I need a break from writing about the most abominable corruption stories these past weeks. It has been depressing.
Instead, let me write about when Filipinos rose to the challenge of an international energy crisis and developed an indigenous energy source from scratch.
It was the mid-70s after the Arabs drastically reduced the amount of oil they sell to Western oil companies to protest Western support of Israel. The oil companies pro-rated the cut in supply among their customers in what they call ‘the equal misery formula.’
Bad for us. Our energy supply was almost totally dependent on Esso, Shell, Caltex and Getty. Only a bit of hydro was local.
We had to start a search for local energy sources in a hurry. The newly organized Ministry of Energy gathered geologists and other scientists from UP and other institutions with a mission to reduce our dependence on imported energy.
There was the predictable search for oil in Palawan and coal from Mindanao. Then there was Dr. Arturo Alcaraz who was toying around with a new energy source, harnessing heat from the earth. On April 12, 1967, an electric bulb was lit up by geothermal energy for the first time in Tiwi, Albay.
Geothermal energy sounded exotic but it wasn’t new. Union Oil of California was using geothermal energy in Sonoma County to produce electricity that was fed to the grid. We heard of their operation and contacted them.
When Fred Hartley, the chairman of Unocal heard about our interest to develop our geothermal resources, the autobiography of the late Energy Minister Ronnie Velasco quoted him saying: ‘Oh, I would like to talk to them. Those guys have fantastic geothermal potential, but they are not doing anything about it. They’re just sitting on it.’
The timing of the meeting couldn’t have been more propitious, Velasco recalled. With the oil supply shock as background, a deal was agreed to let Union Oil check out our geothermal resources. This complemented our independent efforts at PNOC to do the same.
Velasco wrote in his book that the contract between Unocal and Napocor on geothermal development was lopsided in favor of Unocal. That’s because they had the technology we needed in extracting the steam. Unocal worked on the Tiwi and Makiling Banahaw fields.
Eventually, the New Zealand government awarded a NZ$15 million geothermal technical assistance to help advance PNOC’s Tongonan, Leyte development. A NZ company, KRTA, which had extensive experience in geothermal energy, was named to help us.
By this time PNOC had organized an energy development subsidiary, PNOC EDC. With KRTA, we explored and developed the Leyte Tongonan field and the Palimpinon field in Negros Oriental. It was determined that both fields had enough resources to support commercial scale power plants.
For three decades (1980s-2010s), the Philippines was the second largest geothermal power producer worldwide, after the US.
In November 2007, PNOC EDC was privatized in a public bidding won by First Gen Corp. of the Lopez Group. EDC moved from the first three MW pilot plant in Tongonan to 1,150 MW by the time EDC was privatized.
As of April 2025, the total installed capacity for geothermal power plants stood at 1,987 megawatts. First Gen’s Energy Development Corp. (EDC) owns and operates 13 integrated geothermal power stations in Leyte, Bicol, Southern Negros and North Cotabato, with an installed capacity of 1,189.34 MW.
The potential geothermal capacity in the Philippines is estimated to be around 4,064 MW. With installed geothermal generating capacity at 1,987 MW, there could be around 2,000 MW more of geothermal potential that may be available for electricity production.
We have probably explored and developed as much of the easy-to-get resource we know we have. As of March 2025, the Philippines only has 122.22 MW of newly committed geothermal power projects.
We went from almost nothing to become the world’s second largest producer because the government prioritized investments in it. There was a special impost on gasoline and diesel retail prices that went into a Special Fund that financed our geothermal exploration and development.
Geothermal development is heavy on the front-end expense because wells must be drilled, the steam piped and the power plants built nearby.
Drilling costs are the single biggest expense in exploration. Drilling a single well can cost around $6 million to $8 million.
Not all wells drilled show the quality and quantity of steam that can be used in a commercial power plant. That risk may not be a problem with a government-owned entity like PNOC but the private sector needs incentives to do more.
The risk in geothermal development is mostly during the exploration stage. That’s why the government is looking at a de-risking mechanism to encourage private developers to invest in geothermal energy.
The DOE is estimating an initial $100 million (out of a total loan of $250 million) for the first tranche of the Geothermal Resource De-Risking Facility from the Asian Development Bank aimed at reducing investment risks in geothermal energy.
Once this financing package is put in place, this move may help spark investor interest for geothermal energy.
While the Philippines has already tapped about half of its geothermal potential, Indonesia still has around 90 percent untapped geothermal resources.
Because we have the technology and trained staff, First Gen established its Indonesian subsidiary, PT FirstGen Geothermal Indonesia, to bring its expertise from decades of geothermal experience to Indonesia.
Given the increasing importance of clean energy, developing more of our geothermal potential is needed. It is also the kind of baseload power source that will help make the RE transition smoother.
Geothermal 2.0 will do our country proud the way the first foray in geothermal did. It will show the world that Filipinos are really a lot better than the international picture of corrupt public officials is currently suggesting.