Philippines faces headwinds in developing energy efficiency

Date Published: 
October 11, 2021
  • A screenshot from a recent PE2 presentation before legislative staff shows the country’s PHP 12 trillion (USD 243 billion) capital requirements for energy efficiency through 2040. (Image: PE2)
    A screenshot from a recent PE2 presentation before legislative staff shows the country’s PHP 12 trillion (USD 243 billion) capital requirements for energy efficiency through 2040. (Image: PE2)

(PE2 Note: Danessa Rivera of The Philippine Star reports on PE2’s emerging EE Outlook for 2021-2040, as well as the need for the country to address the market failure for EE portfolio finance.)

MANILA, Philippines — The Philippines still faces headwinds in developing energy efficiency despite the enactment the Energy Efficiency & Conservation (EE&C) Act of 2019 due to lack of access to financing.

During the Energy Smart Forum organized by the European Chamber of Commerce of the Philippines (ECCP) – PE2 last week, Philippine Energy Efficiency Alliance (PE2) president Alexander Ablaza said the country must address market failure for energy efficiency (EE) portfolio finance.

“From the last projection, the whole economy will need some $243 billion in investments between now and 2040 across sector,” he said.

The investment amount is also expected to increase as the PE2 – a non-stock, non-profit organization of energy efficiency market stakeholders – is currently updating its projections to account for changes in the market, namely the post-pandemic economic reset and the increasing enforcement of the EE&C Act and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, Ablaza said in a text message.

“PE2’s emerging EE Outlook will have two growth scenarios – low and high, with high aligned with DOE’s new Philippine Energy Plan 2020-2040. Investment requirements are still being projected, but for now, there’s a possibility for EE capital requirement to breach the $243-billion level, especially the high-side scenario,” he said.

PE2’s emerging Energy Efficiency Outlook 2021-2040 is eyed for release in late October or November, at the latest.

For EE financing, Ablaza said up to 98 percent of energy service companies (ESCOs) across developing Asia do not have suitable access to bank lending or equity capital to pursue long-term pipeline of ESCO-financed performance contracts.

He said there are also no aggregators or entities that remove barriers and risks to implement EE projects.

Unlike the RE component, private capital does not flow steadily to the EE sector, which can actually save 45,900 MW in the power grid from potential EE improvements, Ablaza said.

“Sadly, in energy efficiency, there’s very, very little private capital movement. You will see four development banks with sustainable energy finance… but volume-wise, it’s dominated by renewable energy,” he said.

From 2016 to 2021, private sector drove the P276-billion of green, social and sustainability bonds in the Philippines, the SEC said.

But of the total, only 37 percent were shared by a combination of renewable energy (RE) and EE projects.

Citing the United Nations Economic and Social Commission for Asia and the Pacific, SEC commissioner Ephyro Luis Amatong said that within the energy sector, RE and EE offer the strongest combination of economic, jobs-related and climate benefits.

The lack of EE financing is the reason why Ablaza joined with a team from the energy sector, industrial investments, and legal practice to form Climargy Inc.

Climargy helps commercial and industrial facility owners implement energy efficiency and other low-carbon energy management upgrades sooner, taking risk and capital decisions outside the typical constraints of their balance sheets.

It’s really about getting them away from pushing money for energy efficiency upgrades on the balance sheet of the ESCO, and on the balance sheet of the host entity or end user, and shifting that away and transferring all that assets and liabilities to Climargy,” Ablaza said.

The company is looking at an initial investment tranche of $108 million to bankroll EE projects in the country.

Written/Posted by: 
Danessa Rivera

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Philippine Energy Efficiency Alliance Inc. (PE2), is a non-stock, non-profit organization of energy efficiency market stakeholders.

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R.A. 11285 - An Act Institutionalizing Energy Efficiency and Conservation, Enhancing the Efficient Use of Energy, and Granting Incentives to Energy Efficiency and Conservation Projects

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Beyond COVID-19: How governments, ESCOs and innovative financial modalities can mobilize energy efficiency capital through 2040

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