Blog

[SINGAPORE] The Philippines’ latest green energy auction has lured investors to its offshore wind push, but experts caution that the country’s 2030 target of 3.3 gigawatts (GW) may be overly ambitious, given the long lead times and complex approvals such projects demand.

“We are a little sceptical about the timeline,” said Shantanu Jaiswal, head of India and South-east Asia research at Bloomberg New Energy Finance (BNEF).

“Globally, we’ve seen that it typically takes six to 10 years to develop offshore wind from scratch,” Jaiswal said. “Offshore wind needs more approvals and environmental clearances, and processes like seabed studies.”

Announced in June, the fifth iteration of the country’s green energy auction (GEA) programme, which focuses solely on fixed-bottom, water-based wind farms, is targeting for the country’s first offshore projects to begin operations between 2028 and 2030. Currently, all operational wind farms in the archipelago are located onshore.

While some pilot projects could happen sooner, Jaiswal expects the first commercial offshore projects in the Philippines to be commissioned around 2032 instead.

Offshore wind projects, which are typically built in water bodies such as open seas, take advantage of higher wind speeds to enable greater turbine efficiency for power generation. Under a high-growth scenario, the World Bank projects that the Philippines’ offshore wind capacity could reach up to 21 GW by 2040.

Wind power remains a crucial aspect of the Philippines’ national renewable energy programme (NREP) launched in 2020, which sets out goals for renewable energy in the country’s power mix to reach 35 per cent by 2030 and 50 per cent by 2040.

These ambitious targets have turned the country’s clean energy industry into one of its fastest-growing sectors. Analytics firm GlobalData projected in a June report that the country is expected to receive an additional US$26.2 billion worth of investments into its power sector between 2025 and 2030.

For investors, the expanse of the open sea – particularly waters deeper than 50 metres – offers a potential 178 GW of power that remains untapped in offshore wind, according to the World Bank.

“Onshore wind power is expected to account for 19.4 per cent (of projected investments), while offshore wind power is expected to account for 17 per cent,” GlobalData senior power analyst Attaurrahman Ojindaram Saibasan wrote.

Christopher Len, acting coordinator for the climate change in South-east Asia programme at the Iseas-Yusof Ishak Institute, noted: “Among renewable options, offshore wind in the Philippines has immense potential and ability to provide large-scale and reliable clean energy.”

While onshore wind and solar power generation are likely to remain cheaper, offshore wind’s “round-the-clock” power generation profile is crucial to plug the gaps left by the more intermittent profiles of onshore wind and solar energy, noted BNEF in a June report.

Investor interest

Structurally, the renewables market in the Philippines is attractive to investors due to its openness. “The Philippines is one of the most liberalised energy markets in the region,” said Jaiswal.

The country’s transmission network and power grid are currently each monopolised by a single firm, but the archipelago’s power generation and distribution markets remain highly competitive among a large number of players.

Among wind power projects, local developers include Acen, Alternergy and CleanTech, all of which have been awarded contracts by the Department of Energy to develop wind farms.

Foreign and regional developers have been quick to capitalise on these trends, with firms such as Singapore-based Vena Energy entering into a joint venture with Philippine developer Aboitiz Renewables in 2023, to develop a 102 megawatt (MW) wind power project in the Rizal and Laguna region.

Acen, the energy platform of Ayala Group, announced a partnership with Danish investor Copenhagen Infrastructure Partners in May, with the aim to develop a 1 GW offshore wind project in San Miguel Bay through GEA-5.

“Foreign firms are drawn to the country’s liberalised and investor-friendly renewable energy landscape,” said Dr Len.

Even hardware manufacturers are part of the competitive picture. “We’ve seen Chinese turbinemakers start to become the leading manufacturers in the Philippine market,” Jaiswal said.

According to BNEF, Chinese suppliers such as Envision, Goldwind and Shanghai Electric accounted for all orders signed in 2024 in the Philippines. These Chinese manufacturers offered turbine prices that were up to 45 per cent lower than their Western competitors, BNEF noted in a July report.

Ambition versus ground realities

Still, the realities of the offshore wind market have presented concerns to investors. “We haven’t seen much concrete investment flows yet in offshore wind,” Jaiswal noted.

Unlike on land, where engineers can directly access turbines, offshore construction and maintenance is constrained by weather and open sea conditions, he said. “This increases both the capital and operational expenditures for such projects.”

A lack of clarity around tariffs and regulatory procedures in the Philippines may also have scuppered investor confidence, Jaiswal added.

Wind power developments have also seen slow progress, but this is set to change.

Several onshore projects, first awarded under the maiden GEA-1 in 2022, are set to be commissioned this year, reaching an estimated 372 MW of generation capacity. This is expected to revive activity in the sector that has been lethargic – the last commissioned onshore wind farm was the Puerto Galera wind power project in Mindoro in 2019.

Nevertheless, the long-awaited revival of onshore wind development may be the cue for investors to re-enter the market, Jaiswal noted, as the burgeoning offshore wind sector looks to set sail.

“At the end of the day, investors and bankers want long-term certainty,” Jaiswal said. “The government needs to give long-term signals to investors through a stable policy environment.”

Dr Len believes that the Philippine government is beginning to send these signals, citing its NREP targets and a landmark 2022 move that lifted the cap on foreign ownership of renewable energy projects from 40 per cent to 100 per cent.

“There is now a clear policy and industry push for greater direct foreign participation, with international companies and joint ventures increasingly taking the lead – especially in large-scale and offshore wind developments,” Dr Len said.

“Building investor confidence will require the Philippines to prioritise clear and efficient permitting, improved coordination among government agencies, and early, proactive engagement with stakeholders.”