Overcoming obstacles in shift to renewables

With abundant sun, surf, and one of the world’s largest geothermal reserves, the Philippines is often cited as one of Southeast Asia’s most promising clean energy markets.

At least on paper, national policies look to make good on that promise: the government has already opened the sector to full foreign ownership, rolled out successful green energy auctions, and committed to raising renewables’ share in the power mix to 50% by 2040.

Investment is growing. The Department of Energy (DoE) predicts P25 trillion worth of investments to flow into the local renewable energy (RE) sector over a 10-year auction plan. The potential combined capacity for the year is predicted to reach about 18,000 megawatts (MW). According to the DoE, this positions the country within range of its target of expanding RE share to 35% by 2030.

“If you think about it, last year P1.3 trillion went into renewable energy, and we’re talking about 10 years here,” DoE Secretary Sharon S. Garin previously told media.

Yet, ongoing energy security challenges as well as persistent grid bottlenecks are foreseen to slow progress towards that goal, according to international intelligence firm S&P Global. It predicts such headwinds are dragging down the share of renewables in the Philippines’ power mix to just 27% by 2030.

RE projects are capital-intensive, technically complex, and subject to the usual risks of infrastructure development. But the uncomfortable truth is that the Philippines’ renewable investment challenge is not primarily an energy problem. It is a system problem — rooted in infrastructure gaps, institutional friction, and market design inefficiencies that extend well beyond the power sector.

Vince Heo, director for Asia-Pacific Power and Renewables Research at S&P Global, pointed to structural and systemic gaps in the Philippine energy grid — the transmission network in particular — that prevent new RE power projects from actually reaching consumers.

“We are running the software to see whether the system balance could be met or not, and it’s clearly not in the Philippines. You don’t have good grid planning here,” Mr. Heo said.

Essentially, RE projects are often located in remote provinces where wind, sun, and geothermal energy is abundant. But these sites are often far from existing high-voltage transmission lines or any accessible interconnection points to plug the harvested energy into the national grid. Without a modern grid and sufficient energy storage systems, the system also cannot balance the intermittent nature of RE sources.

This also hinges on the assumption that such RE projects get off the ground in the first place. In one example of an offshore wind development, for instance, S&P Global highlights that a developer might need over 80 different permits involving more than 25 different government agencies.

Mr. Heo warned that at the current rate, the Philippines is likely to only reach the target 50% RE share by 2050, ten years later than the 2040 goal set under the government’s Power Development Plan 2023–2050.

Energy policy has moved faster than infrastructure planning, resulting in a system where generation capacity is expanding without the commensurate ability to deliver that power efficiently across the country. In such an environment, even technically viable projects face curtailment risks — an outcome that directly undermines investor returns.

Energy service contracts only pay for delivered energy. As such, wasted energy, because the grid cannot absorb the power generated, leads to lost revenue.

For investors, that is hardly a convincing environment. Capital tends to be patient when risks are clear and manageable; it becomes cautious when timelines and outcomes are unpredictable.

Especially when placed amid a global context where capital for RE is not scarce but highly selective, the Philippines is competing with neighboring markets for investment. For many, countries like Vietnam and Indonesia are simply more attractive in terms of generating returns.

A study by the Philippine Institute for Development Studies (PIDS) published March 17 found that from 2003 to 2024, electricity consumption in the Philippines rose from 52,941 gigawatt-hours to 126,941 gigawatt-hours, an equivalent increase of about 140%. In contrast, over the same period, transmission lines expanded from 20,774 circuit-kilometers to around 23,110 circuit-kilometers, or only about 11%.

“This underinvestment in transmission contributed to the ongoing energy insecurity in the Philippines,” the study said.

PIDS noted that delays in transmission projects remain a key issue that affect investment timing and the system’s ability to keep pace with demand. These delays are linked to a combination of regulatory processes, right-of-way constraints, and coordination challenges across institutions.

The study also highlights that delays in regulatory processes, particularly in rate-setting, can create more uncertainty and influence investment decisions, with implications for both service delivery and cost outcomes. 

“When transmission infrastructure is not available on time, lower-cost or cleaner generation gets curtailed, forcing the system to rely on more expensive alternatives,” the study said.

Long-standing structural issues translate into higher system costs, especially during periods of elevated fuel prices. Higher system costs mean a less affordable, less secure national energy system.

“Improving transmission sector performance will depend on regulatory capacity and clarity, effective coordination, and a governance framework that consistently prioritizes reliability, affordability, and long-term system resilience,” the study concluded.

Clearly, the limitation is not the availability of renewable resources, but the readiness of the system to support them. Taken together, these challenges point to a single conclusion: that the barriers to renewable investment in the Philippines are interconnected, reinforcing one another across infrastructure, regulation, and market dynamics.

Grid limitations amplify investor risk; regulatory delays exacerbate financing costs; weak market signals dampen investor incentives. Addressing any one of these in isolation will yield only partial gains.

The Philippines’ energy transition, then, will take much more than the deployment of solar panels or the construction of more wind farms. It will depend on an effort that will take the entirety of the nation — less discovering new solutions, and more about executing existing ones more effectively. — Bjorn Biel M. Beltran