Energy to the Philippines
Trends and opportunities
The Philippines is one of the world’s fastest growing economies, having
recorded a GDP growth of 6.8 per cent in 2016 and aiming for 6.5 to 7.5 per
cent in 2017 and 7 to 8 per cent by 2022. With an ever-expanding domestic
consumption, unprecedented public spending on infrastructure, rising
services and manufacturing industry, increasing power generation while
reducing costs is a top priority for the country.
As of 2017, the Philippines has a total installed capacity of 21,621 MW
(compared to 14,348 MW in 2016), thanks to coal and solar power plants (
Source: Department of Energy, Electric Power Industry Management
Traditionally, the country’s energy mix has been 35-35-30 per cent, for
coal, oil and gas, and renewables, respectively. Under the Duterte
administration, the Department of Energy (DOE) is taking a “technology
agnostic” approach. The energy mix will be based on demand and not on fuel
supply. The load curve of the country must be 70 per cent baseload, 20 per
cent mid-merit and 10 per cent peaking regardless of fuel type.
Coal (35 per cent of the installed capacity) is largely imported from
Indonesia, followed by Australia. While the Philippine government is
willing to increase the contribution of renewables, coal-fired power plant
developments are still being pursued as the cheaper power generation
Natural gas currently (16 per cent of the installed capacity) is solely
generated by the Malampaya Gas field. However, this field is set to be
depleted by 2024. Natural gas pipelines and terminal facilities are
therefore being considered to allow for importation.
Renewables (33 per cent of installed capacity) are largely hydro and
geothermal. The Philippines is the second largest producer of geothermal
energy in the world, next to the US. According to DOE, 344 hydropower
projects have been approved and awarded, with a potential capacity of 7.4
GW. A further 191 hydropower projects are pending. However, reliability
remains a challenge due to the Philippines being the third country most
prone to natural disasters in the world. The National Renewable Energy
Program (NREP) seeks to increase the RE-based capacity of the country to an
estimated 15,304MW by 2030, almost triple its 2010 level.
Nuclear energy does not form part of the current energy mix and this will
remain the case unless the Bataan nuclear power plant is rehabilitated.
Coal remains the major source of electricity for Luzon, Visayas and
Mindanao. The country has a total of 208 power plants:
- 21 coal power plants
- 52 oil/gas/diesel-fired power plants
- 135 renewable energy power plants
Most renewable energy plants are solar farms. There are new 19 grounded
mounted solar photovoltaic (PV) cells in the country, most of which are in
National Grid Corporation of the Philippines (NGCP) is the sole
transmission service provider of the country since 2009. It is a privately
owned corporation with a 50-year concession to operate, maintain and expand
the country’s state-owned power grid. NGCP manages over 31 thousand MVA
substation capacities and over 20 thousand circuit-km transmission line.
The transmission system is composed of:
The Luzon Grid is interconnected with the Visayas Grid through high
voltage direct current transmission line and submarine cables.
- The Mindanao Grid, a stand-alone grid, is composed of long-distance
transmission lines and primarily relies on hydropower.
The Transmission Development Plan (TDP) of the NGCP over a 10-year period
includes the increase in load capacity and improves the system reliability
of the transmission facilities of substations in Metro Manila, Visayas and
in Mindanao. This is aimed to accommodate the incoming generating plants
that will cater to the growing power demand of the country, particularly by
the infrastructure sector. Another highlight of the TDP is the Mindanao
Transmission Backbone Project, connecting Mindanao with the Visayas island.
This will help ensure that electricity can be distributed and shared among
the country’s three island groups.
The Philippine power distribution industry is handled by private companies.
There are 146 distribution units in the Philippines - 27 Private
Investor-Owned Utilities (PIOU) and 119 Electric Cooperatives.
Manila Electric Company (MERALCO) - The largest electric power
distribution company in the country with almost 7 million household
customers and an estimated market share of 34 per cent across the
Philippines, as high as 53 per cent for Luzon. It has a mega franchise
which covers 36 cities and 75 municipalities, including Metro Manila. About
half of the country’s GDP is generated in Meralco’s franchise area.
Visayan Electric Company - The second largest electric utility in the
Philippines with almost half a million household customers and an estimated
market share of 2.4 per cent of the Philippines. It serves the cities of
Cebu, Mandaue, Talisay and Naga in Visayas and four municipalities of
greater part of Metro Cebu. Its franchise area covers about 674 km with an
estimated population of 1.73 million. Owned and managed by SN Aboitiz Power
Corporation and Vivant Corporation.
