Clean Energy Finance and Investment Roadmap of the Philippines

Roadmap Action Plan

This section provides an overview of a strategic framework to unlock finance and investment in offshore wind projects and energy efficiency in public buildings in the Philippines. This section serves as guidance for the central and local government in the Philippines, the private sector and the international development community active in the country, on attracting finance and boosting clean energy investments.

Enabling finance and investment in offshore wind power

Offshore wind can play a key role in helping the Philippines meet its renewable energy generation target of 35% by 2030 under the National Renewable Energy Plan (NREP) and 50% by 2040 (DOE, 2021[4]). With over 17 thousand kilometres of coastline, the Philippines is estimated to have a technical offshore wind potential of 178 GW. If fully harnessed, offshore wind has the potential to supply 23% of the country’s electricity by 2050 (World Bank, 2022[2]). However, the country only has 0.7 GW of wind capacity installed to date, all of it onshore. Offshore wind for the Philippines offers opportunities to reframe how its marine resources are appropriately exploited to achieve its low carbon and development ambitions.

In a prior study, the World Bank set out a series of suggestions to develop the offshore wind market in the Philippines. This OECD report builds upon that work by providing a more granular view of the market and the steps needed to make offshore wind a viable option for the Philippines coastal regions. The recommendations below developed under this OECD Roadmap outline some key steps and actions that can ensure a rapid scale up of offshore wind in the Philippines, including:

• Setting clear targets for fixed and floating offshore wind in power generation toward 2030 and beyond as a first step for development plans. This should be underpinned by detailed provisions for licensing, permitting, grid connection and supply chain infrastructure such as ports, roads, manufacturing capacity. Ensuring a co-ordinated approach to maritime spatial planning, power development plans, national renewable energy plans, and transmission development plans is also essential. Enhanced cross-agency collaboration would allow the Government of the Philippines to convert the high offshore wind potential into bankable projects in addition to strengthening supply chain resilience and facilitate economies of scale.

• Allocating development zones for fixed and floating offshore wind, to fast-track new projects, guide grid planning and improve procedures for transmission expansion. By collecting geo-technical data for marine spatial planning, with the support of industry and development partners, the government can fully leverage economic potential of offshore wind. In doing so, this will also help identify appropriate areas for industrialisation through domestic supply chains, port upgrades and related infrastructure that will deliver co-benefits for local communities.

• Integrating offshore wind into the country’s Energy Virtual One-Stop Shop (EVOSS) and streamlining permitting procedures, to reduce administrative barriers and encourage new market entrants. A clear configuration of roles and responsibilities for all the government agencies involved in offshore wind planning and permitting would allow for a successful roll-out of the offshore wind EVOSS. Likewise, investing in digital tools, human resources and talent development for the offshore wind one-stop shop will ensure that the process is efficient and transparent.

• Synchronising the buildout of offshore wind projects with the expansion of transmission infrastructure, to help mitigate risks such as grid congestion and power curtailment. Accelerating the grid build out and optimising its use will be critical to deliver economically viable offshore wind projects in the Philippines by reducing potential risk premia and ensuring smooth system integration. This is highly dependent on the timely implementation of the centralised national grid project that interconnects the three main regions in the Philippines. In addition, streamlining project selection procedures for inclusion in the Transmission Development Plan (TDP) and ensuring close involvement of the DOE can help avoid connection delays. Proactive grid planning - jointly by the DOE and the National Grid Corporation of the Philippines (NGCP) - for larger volumes of offshore wind capacity additions, can lower the cost per project and investments needed for onshore grid upgrades.

• Allocating offshore wind to a separate technology band in future rounds of Green Energy Auctions Programme (GEAP), to improve competition outcomes. It is important to give to the industry visibility on timing, volumes and pricing. In parallel to the auctions, the government can also consider an open-door policy for a developer-led market, provided the planning and permitting for projects are secured.

• Setting out revenue stabilisation measures at the early market stage will be important to attract low-cost and long-term finance for capital intensive offshore wind projects. Early projects are important because they will help build the supply chain, a credible track record, and investor confidence, all of which can contribute to a lower cost of finance. In line with this, a transparent costing methodology needs to be developed for offshore wind prior to establish the ceiling prices – Green Energy Auction Reserve (GEAR) - in the current auction design. It is also important to continue with the inflation indexed tariff to mitigate macro‑economic risks in a project.

