Philippines is second-most attractive emerging market for renewables

The Philippines ranked as the second-most attractive emerging market for renewable energy (RE) investment, according to the 2024 Climatescope report by BloombergNEF.

The Philippines climbed two spots to second spot out of 110 emerging markets in the 13^th annual edition of the Climatescope report.

It received an overall score of 2.65 out of 5, based on three parameters: fundamentals, opportunities, and experience.

“The Philippines has been on a growth path since 2021, and for the first time has entered second place in the ranking, knocking mainland China down a slot,” according to the report by BloombergNEF, which is a strategic research provider covering global commodity markets.

This was the country’s highest ranking after placing fourth in 2023, 10^th in 2022, and 20^th place in 2021.

“The government has established a target of 35% renewable energy in power generation by 2030, and the Philippines stands out as the only emerging market in the Asia-Pacific region (APAC) to have all of the renewable energy policies surveyed by Climatescope — auctions, net-metering schemes, tax incentives and a clean energy target — in force,” BloombergNEF said.

India emerged as the most attractive emerging economy for the second year in a row with a score of 2.73 due to its “bold renewable energy target” and its ongoing efforts to achieve the goal.

The Philippines was ahead of China (2.61), Kenya (2.59) Romania (2.57), Brazil (2.54), Chile (2.51), Nigeria (2.51), Namibia (2.51), and Guatemala (2.50).

Investor interest in the Philippines’ renewable energy sector received a boost after the government allowed full foreign ownership in the sector starting November 2022.

Foreign nationals and foreign-owned entities are now allowed to explore, develop and use RE resources such as solar, wind, biomass, ocean or tidal energy in the Philippines. Foreign ownership of RE projects was previously limited to 40%.

According to the Climatescope report, the Philippines had a score of 3.83 on fundamentals, the highest among emerging markets. This measures the foundational mechanisms for renewable energy development in a market, including its clean energy policies, operating rules and incentives, and batteries to the deployment of investment.

In terms of opportunities, the Philippines ranked 8^th with a score of 2.11. This parameter focuses on identifiable traits that mark a market’s attractiveness to investors.

Over the past five years, the Philippines has attracted $5.2 billion in RE investments, but only 7% of the total came from foreign investment, according to the report.

With the power demand increasing and the Philippine market still heavily reliant on fossil fuels, there is still a need to grow its renewable energy capacity, BloombergNEF said.

According to BloombergNEF, peak demand rose 63% from 2014 to 2023, reaching 19.2 gigawatt-peak in 2023.

The Department of Energy (DoE) said that the ranking reflects “the growing confidence of the global community in our country’s commitment to clean energy transition and sustainable growth.”

“This recognition inspires the DoE to further intensify its efforts in achieving our renewable energy goals, ensuring that our nation remains a global beacon of progress in the energy transition,” the department said in a statement on Monday.

While most of the RE investments are from domestic investors, the DoE said it is looking forward to realizing the potential of increased foreign participation as it allowed full foreign ownership in renewable energy projects.

“The journey, however, is far from over. With the peak demand growth assumptions of around 5.3% annually from 2024 to 2028, the need to further accelerate renewable energy development is still crucial to address the energy needs of the country’s expanding economy,” the agency said.

Asked to comment, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said that there are opportunities for RE investors in the Philippines.

“RE, especially solar and wind, also suitable for an archipelago such as the Philippines, especially off grid areas,” he said in a Viber message. “This is manifested by the fact that REs are the biggest foreign investments in recent years.”

As of November, the Board of Investments has approved a total of P1.5 trillion in investment pledges, of which P1.35 trillion are primarily in the renewable energy sector.

As of end October, a total of 17,248.53 megawatts (MW) of committed power projects and an additional 1,870 MW are expected to be operational from 2024 to 2030, including those with commercial operation dates that are yet to be determined by the power generators. – Sheldeen Joy Talavera, Reporter