THE PHILIPPINES will need to invest $62 billion in its energy industry by 2040 in order to accelerate decarbonization, the World Bank said.
“Rapidly decarbonizing the power sector entails doubling the cumulative capital investments in power systems by 2040 from $31 billion to $62 billion in present value terms, compared with the current ambitions of the government,” the bank said in a background paper.
“Mobilizing the additional financing for accelerated decarbonization requires increased and strengthened government financial facilitation and policy intervention in removing barriers to and reducing risks for private sector investments,” it added.
The World Bank said that the Philippines has “substantial” renewable energy (RE) resources, especially in solar and wind energy, but these are not properly utilized.
The government must address key challenges such as constraints to grid capacity, climate resilience requirements, adequate financing, and managing the risks to the coal transition, according to the bank.
“Decarbonizing the power sector holds the key to a successful clean energy transition in the Philippines. Power generation is the largest source of greenhouse gas emissions. Its transition to low- or zero-carbon technologies also enables the decarbonization of transport through electrification. This would effectively address most of the CO2 emissions from energy production and consumption,” it said.
“Accelerated decarbonization would result in substantial changes in the mix of power generation technologies. The power system would become predominantly RE-based by 2040,” it added.
An accelerated decarbonization scenario would also require ramped-up capital spending for the integration and scaling-up of renewable energy, the lender said.
“Mobilizing financing for accelerated decarbonization requires enhanced government facilitation or intervention in removing barriers and reducing risks for private investors. There are still multiple legal/regulatory and bureaucratic constraints to overcome, including limitations on foreign ownership of solar and wind projects and the land rights issues slowing project development,” it added.
In the next five years, the government must “build a solid foundation” for accelerated decarbonization, the World Bank said.
“The pathway toward accelerated decarbonization has a steep climb in the latter period of the planning horizon. To be successful in reaching the goal, early efforts in building the support and momentum are crucial,” it said.
“The government already has some critical enabling policies in place to support an accelerated deployment of RE although gaps still exist in policy implementation. Improvement and amendment of existing policies are also needed to remove constraints to competition, financing and ease of doing business,” it added.
The paper cited key short- to medium-term plans including promoting competition in the investment of RE; intensifying energy efficiency efforts; and improving power system planning, among others.
“The Philippines would benefit from an energy transition toward low- and zero-carbon alternatives. A clean energy transition will substantially increase the use of indigenous and renewable energy resources such as hydropower, solar, and wind while reducing reliance on imported fossil fuels, enhancing energy security,” the World Bank said.
“A cleaner energy future is expected to be more affordable given the global trends of declining cost of deploying and integrating solar and wind power, enhancing the competitiveness of the economy,” it added.
The government is aiming to achieve a 35% and 50% renewable energy share in the power generation mix by 2030 and 2040, respectively. — Luisa Maria Jacinta C. Jocson