What Is The Status Of Solar Power In The Philippines?

Solar power has emerged as a critical part of our global energy future. Around the world, countries are rapidly scaling their solar capacity as prices have declined by over 80% in the last decade. Solar PV met nearly 10% of global electricity demand and new capacity expanded by 22% in 2021.

The Philippines has begun to follow the global growth trajectory of solar power. With excellent solar resources, declining costs and supportive policies, solar capacity in the Philippines has expanded from almost nothing in 2014 to over 1 GW today. Though still a developing market, analysts see significant potential for further solar growth in the nation.

Solar Resource

The Philippines is located in Southeast Asia near the equator and receives abundant sunlight year-round. The average solar irradiation is estimated at 5 kWh/m2/day, with some parts of the country like Northern Luzon receiving up to 5.1-5.5 kWh/m2/day. Metro Manila and other areas in Southwest Luzon receive slightly less at 4.5-5 kWh/m2/day. Overall, solar irradiation levels are 20-60% higher than many countries in Europe and on par with major solar markets like India, Thailand and Malaysia.

This consistently high amount of solar resources makes the Philippines well-suited for solar power generation. In particular, Northern Luzon and areas facing east towards the Pacific Ocean tend to have the highest irradiation and most sunshine hours in the country. With over 300 days of sunshine per year in parts of the Philippines, solar PV and CSP plants can generate significant amounts of clean energy.

Installed Solar Capacity

The Philippines has seen steady growth in installed solar power capacity over the past decade. As of 2021, the total installed solar power capacity in the country stood at approximately 1,030 megawatts (MW). This represents a more than ten-fold increase from just 90 MW of installed capacity in 2014.

Solar power accounts for around 2% of the total installed power generation capacity in the Philippines. While solar’s share of the energy mix is still relatively modest, it has been expanding rapidly in recent years. In 2021 alone, around 167 MW of new solar capacity was installed in the country.

The majority of the current installed solar capacity is in the form of utility-scale solar farms. However, rooftop solar installations on commercial and residential buildings have also been growing. As of 2020, rooftop solar accounted for around 13% of the total solar power capacity in the Philippines.

Solar Targets

The Philippines has set ambitious solar energy targets as part of its commitment to renewable energy and reducing greenhouse gas emissions. Under the National Renewable Energy Program, the government aims to increase solar power capacity to 15,300 MW by 2030 and 28,400 MW by 2040. This is a massive increase from the current installed capacity of around 1,000 MW.

To help achieve the 2030 target, the Department of Energy has broken it down into intermediate goals of 2,000 MW by 2022 and 4,500 MW by 2025. Reaching these targets will require rapidly scaling up solar project development and investments over the next decade.

The government sees solar playing a major role in its energy mix going forward. Solar is expected to account for 20% of the country’s total power generation capacity by 2040. The Philippines also aims to source at least 35% of its electricity from renewable sources like solar, wind and geothermal by 2030.

Hitting the solar targets will bring many benefits, including improving energy access, creating jobs, reducing fossil fuel imports and meeting climate goals. However, attracting sufficient investment and overcoming grid limitations remain key challenges.

Key Policies

The Philippines government has introduced several policies to promote solar energy adoption in the country. Some of the major policies driving solar growth include:

Renewable Energy Act of 2008 – This law mandates to source a certain percentage of power generation from renewable sources. It also provides fiscal and non-fiscal incentives for renewable energy projects.

Net Metering Program – Launched in 2013, this program allows solar system owners to receive credit for excess power exported to the grid. This policy has boosted rooftop solar adoption.

Green Energy Option Program – This allows large electricity consumers to source up to 100% of their energy needs from renewable sources through direct power purchase agreements.

Feed-in Tariff (FIT) System – The FIT system guarantees fixed tariff rates and priority purchase for electricity from solar and other renewables. The FIT rates and installation targets have been key drivers.

Renewable Portfolio Standards – Under this policy, power distribution utilities and retail suppliers must source a portion of their energy mix from eligible renewables. This also boosts solar adoption.

Grid Integration

The Philippines has taken steps to improve the integration of solar power into the national grid. The grid operator National Grid Corporation of the Philippines (NGCP) has worked to upgrade transmission lines and substations to handle the influx of renewable energy. However, issues remain due to the variable nature of solar power.

To address grid stability concerns, the Department of Energy has set limits on the amount of variable renewable energy that can be fed into specific nodes or regions of the grid. The limits range from 20% to 50% of peak load. Once the limits are reached, new solar projects may be required to install battery storage systems to smooth out power delivery.

The Philippines has also implemented ancillary service charges and dispatch protocols that value solar plants that can provide frequency regulation services. This encourages developers to install inverter and control technologies that allow solar farms to provide grid support and flexibility.

