May 02, 2024

Climate Smart Ventures and Consortium Partners Release Key Findings of Year-Long Scoping Study to Accelerate a Just and Managed Energy Transition in the Philippines

Climate Smart Ventures and Consortium Partners Release Key Findings of Year-Long Scoping Study to Accelerate a Just and Managed Energy Transition in the Philippines

Ivan Galura, Senior Associate

Ivan Galura, Senior Associate

Kristian Macariola, Associate

Kristian Macariola, Associate

Nian Sayoc, Associate

Nian Sayoc, Associate

Ivan Galura, Senior Associate

Ivan Galura, Senior Associate

Kristian Macariola, Associate

Kristian Macariola, Associate

Nian Sayoc, Associate

Nian Sayoc, Associate

Manila, Philippines – A consortium led by Climate Smart Ventures (CSV), composed of the Makati Business Club (MBC), Jacobs Engineering, and the UPecon Foundation, and supported by the Rockefeller Foundation, launched a series of reports outlining the findings of its scoping study on the aspects needed to accelerate a just energy transition in the Philippines. The study, which officially began in January 2023, was undertaken in close consultation with the Philippine Department of Energy (DOE) as well as key Philippine energy and financial sector regulators.

The five reports tackle key aspects of the just transition and account for the unique features of the Philippine power sector as a deregulated and liberalized market. The executive summary of the project, as well as reports 1, 2, 4, and 5 can be downloaded via the links below, while report 3 is slated to be published by the end of May 2024:

 

Key takeaways from the study focus on three main areas, elaborated as follows:

  1. Expanded grid infrastructure and more ancillary services:
    In addition to current calls by the Philippine government for faster transmission deployment, the introduction of faster types of ancillary services and inertia support are crucial to support higher RE share in power generation. This, in addition to the sufficiency of the existing ancillary services, would ensure system reliability and mitigate potential occurrences of red and yellow alerts, especially during the summer season when electricity demand is high. Approximately 5 GWh of battery energy storage systems (BESS) dedicated for inertia support and very fast ancillary services are needed on top of existing committed BESS capacities to properly manage the entry of new RE plants including offshore wind.
  2. Unlocking vital energy transition capital for CFPPs and new RE assets:
    Public-private partnerships supported by concessional financing can unlock needed funding for earlier value realization of coal-fired power plants (CFPPs) as existing portfolios transition to more RE power generation share. Based on the study’s simulations, an estimated total investment cost of PHP 10 trillion (USD 189 billion) spread across 2024 to 2050 is required to realize the DOE’s RE targets. This estimated amount is needed to develop new and cleaner power plants, modernize and expand the transmission infrastructure to accommodate more RE, and cover the costs of the just transition of CFPPs.
  1. Keeping electricity costs affordable through a managed transition to RE:
    Incidents of yellow and red alerts can be significantly reduced through a gradual transition of the Philippines’ legacy CFPPs overlapping with the managed entry of new RE capacity supported by energy storage technologies. The study estimates that up to 4 GW of CFPPs can be transitioned from 2024 to 2040. Replacing 4 GW of CFPPs would require a minimum 46 GW of new RE and energy storage capacities to meet the country’s RE targets and ensure that Filipino consumers retain access to reliable, affordable, and sustainable electricity.

 

Underpinning the urgent need to address these key challenges, the DOE’s landmark Philippine Energy Transition Plan (PETP), developed in 2023, is a groundbreaking initiative that provides an effective and targeted roadmap for the decarbonization of the country’s power sector. The study recommends the creation of a country-level funding platform to further support the PETP by securing financing commitments from the international climate community and unlocking domestic capital, maximizing existing government financing facilities, streamlining public-private sector coordination, and developing an investment and policy package in consultation with stakeholders.

Through the Makati Business Club, the consortium conducted extensive dialogues with several independent power producers and other private stakeholders in the Philippine power sector. UPecon Foundation and Jacobs Engineering spearheaded the technical studies to assess the various factors related to an accelerated transition. To complement the series of private dialogues and consultations, the consortium also hosted three public events that aimed to gather key stakeholders and build support for the Philippines’ energy transition.

On 22 September 2023, CSV together with the Rockefeller Foundation and Environmental Defense Fund held an event on the sidelines of the 2023 United Nations General Assembly in New York. The event gathered key figures from the governments of the Philippines, the United States, and the United Kingdom, as well as senior representatives from major financial institutions and leading think tanks, and sought to build support for the Philippine Energy Transition Plan. The consortium then hosted subsequent public events in the Philippines on 15 December 2023 and 29 February 2024 that highlighted the preliminary findings of the study and gathered feedback from public and private sector stakeholders from the Philippine power and financial sectors.

“The study undertaken by CSV, MBC, the UPecon Foundation, and Jacobs Engineering, builds on the momentum generated by the DOE’s pioneering leadership in developing the PETP. Greater cooperation between the public and private sectors would allow the Philippines to urgently address persistent red and yellow alerts and unlock vital energy transition capital for a faster shift to stabilized renewable energy in a just and managed manner,” said Lawrence Ang, Managing Partner of CSV.

“Given the liberalized and deregulated nature of the Philippine power market, the private sector plays a crucial role in accelerating the transition of the country’s power sector toward cleaner energy sources and leading innovative solutions to address the country’s climate crisis. However, it is also important to ensure that Philippine power is reliable, affordable, and diverse,” said MBC Executive Director Bobby Batungbacal.

Professor Joy Abrenica, Dean of the University of the Philippines School of Economics and President of the UPecon Foundation, emphasized the importance of measuring the socio-economic impacts of the energy transition – “While the immediate social cost of the transition is reflected in changes in electricity prices, what needs to be further quantified are the health benefits as well as the country’s contribution to the avoidance of extreme weather events brought about by the pivot to cleaner energy. Quantifying these benefits would allow us to appreciate the savings of the government and ordinary individuals from the decarbonization of power.”

Neil D’Souza, APAC Geographic Leader – New Energy & Advisory of Jacobs Engineering, highlighted how the grid and necessary support services will be pivotal in facilitating a managed and accelerated transition to cleaner sources of energy – “As RE power generation share increases, so does the risk of grid instability as a result of decreasing levels of grid inertia. There is a need for inertia support and very fast contingency reserves to ensure the grid can quickly recover to support the variability of RE. Timing the development of grid assets needed to connect RE plants is also key to preventing delays in operations and potential curtailments.”

 

**About Climate Smart Ventures**

Climate Smart Ventures (CSV) is an advisory firm advancing the energy transition in Asia. Our expertise and projects span coal to clean utility-level energy transition, industrial decarbonization, grid transformation, transition finance, and government-level policy recommendations. We also provide ESG and sustainability advisory services, focused on decarbonization and management of environmental and social impacts. Ecosystem building and collaboration are key elements of our firm, which partners closely with the region’s leading corporates and power portfolio owners, investors, off-takers, and others. For more information, visit our website https://climatesmartventures.com.