The 40 MW/60 MWh Alaminos Energy Storage system, developed by ACEN, is connected to the 120 MW Alaminos solar park in the Philippines.

Given the limited scale of solar in the Philippines, it is perhaps surprising that there are plans to develop one of the world’s biggest combined PV and energy storage projects in the country.

Solar Philippines New Energy Corp. (SPNEC) will build the 3.5 GW solar and 4.5 GWh battery Terra Solar project in the provinces of Nueva Ecija and Bulacan on the Philippine island of Luzon.

Some 2.5 GW of solar and a 3.3 GWh battery energy storage system (BESS) will arrive in phase one before April 2026, with the balance due a year later.

In September 2024, UK-based infrastructure investor Actis agreed to take a 40% stake in Terra Solar for $600 million, with the deal set to close by April 2025. Local media have referred to a $4 billion construction cost, which is most likely for phase one alone.

The project will connect to the grid via an existing 550 kV transmission line, with another line to be added. Manila Electric Co. (Meralco), the Philippines’ largest electric utility and owner of 50.5% of SPNEC, has signed a 20-year power purchase agreement (PPA) covering 850 MW of the site’s generation capacity for 12 hours per day.

The nation’s Board of Investments (BOI) gave the site a green lane certificate in August 2024, speeding up permitting processes for strategically important infrastructure.

The 3,500-hectare site will power around 2.4 million households, based on typical monthly demand for 200 kWh. Luzon, the country’s largest island, counted 64 million residents in 2021, and hosts just over half of the Philippines’ population, the capital city of Manila, and most of the nation’s industrial capacity. Terra Solar’s developers say the project will supplant coal-fired power.

Rahul Agrawal, head of energy for Southeast Asia at infrastructure investor Actis, explained that Southeast Asia is home to some of the most dynamic economies globally, and the region’s energy transition is picking up speed. “The Philippines is showing real purpose on the energy transition and no project represents this more than the Terra Solar project,” he said, revealing it will co-locate solar with battery storage on a scale the region hasn’t seen before, backed by a “sizable PPA”, to deliver a stable renewable power supply to Luzon’s main grid.

Contractors have been appointed. Huawei will supply the BESS and US-based Jacobs will provide engineering and technical guidance. State-owned China Energy Investment Corp. landed an engineering, procurement and construction (EPC) contract in November 2024 that includes local training.

However, a spokesperson for S&P Global Commodity Insights warned pv magazine that it is not uncommon for projects of this size to run into delays. “These may arise if the company encounters challenges related to rights-of-way or grid constraints,” they said.

Shabrina Nadhila, electricity policy analyst for Southeast Asia at energy think tank Ember, agreed that developing such large projects can be challenging.

“Delays usually arise from challenges such as complex administrative and bureaucratic processes, including securing land permits and navigating procurement procedures,” she said.

Project delays

The Philippines government had predicted the nation’s total electricity generating capacity would hit around 32.3 GW by the end of 2024, but the actual figure was at least 1 GW lower. Installed PV capacity reached 2.3 GW, with 820 MW of solar added in 2024, breaking the previous record of 320 MW of newly installed capacity in 2021. Even so, this was far below the 2 GW of new solar the government has forecast for 2024. Manila’s ambitions were frustrated by project delays.

In October 2024, the Department of Energy warned that licenses for 53 solar projects could be canceled because of slow progress, with some of those contracts awarded in 2017. The contracts stipulated that feasibility, grid, and other surveys must be completed within two years, but many have failed to complete grid connection studies on time. If contracts are withdrawn, they could be reallocated to other developers.

Completed projects include the SPNEC-developed 150 MW Concepcion project on Luzon, commissioned in 2019, and in 2016, the 63 MW Calatagan solar farm in Batangas, Luzon – the first utility-scale PV project developed and constructed by a Philippine company. The company is also developing the 500 MW Nueva Ecija Solar Farm, also on Luzon.

Vena Energy, another big developer, completed the 132 MW Cadiz project in Western Visayas in 2016, and the 83 MW Ilocos Norte Solar PV project in Ilocos in 2023.

