Why the Time Is Right for Renewable Energy in the Philippines

Prior to the COVID-19 pandemic, the Philippines’ economy was humming. The country boasted an exemplary 6.4% annual GDP growth rate and was part of an elite list of countries experiencing uninterrupted economic growth for more than two decades.

Things look very different today. Over the last year, the Philippine economy registered its worst growth in 29 years. About 4.2 million Filipinos are unemployed, nearly 8 million took pay cuts and 1.1 million children dropped out of primary and secondary education as classes moved online.

To exacerbate this economic and human catastrophe, the intermittent reliability of fossil fuel plants has led to forced power outages and unplanned maintenance. In the first half of 2021 alone, 17 power-generating companies went offline and breached their plant outage allowances as a result of the so-called manual load dropping to preserve power grid stability. Rolling blackouts, which historically only happen in the hottest months of March and April when hydropower plants underperform due to water supply scarcity, have continued well through July, disrupting school and work for millions. The power supply instability may also be affecting COVID-19 vaccination rates, since vaccines need stable energy to meet temperature-control requirements.

There’s a solution to the Philippines’ economic and energy woes: investing more in renewable energy development. Indeed, the country could finally be at a critical turning point in bringing its outdated energy system into the future.

How Will Renewable Energy Help the Philippines?

The Philippines’ current blackouts, and the associated energy supply and security challenges, have already prompted multi-sectoral, bipartisan calls for action to transform the country’s energy system. The island nation also remains highly vulnerable to the impacts of climate change. In the last few years, as potential impacts become clearer, climate action has become an important issue for energy supply, energy security, job creation and post-pandemic essentials like cleaner air and a healthy planet.

A cyclist passes the 32,000-panel Valenzuela Solar Farm in Manila.

A cyclist passes the 32,000-panel Valenzuela Solar Farm in Manila. Investing in renewable energy could create a more stable electricity system while helping the Philippines rebound from economic downturn. Photo by Lisa Marie David and IMF Photo/Flickr

Investing in renewable energy now should be one of the country’s priorities in order to alleviate several problems it faces. For one, it could provide a much-needed economic boost and quell fears of a U-shaped recovery. According to the World Economic Forum, citing numbers from the International Renewable Energy Agency (IRENA), every dollar invested in the clean energy transition provides 3-8 times the return.

Furthermore, the widespread adoption of renewable energy creates employment opportunities up and down the supply chain. The renewable energy sector already employed 11 million people worldwide as of 2018. A May 2020 report by McKinsey showed that government spending on renewables and energy efficiency creates 3 times more jobs than spending on fossil fuels.

Renewable energy also reduces health risks since higher consumption of fossil fuels increases air pollution.

Additionally, renewable energy can provide electricity access for all while reducing electricity costs for consumers. While millions of new consumers gained access to electricity since 2000, some 2 million people in the Philippines are still without it. Decarbonized and decentralized power generation systems that do not require pricey, massive and logistically challenging transmission networks in rugged and remote terrains would further the goal of total electrification. Providing consumer choice for low-cost clean energy sources can also result in savings and better profit margins for businesses, particularly small- and medium-sized businesses, which are more sensitive to changes in their month-to-month operational expenses than larger corporations.

Finally, the low-carbon energy transition will help thwart climate change and reduce the carbon intensity of the Philippines’ power sector, as well as improve its energy system resilience. Since the Philippines is made up of more than 7,000 islands, distributed renewable energy (DRE) systems that are not dependent on the transportation of fuel are well-suited to the country's geographic profile. This reduces the need for extra-long transmission lines that can be exposed to intense storms or other natural disturbances. DREs, especially those backed by batteries, can provide fast backup power during calamities, making the energy system more resilient.

A Tipping Point for Renewable Energy?

While the national government has already taken some steps to transition away from fossil fuels, coal continues to dominate the Philippines’ power supply.

The Green Energy Option Program (GEOP) is a provision of a 2008 national renewable energy law envisioned to transform the energy system by allowing commercial and industrial energy users to opt for 100% renewable energy. If implemented well, the GEOP could usher in a new business-as-usual scenario — one that no longer leans on fossil fuels, but instead makes renewable, green power the default choice because it is the option that makes economic, environmental and practical sense. However, the GEOP has remained unenforced for more than a decade.

But this may be poised to change: On July 29, 2021, a group of leading companies headed by Toyota Motor Philippines released a joint statement of support pushing for a rapid, full implementation of the GEOP. Notably, Toyota Philippines was joined by AC Energy, the energy arm of the country's oldest conglomerate, which last year announced to great fanfare its plans to fully divest from coal by 2030 on the way to becoming Southeast Asia’s largest listed renewable energy developer.

High-level executives of the incumbent Duterte administration — including Department of Finance Assistant Secretary Paolo Alvarez and Department of Energy Undersecretary Felix William Fuentebella — provided reactions of support for a clean energy transition. They were joined by a line-up of leading political candidates expected to figure prominently in the crucial May 2022 elections, the first national election since the COVID-19 pandemic.

This unprecedented, truly bipartisan show of support for the energy transition and for climate action in the Philippines marks a historic turning point — political leaders across party lines have somehow unified toward a common cause.

At the same time, the May 2022 elections will see 4 million first-time Filipino voters, most of whom are increasingly climate-aware youth. This number — about 10% of total votes cast — is significant, meaning climate policy and ambitious renewable energy plans could be decisive in the election’s outcome.

Seizing the Renewable Energy Opportunity in the Philippines

Like many developing countries, especially those in Asia, the Philippines needs to respond and recover fast to the economic impacts and human devastation of the COVID-19 pandemic. Investing in climate-proof, economically smart renewable energy will put the country on the right path. Rather than continuing to rely on unstable, polluting fossil fuels, the Philippines has an opportunity to embrace the support of the private sector and the public, lead among its peers in the region, and chart a bold path toward a renewable energy future.

The question now is: Will its national government seize the opportunity?

https://www.wri.org/insights/renewable-energy-opportunity-philippines