depth information is available for utilities in general.
Currency of PPAs
Are PPAs (eg. corporate PPAs and all other types) signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel price distortions - Subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Fossil fuel price distortions - Taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes or carbon prices?
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