PH Renewable Energy Growth May Miss Targets Amid Structural Hurdles
- January 28, 2026
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The Philippines may struggle to meet its renewable energy (RE) targets over the coming decades as grid constraints, permitting bottlenecks, and financing challenges continue to slow project development, according to S&P Global.
S&P Global forecasts that renewables could account for only about 27% of the country’s power generation mix by 2030 and around 50% by 2050, which is well below the government’s targets of 35% by 2030 and 65% by mid-century under the Philippine Energy Plan 2023–2050.
Forecasts Lag Behind Government Targets
Vince Heo, director for Asia-Pacific Power and Renewables Research at S&P Global, said the projections reflect the firm’s internal assessment rather than its base-case scenario. “We are making a forecast. It’s our own view. It’s not based on our base case,” Heo said in separate interviews on the sidelines of an event in Makati City and in a recent discussion with the media.
Renewable energy currently accounts for about 25% of the Philippines’ power mix, while coal remains the dominant source at roughly 60%. Although the government has been pushing to reduce reliance on fossil fuels, S&P Global sees a “big gap” between official targets and the pace at which projects can realistically be delivered.
Grid Constraints
A major concern cited by S&P Global is the country’s ability to integrate large volumes of variable renewable energy into the power system. Heo said the intermittent nature of solar and wind generation, combined with limited energy storage capacity, poses risks to grid stability.
“Let’s say all these solar projects, seven gigawatts are all operational—there’s an issue with dealing with this intermittency from solar and there’s not enough storage in the power grid,” Heo said. As a result, the country may continue to rely on “firm capacity” from coal- and gas-fired plants that can provide round-the-clock power.
The transmission network itself is another bottleneck. Several renewable energy service contracts have been awarded in areas far from existing transmission lines, limiting available interconnection points and causing delays. “We are running the software to see whether the system balance could be met or not, and it’s clearly not in the Philippines. You don’t have good grid planning here,” Heo said.
The National Grid Corp. of the Philippines (NGCP), the country’s sole grid operator, has also acknowledged these challenges, calling for “more incisive and progressive policies” and a “holistic solution” to manage the entry of variable renewable energy while ensuring grid stability. NGCP has stressed that development across the power supply chain must be coordinated and balanced.
Permitting And Project Delays
Beyond grid issues, S&P Global highlighted the complexity of the permitting process as a key obstacle to faster RE deployment. Heo described permitting reform as “the number one priority” for the sector.
Developers must secure approvals from multiple government agencies at both the national and local levels before construction can begin. In offshore wind development alone, projects may require more than 80 permits involving over 25 agencies, significantly extending timelines and raising costs.
These challenges have contributed to project delays and, in some cases, cancellations. The Department of Energy (DoE) recently terminated or accepted the relinquishment of 163 renewable energy contracts, equivalent to nearly 18 gigawatts (GW) of potential capacity, after developers failed to meet project milestones.
Heo said the move sends a positive signal to the market. “I think it’s good that the government came out and announced this news so that everyone knows what’s happened and the consequences of not meeting the timeline,” he said, adding that it reflects a commitment to transparency.
Financing Costs And Investment Risks
Financing conditions also weigh on the outlook for renewable energy growth. According to S&P Global, the weighted average cost of capital (WACC) for solar projects in the Philippines is estimated at around 10–11%, about 3–4 percentage points higher than in more advanced markets.
“I think (the Philippines has) a higher country risk,” Heo said, citing regulatory uncertainty and transmission-related concerns as factors that make international banks more cautious about financing projects in the country.
Despite these challenges, interest from foreign investors has increased since the Philippines allowed 100% foreign ownership in renewable energy projects. “The government lifting the foreign ownership restrictions was a good trigger,” Heo said, noting growing interest from international developers and investors.
Long-Term Outlook
Energy analysts and civil society groups warn that policy choices will play a critical role in determining whether the country can close the gap between targets and outcomes. Avril de Torres, deputy executive director of the Center for Energy, Ecology, and Development, said falling short of RE goals is “certainly a possible scenario.”
She attributed the risk to policy directions that allow coal, gas, and other fossil fuels to crowd out renewables rather than be displaced by them. De Torres called on the government to expand support for distributed and community-based renewable energy projects through incentives and concessional financing to unlock untapped potential.
Source:
https://www.philstar.com/business/2026/01/23/2502813/philippines-unlikely-meet-re-targets-2030