In August 2024, Vena announced that it would build the 550 MW Bugallon solar project with an unspecified amount of battery energy storage in Bugallon, on Luzon, by the end of 2025. That will be the country’s second-biggest PV project behind Terra Solar.

Citicore Renewable Energy Corp. (CREC) has 285 MW of generation capacity across 10 solar projects in the Philippines. The company hopes to expand following a successful initial public offering in 2024 that attracted investment from the UK government, among other sources. CREC is currently completing a 69 MW solar plant on Negros. Prime Solar Solutions completed the first 64 MW phase of a 128 MW solar plant in Maragondon, 100 km south of Manila, in July 2024. That project is backed by a 50 MW, 20-year PPA with Meralco.

Ambitious target

The Philippines government has set a target of increasing the proportion of renewables in its power generation mix from 22% in 2023 to 35% by 2030, and 50% by 2040. While hydro and geothermal power currently account for most of the country’s clean energy capacity, most new sites will feature solar and wind generation.

To drive investment, the government lifted restrictions on foreign ownership and introduced the Green Energy Auction Program (GEAP), under which developers are awarded long-term PPAs with state-owned National Transmission Corp. Although the “GEA-4,” which was due to have a heavy focus on energy storage, did not take place in 2024 as planned, the program is continuing. PPAs backing 5 GW of renewables have been awarded, with 12 GW planned for the next two rounds, both of which could be held in 2025.

Duties have been lifted on the import of components and permitting processes for PV projects have been simplified, such as through the Green Lane Certification program, “as well as initiatives to shorten approval timelines from the grid operator for grid studies,” Agrawal said. Developers can make use of National Grid Corp. of the Philippines’ (NGCP) Transmission Development Plan, which provides a roadmap to guide project location.

The Philippines has become an attractive market. The power sector attracted a record PHP 1.35 trillion ($23 billion) of investment in the first eight months of 2023, some 95% of which was directed at renewables, according to the BOI. The Department of Energy sanctioned the construction of 29 utility-scale solar projects, each with capacities of at least 180 MW, over the same period. The biggest were the 516 MW Baao project planned by Suncastle Energy Resources in Camarines Sur, and Tera Renewables’ 532 MW Villasis-Malasiqui 1 Solar Power Project in Pangasinan.

Investment is being made in a wide range of zones, with 760 MW of solar and 310 MW of BESS projects planned in the Visayas group of islands alone. In March 2024, Philippines company ACEN and US-based business BrightNight announced plans for 1 GW of solar and other renewables across the country, at a cost of $1.2 billion.

NKS Solar One has submitted plans to build the country’s first two big floating solar projects: a 162 MW floating array on Lake Caliraya and an 88 MW project on Lake Lumot, both southeast of Manila. If the required permits are secured, the projects should be completed by April 2026.

Key challenges

Although not all of the projects may be completed due to grid and finance constraints, the number and scale of planned projects does highlight the level of interest in the industry. “Enhancements to grid capacity, including transmission line upgrades and energy storage integration, must be prioritized to accommodate the rising share of solar power,” the S&P Global Commodity Insights spokesperson said.

Although National Grid Corp. of the Philippines is working to provide more connections, the grid is constrained by the country’s archipelagic geography. Limited inter-island transmission capacity increases the likelihood of congestion and curtailment. Renewable energy investment “must be matched by enhanced grid infrastructure and improved inter-island connections, where needed, to support rising renewable supply and electricity demand,” said Nadhila.

The Ember analyst added that a tariff structure to back solar-plus-storage BESS sites could stimulate the market into further competition and make batteries affordable. S&P Global Commodity Insights’ spokesperson said battery-backed solar-plus-storage costs should be at parity with coal-fired power in the Philippines between 2025 and 2030.

Philippine power prices are among the highest in Southeast Asia, partly due to a decentralized market structure, which is, counterintuitively, another challenge for solar.

PV operators can sell power through the wholesale electricity spot market, but price fluctuations there can create revenue and finance risks. Such prospects may prompt investors to demand higher returns, eroding the competitive nature of solar projects.