Davao Light & Power Company - The third largest privately-owned
electric distribution utility in the country with over 330,000 household
customers and a market share of 1.5 per cent of the Philippines. Its
franchise covers Davao city and Davao del Norte, as well as four
municipalities in Mindanao. It is a subsidiary of SN Aboitiz Power Inc.
- Electric Cooperatives (ECs) - The Philippine Rural Electric Cooperatives
Association, Inc. is the national organisation of 119 electric cooperatives
operating in the Philippines. It has a total of over 13 million household
customers accounting for over 56 per cent market share of the Philippines.
ECs are non-stock non-profit organisation whose mandate is to implement
extensive rural electrification program in order to promote agriculture and
industries in the rural areas. Rural electrification address the increasing
energy demands of the growing population in the rural areas. Household
electrification rates by the ECs in Luzon and Visayas are almost 92 per
cent each, while electrification rate in Mindanao is almost 73 per cent
(Source: The Philippine Rural Electric Cooperatives Association, Inc.,
Other Private Investor-Owned Utilities (PIOU) - There are a total of 24
remaining PIOUs --- 14 in Luzon, six in Visayas and four in Mindanao
accounting for 5.5 per cent of the country’s total market share.
Engineering services for coal power plants such as Operations & Maintenance
There will be 45 coal operating plants by 2018 with a forecasted demand for
22 million metric tons (mmt) of coal. Most of these plants were built by
Mitsubishi Heavy Industries with 2-5 year warranty. Some of its turbines
and boilers are from Asea Brown Boveri, General Electric and other branded
manufacturers. There is a need for independent O&M contractors to reach
maximum rated capacity. Coal supply
The Philippines has been and will continue to be a net importer of coal.
Records from the Department of Energy (DOE) reveal that for the past decade
total coal consumption was almost three times greater than domestic coal
production with the deficit filled by coal imports. The demand for coal
will increase to 22 mmt by 2018 and 30-40 mmt by 2030.
The demand for coal in the region is expected to triple in the next 25
Australia’s third-biggest export to Southeast Asia is its thermal coal.
International Energy Agency projects that there will be an increased demand
from the Philippines for Australian coal. Records from the Department of
Foreign Affairs reveal that coal imports from Australia reached AUD 82.8
million in 2016, a 93 per cent increase from the previous year. This is
expected to increase as Australian coal will have zero tariff by 2018.
Liqeufied Natural Gas Supply and Engineering Services
The country has five operating gas-fired power plants with a total of 3,211
MW installed capacity equivalent to 16 per cent total installed capacity or
22 per cent of the Luzon grid (Source: Department of Energy, ‘Capacity Mix’, June 2016). The
Malampaya gas field, the only source of natural gas, is expected to be
depleted by 2022. To fill up the impending reduction in installed capacity
the government and the private sector will have to work hand-in-hand to
secure the supply of natural gas. The First Gen Corporation, the country’s
leading clean and renewable company, will build its own LNG regasification
terminal. This will prompt them to import natural gas before 2024. The
project cost is A$1.32 billion but no Final Investment Decision has been
released to date. The company is still trying to identify its foreign
The Department of Energy (DOE), through the Philippine National Oil
Corporation (PNOC), will build a 104km high pressure transmission natural
gas pipeline from Batangas to Manila. It is expected that this project will
be under the Public-Private Partnership agreement. There are eight other
natural gas pipeline projects planned by the DOE for the period 2018 to
2024. Australian contractors can offer offshore pipeline technologies,
software for analysing pipeline, and pipeline testing facilities to
possible Engineering Procurement and Construction.
Innovative solar technology including battery storage and fast-charging batteries and other renewable energy technologies for off-grid areas
There has been an increase in the number of solar energy contracts from 7
in 2010 to 38 as of April 2017
(Source: Department of Energy, Solar & Wind Energy Management
An additional 128 solar farms are to be completed in the next two years.
Total installed capacity from solar farms reach 900MW and is expected to
increase to over 4,000 megawatts in the next two years. Solar energy is
only good from 11am to 1pm. The Philippines require battery storage
technology and associated services.
There is also a strong push by local government units to investigate and
consider renewable energy sources. The National Renewable Energy Plan
targets installed capacity from RE at 15,234MW by 2030. Australian RE
developers may enter into partnerships to introduce technologies,
particularly solar both for the power and transportation sectors.
