THE PHILIPPINES has the strongest renewable energy (RE) project pipeline in Southeast Asia, according to a report, though banks’ appetite for financing gas and coal-fired projects remains strong.
A report released by the Center for Energy, Ecology, and Development (CEED) on the region’s RE and coal financing said the Philippines and Vietnam led the region’s RE expansion, particularly in solar and wind, with a total planned capacity of 160.8 gigawatts (GW) and 131 GW, respectively.
But the Philippines, after Vietnam, also had the most gas-fired power plants in the pipeline, with the two countries accounting for 62% of the total planned capacity in the region.
The Philippines, which is grappling with the dwindling domestic supply of gas, has 7.7 GW of future capacity announced, 2.0 GW under construction, 14.0 GW dormant, and 18.7 GW in the pre-construction stage, according to the report.
Vietnam, which has the most planned gas power plants, has 23.0 GW announced, 3.1 GW under construction, 12.0 GW dormant, and 17.6 GW in pre-construction, it said.
The Verde Island Passage — a stretch of water between Batangas and Mindoro — has been the center of fossil gas expansion in the Philippines, hosting five existing fossil gas plants, 10 proposed gas and liquefied natural gas (LNG) power plants, and two operating LNG import terminals, with three more in the pipeline, according to the report.
The Philippines considers natural gas, which is not a renewable energy source as it comes from a non-replenishing source, as a transition fuel to meet its climate goals.
But CEED said the volume of planned gas projects suggests a long-term commitment to fossil gas that “extends well beyond any reasonable transition timeline,” noting that increasing reliance on natural gas runs counter to the Global Methane Pledge’s goal of 30% emissions reduction by 2030.
It said each power plant represents potential methane leakage points across the gas supply chain, from production and transportation to storage and combustion.
Gas commissioning hit its highest in 2016 at 7.3 GW and then in 2021 at 6.1 GW.
“Without reconsideration of these expansion plans, Southeast Asia’s gas infrastructure boom could undermine global efforts to curb methane emissions, one of the most potent contributors to near-term climate warming,” according to the report.
It said Southeast Asia’s gas import capacity has drastically risen since 2016 reaching 35.11 million metric tons this year, “with the Philippines emerging as the biggest developer of import terminals.”
Elsewhere in Southeast Asia, Thailand continued to lead the development of gas-fired power plants with 15.9 GW total capacity, up 2.2 GW since September 2023.
It was followed by Malaysia with 7.9 GW of commissioned gas power plants, and Indonesia with 7.1 GW.
“The remaining countries make up the rest of the 2.3 GW. Although the rate of development of gas power plants post-Paris varies in gravity, it remains consistently increasing, especially in Thailand,” the report noted.
The report said the Philippine RE expansion is threatened by at least 105 contract terminations, due to proponents’ failure to obtain permits or conduct grid impact studies.
It said the grid’s inability to absorb RE capacity threatens the transition to a RE-based power system.
Philippine banks have been significant contributors in coal-fired expansion, according to the report, providing $6.3 billion in loans and underwriting to Philippine-based companies that have been expanding their coal generation portfolios.
“The Bank of the Philippine Islands and Banco de Oro are the top Philippine banks financing the coal industry and are ranked 11th and 13th in the region, respectively, with combined financing of $3.4 billion.”
The report said Indonesian banks have been the top source of coal financing among Southeast Asian banks, providing $8.9 billion since 2016.
Indonesian banks were also the top source of coal financing since the start of the decade, providing $4.2 billion or 33% of the financing channeled since 2020, “with partial 2024 numbers already surpassing the 2023 financing flows.”
Bank Mandiri was the biggest financial institution in Southeast Asia financing coal, followed by other state-owned banks — Bank Negara Indonesia and Bank Rakyat Indonesia, with their financing contribution exceeding $1 billion.
The report noted that state-owned companies are leading the coal capacity surge in Southeast Asia.
Asian firms are the biggest developers of coal plants commissioned from 2016 to 2024, it added.
It said countries whose power sector is primarily run by the government have state-owned companies pushing coal development, with Indonesia’s PT PLN, Vietnam Electricity, PetroVietnam Power, and Malaysia’s Tenaga Nasional Bhd being among the biggest developers in the region.
Japan’s financing institutions, meanwhile, accounted for 23% of the total coal financing in the region, primarily through the Japan Bank for International Cooperation.
Other Japanese banks that significantly bankrolled the region’s coal dependence include SMBC, Mitsubishi UFJ Financial, and Mizuho Financial — all among the biggest financiers of fossil fuels globally since 2016, according to the report.
Chinese banks account for about 11% of the coal financing in the region, through Bank of China, China Development Bank, China Eximbank, and China Construction Bank.
But since the pronouncement of President Xi Jinping of China, the Philippines’ largest trade partner, before COP26 of zeroing Chinese overseas coal projects in line with the country’s carbon neutrality target, Chinese banks who had been funneling sizeable money for Southeast Asia’s coal “ceased project financing by 2021, with small traces of corporate financing,” the report noted.
“Global North financial institutions are among the top shareholders and bondholders of local companies and financial institutions heavily involved in coal development,” the report said, adding that Western financial institutions have also historically provided significant support for Southeast Asia’s coal.
It said while bank like Citigroup, HSBC, Standard Chartered, UBS, Deutsche Bank, and Barclays, have announced they will no longer finance coal, “their policies mainly only cover project financing, allowing them to continue supporting coal through underwriting services.”
The report said while Indonesian banks are among the top banks financing the coal industry in the region, their biggest shareholders include Western institutions like JPMorgan Chase, Citibank, Vanguard, and HSBC, “showing the sustained presence of the Global North in domestic financing.”
While international commitments have significantly reduced traditional financing sources, the region adapted through domestic market development, it added. “This evolution suggests both challenges and opportunities in managing the energy transition.”
“Still, coal financing flows in Southeast Asia expose misalignment between regional climate commitments and financial sector behavior,” according to CEED.
“Major international financial institutions continue to channel significant money flows into domestic developers and financial institutions through shares and bonds and raise capital to fund coal projects in the region, which perpetuate fossil lock-in, delayed climate action, high electricity prices, and regional air quality impacts,” it said.
“The continued financial support to the coal industry has created artificially sustained coal economics, undermining renewable energy competitiveness.”
The Philippines has been chosen to host the Board of the Loss and Damage Fund (LDF), a United Nations financing mechanism that will benefit countries vulnerable to climate change, including the host country itself.
The selection followed efforts by the Marcos administration to promote the Philippines as committed to the global green transition.
Mr. Marcos has positioned himself as a climate leader, citing the need for sustainable practices.
A 2024 Green Economy Report for Southeast Asia led by Bain & Co. said the Philippines saw a 57% increase in “green” investments to $1.46 billion in 2023, but still falls short of the over $16 billion in required capital investments needed for its green transition. — Kyle Aristophere T. Atienza
