The Department of Energy (DOE) is looking to implement a hybridization project for the Small Power Utilities Group (SPUG) diesel power plants using renewable energy (RE) resources through private sector participation.
The agency said Thursday it is working with government and financial sector partners to design new low-interest financing models for RE developers to accelerate the hybridization of off-grid areas served by the SPUG of the National Power Corporation (Napocor).
The parties involved in the discussion are the Philippine Solar and Storage Energy Alliance (PSSEA), Philippine Hydro, Inc. (Phil Hydro), Wind Energy Development Association of the Philippines (WEDAP), multilateral banks and RE developers.
According to DOE Undersecretary Rowena Cristina L. Guevara, the true cost of generation (TCGR) in SPUG areas averages about P18 per kilowatt-hour (kWh) and can go as high as P62/kWh in some locations.
However, consumers in these off-grid areas pay only around P7 to P8/kWh, in line with the subsidized rates approved by the Energy Regulatory Commission (ERC). The difference, roughly P10-11/kWh on average is covered by subsidies collected from all electricity consumers nationwide.
‘Hybridization of SPUG areas through the integration of RE can bring cleaner, reliable, and more affordable electricity in the long run for the Filipinos who need it most. But to make this happen, we need to address and deal with one major challenge -financing,’ Guevara said.
‘We are here to explore a bold possibility of enabling low-interest financing for renewable energy developers without sovereign guarantees and without the usual required power supply agreements. As we enter retail competition and open access, where contracts are shorter, this might seem ambitious-but it is possible and would surely help transform how we scale RE in the Philippines,’ she added.
Participants presented potential models, instruments, and financing pathways that may be adapted for SPUG contexts, while also outlining practical bottlenecks and risks that hinder project deployment, particularly in small-scale and geographically dispersed off-grid systems.
‘With our partners from the government and financial institutions, we aim to identify viable financing structures and determine new potential collaborations so that we can collectively bring RE solutions to SPUG areas and accelerate our energy transition goals,’ Guevara said.
Created by the Electric Power Industry Reform Act of 2001, SPUG is responsible for generating power and operating associated systems in areas not connected to the national transmission grid.
These isolated grids often face very high generation costs and have difficulty attracting private investment due to their remoteness and limited demand.