• Working with International Financial Institutions (IFIs) and Export Credit Agencies (ECAs) creates opportunities to unlock private capital for offshore wind development. The roles and responsibilities of each of these institutions can rely on complementarity and collaboration. Regional Multilateral Development Banks (MDBs) can bridge the investment gap on the enabling infrastructure, port upgrades and other onshore support facilities. IFIs can set up first-loss guarantee financial instruments that can catalyse private sector investments. ECAs can intervene at project level to improve the risk absorption structure of a transaction.

• Developing a skilled and well-trained workforce can improve the competitiveness of the offshore wind sector and advance efficient supply chains in the Philippines. The government and international organisations can step up efforts to support development of human capital. This can include retraining the local Filipino workforce for careers in offshore wind across all the supply chain, incentives to transfer skills from the oil and gas sector or incentives to attract overseas Filipino professionals to bring their international experience from abroad.

Table 2. Offshore wind: key actions and recommendations

Key topic area	Actions [Timing: Short-term (S/T), Medium-term (M/T)]	Implementer
Long-term vision and common guiding principles	Developing a comprehensive offshore wind strategy that considers industry risks and balances the country’s energy transition with economic feasibility. [S/T] Setting specific and time-bound targets for offshore wind generation and installed capacity, with a clearly defined role for fixed-bottom and floating technologies. [S/T]	DOE, in collaboration with all agencies involved in offshore wind planning and permitting.
Enhanced cross-government collaboration	Strengthening planning between agencies, central and local authorities, potentially through working groups for supply chain development and enabling infrastructure. [S/T] Integrating supply chain planning early on in industrial trade policies to facilitate the development of the required onshore supporting infrastructure. [S/T] Coordinating policy approaches across existing strategies such as Maritime Spatial Planning, Power Development Plans, National Renewable Energy Plans, and Transmission Development Plans. [M/T]	Cross-government, DOE, NGCP, TransCo, DENR, NAMRIA, DOTr, DOST, DOLE, International Development Partners
Data collection and resource assessment	Allocating offshore wind development zones through data-driven decision making. This includes resource, spatial, bathymetric, geological, environmental, meteorological and socio-economic data. [S/T] Unifying and visualising all this information under a digital data room for investors, hosted under the DOE, and fully integrated in the offshore wind one-stop-shop to support project planning and permitting. [S/T] Collecting and adding other relevant data to the platform, including broader infrastructure planning such as suitable ports and transmission grids. Collaboration with wind energy developers during this process can ensure a focus on data that private investors are not well-positioned to collect. [M/T]	DOE, NAMRIA, International Development Partners
Offshore wind planning and permitting	Revising guidelines for Wind Energy Service Contracts (WESC) to accommodate offshore wind specific activities, clarify any issues of tenurial rights and allocate realistic timelines to complete the pre-development activities. [S/T] Investing in digital tools and human resources helps streamline processes under the offshore wind one-stop shop and maintain open dialogue with industry. [S/T]	DOE, Government Agencies
Onshore support facilities and port upgrades	Facilitating collaboration between port authorities and offshore wind energy developers to assess the readiness of priority ports. Establishing a baseline for required investments can feed into the business model, the financing structures, and any future infrastructure planning. [S/T] Considering a multi-port strategy, where different ports collaborate to provide different services during different stages of a project’s lifecycle. This is particularly important for floating offshore wind, which has the highest technical potential in the Philippines. [S/T] Given their strategic nature, port related infrastructure can pool together a variety of investors. In the Philippines, the port assessment development phase is expected to be financed