Why Green Energy is Harder Than It Looks: Philippines' RE Hurdles

Notes on the beat MANILA, Philippines — The Philippines has the sun, wind and bold clean energy targets. On paper, going green should be simple. But in reality, it is anything but, as building power plants requires more than sun, wind and good intentions. Recently, the Department of Energy (DOE) launched a sweeping crackdown, terminating more than 160 renewable energy (RE) service contracts tied to projects that failed to materialize over the past two years. If delivered, the nearly 18,000 megawatts (MW) worth of projects could have powered millions of Filipino households and helped lower electricity prices. While developers are rightly criticized for failing to meet their commitments, the government cannot wash its hands of the issue, as bureaucratic hurdles that slow development are also a major factor. Michael Ricafort, chief economist at Rizal Commercial Banking Corp., told The STAR that enabling RE development requires the government to further ease doing business and reduce related costs. In the Philippines, before developers can start building power plants, they must first secure numerous permits from various levels of government, from national agencies down to local authorities. At the local level, approvals are needed from the governor, mayor and even the village chief where the project is planned – each often with different requirements and costs, a source told The STAR. “There’s an impression that once you receive green lane and national significance certifications, you gain cooperation from all levels of government. That’s not true,” said the source, who is a top executive at an RE firm. The priority tags, granted by the Board of Investments and the DOE, are designed to expedite the processing of permits and licenses and help ensure the swift realization of investments. But these certifications seem ineffective when confronted with local government barriers. The DOE itself is aware of this challenge, prompting the agency to introduce an ordinance template aimed at cutting red tape in local governments. In offshore wind development, for instance, over 80 permits currently stand in the way of developers, with the process typically involving more than 25 agencies. What the Philippines needs is a “faster and leaner approval process,” Ricafort said. Businessman-turned-politician Leandro Leviste, whose company was caught up in the DOE’s sweeping terminations, likewise pointed to government red tape as a reason his projects stalled. “What I actually learned from that is it’s very difficult to start new endeavors in the Philippines because of red tape or regulatory requirements,” Leviste said in a recent interview with Bilyonaryo News Channel. Solar Philippines, which made Leviste the country’s youngest self-made billionaire, is facing a P24-billion penalty from the DOE after its 33 contracts were canceled in the past two years due to nonperformance. These deals represent over 11,400 MW, or about 64 percent of the total potential capacity of all service contracts terminated in 2024 and 2025. Energy Secretary Sharon Garin said the DOE consistently reached out to Solar Philippines regarding its contracts, but the company failed to respond. Among all RE projects, solar is considered the fastest to develop, with some installations completing in less than a year depending on their type and scale. True enough, MTerra Solar, a project of SP New Energy Corp. (SPNEC) once controlled by Leviste but now under the Meralco Group, is on track to begin supplying power to the grid this quarter after breaking ground in late 2024. The project, which features a 3,500-megawatt solar farm paired with a 4,500-MW-hour battery storage, is poised to become the world’s largest integrated solar facility upon full completion in 2027. Earlier, Meralco PowerGen Corp. clarified that its investment in SPNEC is completely unrelated to the legislative franchise granted to Solar Para Sa Bayan Corp. (SPBC), another company founded by Leviste. Through Republic Act 11357 signed in 2019 by then-president Rodrigo Duterte, SPBC was awarded a non-exclusive franchise to build, install, operate and maintain distributed energy resources and microgrids in remote areas. Leviste admitted that the company was “defunct” and “stopped operating many years ago” and that he had already divested his stake before entering politics. Yet, Section 18 of the franchise prohibits the grantee from transferring its controlling interest to any person, company or entity without prior approval of Congress. Despite setbacks from Leviste’s firms and other developers whose names the DOE has yet to disclose, the energy chief remains confident that the Philippines stays on track to meet its targets. The share of renewables in the country’s power mix has increased to 25 percent from 22 percent. This is positive development indeed. Looking at the bigger picture, however, progress still seems slow, especially with the country just four years away from its target of reaching 35 percent.