What’s Holding Back Foreign Investors in Renewable Energy?
- August 13, 2025
In Bloomberg New Energy Finance’s (NEF) 2023 climate report, the Philippines emerged as one of the world’s most promising power markets, ranking fourth among 110 emerging economies in terms of investment appeal. Its natural endowments of abundant sunshine, rich geothermal reserves, and strong wind potential both onshore and offshore give it a clear edge in the global renewable energy (RE) race.
Government incentives and policy support have further strengthened the country’s position. Between January and mid-September 2024, the Board of Investments (BoI) cleared $24.29 billion in projects, with RE accounting for 95% of the total.
As of November 2024, renewables made up 22% of the national power mix, but the government is setting its sights higher—aiming for 35% by 2030, 50% by 2040, and surpassing the halfway mark by 2050.
(Also read: Too Soon to Go Green? Why Rushing into Renewables May Not Work)
Supportive policies that attract foreign investment
A mix of strategic measures has helped position the country as a magnet for foreign RE investors.
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Tax breaks
The Philippines has rolled out an extensive suite of fiscal perks to draw investors into its RE sector. Anchored in the Renewable Energy Act of 2008 and reinforced by recent tax regulations, these measures include generous income tax holidays, reduced corporate tax rates, exemptions from duties and value-added tax, and other benefits designed to lower upfront costs and improve long-term returns.
Developers can also tap into accelerated depreciation, carbon credit exemptions, and incentives for hybrid and cogeneration systems, while enjoying preferential tax treatment on equipment, materials, and power sales. The package aims to ease capital burdens, reward early investment, and create a competitive edge in the region’s fast-growing clean energy market.
More recently, the CREATE MORE Act expanded the menu of incentives, offering enhanced deductions for research, training, labor, and power costs, alongside extended timelines for tax relief.
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Full foreign ownership
In 2022, the Philippines scrapped foreign ownership limits in RE, with the Department of Energy (DOE) revising the Renewable Energy Act’s rules to allow full foreign participation in developing solar, wind, biomass, and marine energy projects. Then DOE Secretary Raphael Lotilla lauded this reform, stating it could accelerate RE project development, generate jobs, and help the country meet its targets.
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Streamlined Process for Investors
The Ease of Paying Taxes Act and expanded Bureau of Internal Revenue e-services aimed to simplify registration and tax compliance. The DOE also reopened RE contract applications through its Energy Virtual One-Stop Shop, a digital platform that centralizes and accelerates project approvals.
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Government push
The government has rolled out a suite of measures to spur wider adoption of clean power. From RE portfolio targets to net metering, competitive green energy auctions, feed-in tariffs, and a trading platform for RE, these initiatives aim to draw more players into the energy transition.
(Also read: Dunkelflaute: When Wind Went Silent)
Why foreign RE investors hesitate
But even with attractive perks, foreign investors still face significant barriers in the RE market.
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Complex regulatory process
Renewable Energy Association of the Philippines president Erel B. Narida flagged the country’s project approval process as overly rigid, noting that building a utility-scale solar farm can demand more than 250 signatures from various agencies and local officials. “If one official did not sign today, you cannot finish it in a year,” he said.
While acknowledging that the strict rules are meant to safeguard consumers, Narida admitted they remain a hurdle for investors. He advised developers to comply fully with the process despite the delays, stressing that doing so ensures greater security for projects in the long run.
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Tech availability
German-Philippine Chamber of Commerce and Industry Executive Director Martin Henkelmann pointed to technology access as another stumbling block. “Some of the machines needed for the projects, they are quite complicated,” he explained. “There arise issues on the side of installing them, but also sometimes in getting the equipment. It is quite a typical issue.” Each project, he added, presents unique technical challenges that can slow progress.
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Poor regulatory framework
Energy expert Guido Alfredo A. Delgado cited cases where the Energy Regulatory Commission (ERC) approved electricity rates under a provisional authority but later cut them retroactively. In one case, the ERC assigned different heat rates to two identical diesel engines without a technical explanation.
Delgado argued that the ERC’s use of the Capital Asset Pricing Model (CAPM) creates a “circular and conflicted” situation, since the very risk it measures is shaped by the regulator’s own decisions. “Regulatory risk is the single most significant threat facing investors… and it is a risk created by the regulator itself,” he stressed.
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Corruption
According to columnist Boo Chanco, corruption at the local level has derailed RE projects. He cited a reader’s account of a Belgian solar firm that abandoned plans for a Central Luzon solar farm after officials allegedly demanded a 30% kickback, far above what the company deemed tolerable. “So, in utter frustration, they packed up their 7th-floor office on Ayala Avenue and left the country in disgust!” the reader had written.
Chanco observed that the Philippines’ reputation for corruption likely discourages many investors, with only the most determined willing to take the risk. “Even then, they have a limit which our greedy officials exceed,” he wrote. “There are also the anti-corrupt practices laws in their home countries that penalize corrupt acts committed in foreign countries by their citizens.”
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Grid constraints
In the Philippines, RE growth is being held back by the country’s underdeveloped transmission network, according to industry players. The Developers of Renewable Energy for Advancement Inc. (DREAM) warned that without adequate grid capacity, new clean energy projects face delays or cancellations. “Generators want to build in some areas, only to find out there’s no transmission capacity,” said DREAM president Jose Layug Jr.
By 2025, the National Grid Corporation of the Philippines (NGCP) had finished just 75 of its 258 scheduled projects, a shortfall that slowed national grid expansion and stalled the rollout of key RE initiatives.
Holistic reform
Joey Ocon, co-convenor of the Center for Energy Research and Policy, noted growing momentum in opening foreign ownership and attracting renewable investments. “However, reliability remains a critical blind spot, especially in island communities that rely heavily on tourism,” he stated. “These are the most vulnerable to power interruptions.”
He highlighted grid congestion as a key barrier, with inadequate transmission infrastructure delaying connections and forcing curtailment despite increased solar and wind capacity additions.
“If you keep adding renewable plants but the grid isn’t ready to handle the load, it’s like building a highway with no on-ramps,” he stressed. “Without improving transmission, our renewable goals will remain out of reach.”
Meanwhile, facilitation payments pose a quiet but corrosive problem for RE development in the Philippines. Not only are these illicit payments outlawed under the Anti-Red Tape Act of 2007, but they also undermine the integrity of investment in clean energy, draining both trust and capital.
Ensuring the energy transition is truly effective means more than meeting targets on paper—it requires tangible improvements that communities across the Philippines can feel in their daily lives. Addressing infrastructure gaps, eliminating corrupt practices, and fostering inclusive governance are essential steps to create a RE future that is reliable, equitable, and sustainable for all Filipinos.
Sources:
https://www.philstar.com/business/2022/11/18/2224546/full-foreign-ownership-re-projects-okd
https://insiderph.com/insider-view-why-investing-in-power-is-an-investors-nightmare
https://pcij.org/2023/03/21/why-green-energy-cant-gain-ground-in-the-philippines/
https://www.philstar.com/business/2023/07/19/2282012/corruption-hinders-re-investment
https://business.inquirer.net/446086/grid-infrastructure-cant-cope-with-re-boom-bmi-research
https://thebenildean.org/2025/05/reality-check-the-philippines-crawl-toward-clean-energy
https://www.manilatimes.net/2025/07/27/business/top-business/energy-sector-still-faces-major-hurdles-expert/2156646