by the Asian Development Bank. Where needed, developers can also contribute to the initial port assessment phase and in the elaboration of the port development plans. [S/T] Securing crucial concessional finance from multilateral development banks in bridging some of the investment gap and complementing the existing short-term finance facilities of ports. [M/T] Improving investment certainty and a creating a bankable project pipeline to facilitate lending from commercial banks. Allocation of specific development zones, timely planning and permitting, and frontloaded auction schedule can provide investment certainty and showcase future utilization rates. [S/T]	Department of Energy (DOE) Department of Transportation (DOTr) The Philippines Port Authority (PPA) National Grid Corporation of the Philippines (NGCP) International Development Partners Wind energy developers Institutional investors; Multilateral development banks Commercial Banks
Grid networks and trans-mission planning	Including offshore wind in the Competitive Renewable Energy Zones (CREZ) to match output with demand, in addition to facilitating some of the grid development, maritime spatial planning, ports capabilities and other supporting infrastructure. [S/T] Reforming and diversifying the project selection process for the transmission development plan and improving the efficiency of the current process of system impact studies, to allow a project to secure timely grid permit and connection. [S/T] Clarifying asset boundary classifications under the grid code, to provide some transparency on the transmission line ownership and, when applicable, the recovery mechanism by TransCo. This can cover specific provisions throughout all stages of a project lifecycle, including decommissioning. [S/T]	DOE, NGCP DOE, NGCP, ERC, International Development Partners DOE, NGCP, TransCo
Auction design and regulatory framework	Using the country’s Green Energy Auction Programme (GEAP) to enable industry development. The offshore wind auction model, including volumes and tariffs, will need to consider all the industry risks, actions and timelines mentioned above. [S/T] Creating a separate band under GEAP for offshore wind. Moreover, auction schedules can be frontloaded to provide investors across the entire supply chain with medium term visibility for financial and project planning. [S/T] Allowing early offshore wind projects to benefit from revenue stabilization based on transparent methodology for setting ceiling prices. This could be developed with established international organizations with previous experience in offshore wind. [S/T] Improving confidence in any long-term power procurement contract (PSAs, CPPAs) by i) establishing clear and unambiguous rules, roles, and responsibilities for each of the contracting party; ii) introducing some flexibility in these contracts with a minimum and maximum price range. [S/T]	DOE, International Development Partners
Offshore wind finance	Enabling project finance mechanisms, structured on a non-recourse basis in the development phase. Such structures can pool domestic and international capital and broaden the financial market participants to bring in more institutional investors, which can contribute to lower cost of finance. [S/T] Organising targeted workshops, knowledge sharing and other capacity building programmes for the financial services industry to improve the understanding of offshore wind market fundamentals in the Philippines. [S/T] Leveraging concessional finance for early projects to help the Philippines overcome the initial cost premium for offshore wind as a new technology in the country. This can crowd-in commercial finance for future projects and lower the cost of electricity from offshore wind. [S/T] Scaling up the use of dedicated financial instruments, especially those based on first loss guarantees, to incentivise commercial finance and lower the cost of capital. [M/T]	Project developers, lenders, investors International financial services with offshore wind experience. Debt and Equity advisors International Financial Institutions and Development Banks International Financial Institutions
Capacity building	Retraining the local workforce for careers in offshore wind across all the supply chain (advisers, technicians, financiers, government agencies, other support staff), combined with incentives to attract overseas Filipino professionals to bring their international experience. [M/T]	DOE, DOST, Government Agencies, Development Partners

