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Philippines Renewables Key View
- 16 Mar 2022
- Project Developments
Key View: We expect Philippines to accelerate the decarbonisation of its power sector over the coming years, with increasing opportunities for renewable facilities. We have revised our forecasts slightly this quarter for the non-hydro renewables sector, in line with rising investor interests and a rapidly-expanding project pipeline amid rising regulatory support, and see further upside risks. The government has also approved to reintroduce nuclear into the market's energy mix, marking a significant shift in Philippines energy policy direction, which may undermine renewables development if resources are reallocated, although we believe this will likely lie outside of our forecast period.
Renewables Headline Forecasts (Philippines 2021-2026)
|Indicator ||2021e ||2022f ||2023f ||2024f ||2025f ||2026f |
|Generation, Non-Hydropower Renewables, TWh ||14.975 ||15.728 ||16.231 ||16.690 ||17.148 ||17.580 |
|Generation, Non-Hydropower Renewables, % y-o-y ||3.9 ||5.0 ||3.2 ||2.8 ||2.7 ||2.5 |
|Capacity, Non-Hydroelectric Renewables, MW ||3,977.7 ||4,275.7 ||4,996.5 ||5,455.7 ||5,969.7 ||6,637.8 |
|Capacity, Non-Hydroelectric Renewables, % y-o-y ||3.7 ||7.5 ||16.9 ||9.2 ||9.4 ||11.2 |
|e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions |
Key Forecasts And Latest Updates
- We have made a significant upward revision to our non-hydro renewables forecasts this quarter, in line with rising investor interests and a rapidly-expanding project pipeline amid rising regulatory support. We now forecast non-hydro renewables capacity to total 10.2GW by 2031, from an estimated 4.0GW in end-2021, driven largely by wind and solar projects. This is subjected to further upside risks, although we will await the establishment of concrete policy and incentives to achieve growth first.
- The draft revision of the Philippines Energy Plan (2040) suggests a stronger focus for solar projects, looking to increase capacity by nearly 10.2GW. Other renewable fuel types include 2.8GW of wind, 343MW of biomass and 200MW of geothermal. The DoE has also included a 500MW target of battery energy storage system. At present, it remains unclear what policies or incentives will be put in place to achieve these targets.
- The DoE has also set new renewable energy targets in its latest version of the National Renewable Energy Program, with renewables expected to account for 35% of Philippines power mix by 2030 and 50% by 2040. Public consultations for the plan concluded in August 2021, and regulators are hoping to finalise and release it over the coming months.
- The DoE has launched a 2GW tender in January 2022, including 130MW of hydro, 1.26GW of solar, 380MW of wind and 230MW of biomass. These will be located across Luzon Visayas and Mindanao, with allocated capacity for each. This marks a shift away from the existing feed-in-tariff scheme, although this is classified differently from those that the utilities have launched to meet their RPS under the Renewable Energy Act.
- Philippines is looking to launch a roadmap for its offshore wind power development, alongside the support of the World Bank. This will set out to identify areas with high potential, policy recommendations, and consulting with local stakeholders to establish an offshore wind market. DoE has already awarded five offshore win energy contracts with a combined capacity of 5GW.
- The DoE has released a draft policy to develop waste-to-energy facilities across the country, and will accept public comments up to September 8 before finalising it. The most notable development is to include these facilities with 'must dispatch' preference, and other incentives given to distribution utilities procuring energy from these facilities.
- The DoE has reclassified geothermal as a mineral resource and now allows for 100% foreign investment into geothermal projects, in a bid to attract more foreign investors into the sector. Five of these developments were launched under the third Open and Competitive Selection Process. Bids were received from Energy Development, Philippine Geothermal Production and MASE Power. Two geothermal projects - the 9MW Itogon Geothermal Project and the 4MW Maricaban Island Geothermal Project - did not get any proposals from the private sector. The projects are now available for direct application.
- As part of the policy guidelines for energy conservation, the DoE has mandated that all new and existing buildings will be required to use solar photovoltaic and renewable energy technologies. Covered buildings will initially source a minimum of 1% of their projected annual energy requirements and will allow be allowed to sell surplus renewable energy (max of 100kW) to their local power unit. These figures may be raised by the Energy Regulatory Commission in future.
- The government has approved to revive nuclear in the market, with President Duterte signing an executive order to include nuclear in the market’s energy mix on February 28 2022. The order also directs an inter-agency panel to look reopening the mothballed Bataan Nuclear Power Plant. This order has come as his term draws closer to end, and the current front-runner in the May presidential election, Ferdinand Marcos Jr, has also stated plans to revisit the project. Following the order, a nuclear policy is set to be announced soon, which will include drafting of framework, legislation, compliance with international standards and stakeholder consultation. The market is currently consulting a feasibility study with Russia, which is expected to be completed in April. The government have said that the Russia-Ukraine conflict is not expected to affect plans for a Russian role in developing nuclear infrastructure here. We note that there has already been some traction on developing Philippines’ nuclear sector in recent months, given ongoing government considerations to restart the country’s Bataan Nuclear Plant and reintroduce nuclear energy in the country. Should the government decide to progress with its nuclear plans, we note that the government has the capacity to ramp up the sector relatively quickly, and it is likely that resources will be allocated to the nuclear sector instead, undermining the development of renewable energy.
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