Going forward, energy storage is expected to play a bigger role in integrating solar power. Battery storage can help mitigate solar variability and ramp rate control challenges. The DOE aims to have 1 GW of grid-connected battery storage online by 2040. Enhancements to transmission infrastructure will also facilitate greater solar penetration across the archipelago.

Cost of Solar

The cost of solar power in the Philippines has declined significantly in recent years, making it increasingly competitive with fossil fuel sources. Key factors driving down solar costs include:

• Falling module prices – Solar panel prices have dropped around 80% in the last decade due to economies of scale and technology improvements.
• Lower soft costs – Soft costs like installation labor, permitting, financing and customer acquisition have also fallen, especially with growth of large-scale solar farms.
• Supportive policies – Government policies like feed-in-tariffs helped spur early growth of solar and enabled economies of scale.

Utility-scale solar power prices fell from around $0.30/kWh in 2010 to under $0.05/kWh in 2020. In recent solar auctions, winning bids have been as low as $0.0326/kWh, cheaper than coal. Rooftop solar prices have also fallen below retail power rates for many commercial and industrial consumers in metro areas.

These cost reductions have made solar power cost-competitive with grid electricity in many cases. This is driving strong demand growth as more consumers and companies opt for solar power. With costs expected to continue falling, solar is poised to become one of the lowest cost sources of electricity in the years ahead.

Key Players

The Philippines has attracted several major companies in the solar power industry. Some of the key players include:

AC Energy – This is the energy arm of the Ayala Group, one of the largest conglomerates in the Philippines. AC Energy has invested heavily in solar farms across the country. They have developed and operate solar projects totaling over 1,000 MW.

Solar Philippines – Founded by Leandro Leviste, Solar Philippines is the largest solar energy company in the country. They have installed rooftop solar on major commercial buildings and also developed large utility-scale solar farms. Their portfolio includes over 1 GW of projects.

SunEdison – The Philippine operations of US solar giant SunEdison were acquired by Global Business Power Corporation in 2016. SunEdison pioneered the country’s first utility-scale solar farm and has over 150 MW of solar parks.

Helios Solar Energy – A major player in rooftop solar segment, Helios has deployed over 25,000 solar rooftop systems in Philippines with 70 MWp capacity. Some of their major clients include SM Malls, Toyota and Petron.

Other leading companies involved in the Philippine solar power market include Equis Energy, Solar Pacific, Citicore Power and Thomas Lloyd. International players like Scatec Solar and ib vogt also have presence.

Barriers

The Philippines faces several challenges to further expansion of solar power:

High upfront costs: The high upfront investment required for solar PV systems can deter adoption, especially for lower-income households and small businesses. Access to financing options is critical.

Subsidies and incentives: Generous subsidies and incentives for fossil fuels make them cheaper than renewables in some cases. Phasing out subsidies for coal, oil, and natural gas could help level the playing field.

Grid infrastructure: The Philippines’ aging electrical grid infrastructure requires upgrades to handle the intermittent nature of solar power and two-way flow of electricity. Investments in smart grids, battery storage, and grid flexibility are needed.

Land constraints: Finding sufficient land area for large-scale solar farms is difficult on the crowded islands. Rooftop solar on homes, factories, and commercial buildings helps overcome land limitations.

Permitting and regulations: Bureaucratic red tape and unclear solar policies, regulations, and permitting processes hamper growth. Streamlining and standardizing these processes could accelerate solar deployments.

Storage solutions: Affordable energy storage is key to increasing the penetration of variable solar power. Continued declines in battery costs and new storage technologies will facilitate higher solar capacity.

Technical expertise: Lack of training and expertise in solar project development, equipment installations, and maintenance could constrain quality and safety. Workforce development programs are essential.

Future Outlook

Despite recent progress, the Philippines has substantial room to expand its solar power capacity in the coming years. Some project that solar will grow to supply 20% of the country’s power generation by 2040, up from less than 1% today. This growth will be driven by several key factors:

Continued cost declines for solar PV modules and balance of system components will make solar increasingly competitive with fossil fuels. Solar’s modularity also allows for targeted deployments tailored to the needs of remote islands and off-grid areas.

New policies and regulatory changes could further spur solar adoption. The DOE aims to streamline permitting processes and enact additional incentives like net metering and feed-in tariffs. Reduced import duties on solar equipment could also accelerate growth.

Improvements to grid infrastructure and integration will enable higher nationwide solar penetration. Investments in battery storage, smart grids, and grid flexibility will allow solar to scale without destabilizing the power system.

Rising energy demand across the archipelago provides an opportunity for solar to contribute a larger share of new capacity additions. Solar’s rapid scalability makes it well-suited to help meet growth in energy demand.

With these supportive conditions, analysts predict the Philippines solar market will continue its rapid growth in the years ahead. However, reducing policy uncertainty and barriers will be key to realizing the country’s full solar potential.