Enabling finance and investments for energy efficiency and conservation in public buildings

The energy efficiency market in the Philippines remains nascent and efforts are underway to promote its benefits to help market scale-up. The Philippines has an indicative target of 24% economy-wide energy savings by 2040 (DOE, 2017[5]). To this end, the government has adopted a strategy to lead by example and promote energy efficiency in public buildings.

Due to their smaller scale and funding, energy efficiency projects differ significantly from utility scale renewable energy projects. While offshore wind entails logistical complexities and large-scale resource deployment, energy efficiency projects for public buildings are bound by the needs and priorities of each local government unit (LGU) and prospective contractors. However, comprehensive planning approaches, streamlining of administrative procedures and capacity building among relevant partners are all important components of a developing an ambitious energy efficiency programme. The following near- and medium-term actions can help to incentivise finance and investments in energy efficiency among LGUs:

• Establishing clear timelines and pathways to meet national energy efficiency goals within public institutions. The updated National Energy Efficiency Plan (NEECP) 2023 – 2050 has already introduced clear and time-bound sectoral targets that can guide decision making and create a unified direction for energy efficiency investments in public buildings.

• Reforming some existing regulatory frameworks and investment time horizons related to energy efficiency projects. The revision of public procurement rules can be an important mechanism to support energy efficiency projects in public buildings. This can be done through implementing specific carve-outs or revisiting procurement rules to accommodate energy efficiency projects with payback periods exceeding one calendar year, as well as allowing bundled contracts.

• Signalling commitment to energy efficiency progress through fiscal measures to attract private investment where appropriate. The government can also carefully evaluate opportunities to increase budget allocation to LGUs for energy efficiency projects. While sound public finances remain a priority, having the technical knowledge and capacity in place within the LGUs is important in the early stages of energy efficiency project deployment.

• Collaborating with development institutions to leverage technical expertise and facilitate private sector engagement. International development partners can support LGUs in designing a robust and realistic strategy to improve their access to funding sources. Increased awareness on the available commercial funding and an open dialogue between lenders and energy efficiency developers can help LGUs understand the requirements and conditions of an economically viable project.

• Building on past success to strengthen the private Energy Service Company (ESCO) market. The Philippines has a favourable regulatory environment for promoting ESCO models, which can encourage more private sector investment in energy efficiency. Establishing a project pipeline in the public sector via a designated aggregator entity could be a step in the right direction. This can be complemented with continuous capacity building measures, dedicated financing windows for ESCO projects, and potentially an Energy Savings Insurance (ESI) scheme adapted for public buildings.

• Investing in human capital and upskilling to generate new jobs and create a sustainable local workforce. Like offshore wind, energy efficiency can also benefit from technical assistance in public awareness programmes, skills and talent development provided by the government and international organisations. This can support the successful implementation of early projects and lay the foundations for further scale up in new projects and LGUs.

Table 3. Energy efficiency and conservation in public buildings: key actions and recommendations

Key topic area	Actions [Timing: Short-term (S/T), Medium-term (M/T)]	Implementer
Enhanced cross-government collaboration and planning	 Harmonising planning between agencies, national and local authorities to develop an implementation strategy with relevant stakeholders. Facilitating the creation of working groups on energy efficiency in public buildings, hosted by the DOE. [S/T]	DOE, LGUs, Government Agencies
Regulatory reforms	Revising procurement and accounting rules for public authorities to facilitate energy efficiency projects with payback period spanning several years. [S/T] Liberalising public procurement restrictions to allow for the provision of mixed contracts such as Energy Performance Contracts (EPCs). [S/T] Assessing current energy efficiency regulatory regime to evaluate if the sub-sector coverage and standards are compatible with the country’s climate ambitions. [M/T]	DOE, International development partners
Access to finance	Evaluating options for increasing public budget allocation for LGUs to ensure capacity and resources are in place for early energy efficiency projects. [S/T] Formulating a strategy to diversify funding through concessional finance, energy efficiency funds, or capital markets via municipal bonds. [M/T] Developing dedicated campaigns and training sessions to help LGUs understand lender requirements and build economically viable project proposals. [S/T] Exploring opportunities to establish a project pipeline for energy efficiency investments in the public sector via a designated aggregator entity. [M/T]	DOE, LGUs, International development partners, Private investors
Data collection and transparency	Synthesising data on energy efficiency potential, performance, payback periods and other parameters for business models and knowledge sharing about energy efficiency benefits. [M/T]	DOE, LGUs, International development partners
Capacity building	Implementing capacity building programmes across the supply chain, such as: policy and regulations, project origination, project implementation, financing and incentives, as well as performance data and analytics. [S/T]	DOE, government, agencies, IFIs
Energy Savings Insurance (ESI)	Building on international experience and allowing MDBs and the financial services industry, authorised by the DOE, to trial ESI for the Philippine LGUs. [S/T] Considering mainstreaming ESI into the insurance market based on trial results. [M/T]	International development partners, DOE

References

[3] DOE (2022), Mandatory Implementation of Energy Efficiency and Conservation Programs and the Strict Observance of the GEMP Guidelines.

[4] DOE (2021), National Renewable Energy Program.

[5] DOE (2017), The Philippines Energy Efficiency and Conservation Roadmap 2017 - 2040.

[1] Philippines Information Agency (2023), General Profile of the Philippines.

[2] World Bank (2022), A Roadmap for Offshore Wind in the Philippines.