Reinforcement of existing transmission facilities, submarine cables and substations of the National Grid Corporation of the Philippines
The Luzon grid is geared towards the implementation of the new 500kV
transmission facilities and new substations in anticipation of the load
increase in the coming years from Metro Manila and industrialised areas in
Cavite and Laguna and new major growth areas in Bulacan, Pampanga, Porac
The Visayas grid will need to reinforce the 138kV submarine cable
interconnections between Cebu, Negros and Panay to support the large
generation capacity additions for coal-fired power plants and RE-based
plants. The first stage is the additional submarine cable between Negros
and Panay islands.
The Mindanao grid has been depending on hydro generation, which is a major
concern during the dry season. There has been an increase in the number of
committed coal-fired power plants in the region including expansion plans
for the future. It is expected that there will be a total 600MW to 1200MW
generation capacity each from three generation sites in Mindanao.
This could be more than enough for the Mindanao loads. NGCP is will pursue
the Visayas-Mindanao Interconnection Project to allow export of power to
the other grids.
Smart grid technology offers significant opportunities for Australian
consultants and equipment supply providers. Instruments for accurate
measurement, monitoring, control and analysis equipment are needed to
ensure energy sources can be properly and reliably integrated into the grid
and deliver a stable and cost-effective power supply regardless of seasons.
The smart grid will also decrease system losses.
Consulting services for clean energy projects of the Asian Development Bank
The Asian Development Bank energy policy prioritises sustainable energy and low carbon development programs. The ADB had allotted A$7.95 billion annually for Climate Finance for years 2016 to 2020: A$2.65 billion for Adaptation and A$5.30 billion for Mitigation (renewables, energy efficiency, sustainable transport and sustainable cities). There is an opportunity for Australian consultants to participate in the design or implementation of these projects, including through the provision of technology and technical advisory services.
Infrastructure developments such as the construction of coal-fired and RE power plants, port facilities, water management, pipelines, and operations and maintenance are usually contracted to local and foreign EPCs. Sub-contracting opportunities would be available to Australian consultants. Power plant hardware such as turbines, boilers are usually from Europe and the current RE technology is mainly sourced from Europe, Canada and US, although China is seen as a key and cheaper provider of solar technology and hardware such as solar battery storage and solar panels.
Tariffs, Regulations and Customs
Under the ASEAN-Australia New Zealand Free Trade Agreement (AANZFTA)
bituminous coking coal (HS Code 2710.12) will be zero tariff by 2018, from
five per cent from 2012 to 2017.
Imported crude petroleum oils and refined petroleum products entered and
withdrawn from warehouses in the Philippines for consumption is subject to
the most-favoured-nation (MFN) rate of three per cent.
Feed-in-Tariff for Renewable Energy Projects
Feed-In Tariff (FIT) scheme, priority connection to the grid, fiscal and
non-fiscal incentives are being offered to encourage Renewable Energy
developments. The formation of the Public-Private Partnership (PPP)
framework under the Build-Operate-Transfer (BOT) Law resulted in local and
foreign investments in the power sector. To date, there are over 30
Independent Power Producers (IPPs) in the country (Source: Philippine Independent Power Producers Association, Inc).
The FIT for solar PVs is lowered to Php 8.69 per kWh from Php 9.69 per kWh in
In July 2012, the Energy Regulatory Commission adopted the modified
feed-in-tariff levels for renewable energy electricity proposed by the
National Renewable Energy Board in May 2011 (Source: International Energy Agency). FIT for solar has changed,
while it has remained for other renewable energy installations.
Marketing your products and services
Australian organisations interested in exploring opportunities in the
Philippine energy sector are encouraged to work with local or foreign EPCs
or directly with Independent Power Producers (IPPs). Many EPCs have
businesses in neighbouring markets to capture active infrastructure
For hardware products such as turbines and boilers and commodities, i.e.
coal and natural gas, using an agent or distributor is a common and
effective way to serve the market.
In order to be competitive in this market, Australian organisations
particularly RE developers must introduce technology and provide test cases
to the IPPs.
TechCon SE Asia 2018
– Theme “Life-management of High Voltage & Medium Voltage power
equipment”, to be held in SMX Convention Centre, Manila on 23-25 April
Power & Electricity World Philippines 2018
incorporating solar, wind and energy storage shows, to be held in SMX
Convention Centre, Manila on 23-24 May 2018.
Asian Development Bank (ADB) Asia Clean Energy Forum (ACEF) 2018 -
On its 13th year, ACEF 2018 (tentatively set in June 2018) is
the premier clean energy event organised by the ADB. Through targeted
discussions and panels, delegates get updates and the latest information on
key issues in the clean energy sector in Asia. More details will be available closer to the event.
Links and industry contacts
Department of Energy
Energy Regulatory Commission
National Electrification Administration
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