Overview
The Philippines is facing a mounting energy crisis as the Malampaya natural gas fields, currently supplying 30% of Luzon’s energy consumption, are expected to be depleted by 2024. An ever-increasing population, a new government administration, and some of the highest electricity costs in Southeast Asia all present formidable energy production challenges. Due to the impact of COVID-19, the energy sector faced many challenges that necessitated adjustments to ensure continuity of energy services to consumers. The Philippine Government envisions the Philippines being energy self-sufficient in 2030, utilizing a combination of fossil fuels and renewable energy as solutions. About 43 GW of additional power capacity will be required by 2040, and the country is clearly behind schedule in developing solutions.
The current energy mix is composed of coal (30.2%), natural gas (6%), renewable energy (35.5%), and oil-based (28.3%). While the country has indicated an interest in clean energy, this clearly will not come at the expense of development, and no penalties or incentives are in place for utilizing different types of energy sources. The electricity sector is fully privatized, with one major utility, Meralco, holding 80% market share. The remaining 20% is made up of a few regional players, and 100+ electric cooperatives serving the island configuration. The need for energy solutions and new equipment exists, but larger players make purely commercial decisions that favor lower-cost solutions in the near term, and the smaller players are often unable to purchase U.S. solutions for the long term.
Market Opportunities
Renewable Energy: The renewable energy (RE) sector is comprised of RE resources coming from geothermal resources (1,200MW), solar energy (average potential 5kWh/m2/day, hydropower (10,500 MW), wind resources (76,600), and potential biomass (bagasse, potential of 4,000 MW) and ocean energy (170,000 MW). The Philippine RE market has created policy mechanisms such as renewable energy portfolio standards, net metering, green energy option/auction programs, and the renewable energy market (REM) trading system. Low enthalpy geothermal technologies, offshore wind development, energy efficiency projects, and energy storage ancillary services are in different stages of feasibility development, and technical and financial evaluation.
LNG: The Government has granted permits for entities to build the nation’s first integrated LNG import terminal targeted to begin from 2023 to 2025. Several local players with foreign partnerships and U.S. firms are actively pursuing this opportunity. In addition to the opportunity to build the terminal, private sector entities managing the terminal will need to procure gas. The Philippine Government also encourages using small-scale LNG (SSLNG) facilities once the downstream natural gas market is established and after the first LNG terminal is built.
Power Generation: There are more than 70 power generation companies involved in various stages of power plant rehabilitation, upgrading, and regular maintenance work. This presents a range of opportunities for supplying equipment and services. Large conglomerates are rebalancing their thermal/coal power assets with more renewable resources and utilizing clean technologies. As the market is fully privatized, these firms make decisions based on price and the need for diversification.
Distribution and Transmission: Solutions are needed for the main grid, and new projects for distribution systems are required to incorporate renewable energy sources. Smaller utilities must enhance their capabilities but require expertise and investments to increase grid modernization and resiliency. The DOE mandates that all distribution utilities undergo a competitive selection process (CSP) to secure power supply agreements (PSA).
Unserved and Underserved Markets: The need for electricity and solutions outside the main islands and major population centers is critical but often is not commercially viable.
Off-grid and micro-grid solutions, such as energy storage systems and rural electrification enhancements, allow additional solutions. USAID-funded projects present opportunities for consulting and pilot projects.
Recent global trends have made the Philippines more aware of the need for energy diversification, including nuclear energy/small modular reactors (SMRs). In the past, decisions centered around the price, but the need to have multiple sources to ensure business continuity now seems to be recognized. U.S. firms can expect a share of this business if they build relationships with local utilities and register themselves as potential suppliers. The lack of developed energy standards can present uncertainties. Still, given that the market is private sector-driven if a company’s product/solution is desired by the major utilities, firms can expect the Philippine Government will eventually endorse it. The transition to a carbonless future pushes the private sector slowly shift toward sustainability goals and ensures value chains can withstand the threats posed by climate change.
Resources
- Department of Energy
- Energy Regulatory Commission
- National Electrification Administration