A look at the Philippines’ clean energy ecosystem

Courtesy of RMI.
By New Energy Nexus Philippines

The Philippines is one of the most vulnerable countries in the world to climate change. Sea level rise is three to four times faster in this island nation than the world average, and it is hit on average by 20 typhoons per year. Energy equity is also a major concern, as 10 percent of the Filipino population still live in rural areas without access to electricity, and those who do face frequent blackouts.

Fortunately, a small but powerful group of startups are helping the Philippines forge a clean energy future. According to research from New Energy Nexus (NEN), founding partner of Third Derivative, and RMI, 15 start-ups are helping transform the climate crisis – and close the region’s energy access gap – with energies renewable and clean technology solutions.

The good news is that these startups don’t act alone. Public and private leaders in the Philippines are striving to create a cleaner, more accessible, and more reliable energy system. Policymakers have already announced a moratorium on new coal projects and are targeting 35% clean energy by 2030.

But it will take a lot more innovation and investment to achieve this goal. Coal-fired electricity production capacity has increased since 2008 and now contributes 57% of the country’s energy mix. And the country’s renewable energies currently represent less than a quarter of the supply, with variable renewable energies such as wind and solar being much less widespread (2%) than hydropower and geothermal energy.

All of this means major ecosystem opportunities – as well as major hurdles – for energy innovation.

5 Regional needs and opportunities

Next, we explore five takeaways from NEN Philippines Energy Ecosystem Map report, including key characteristics of today’s startup scene; financing, policies and institutional drivers; and the general support landscape.

1. Startups and other early indicators reveal a cleantech ecosystem with room for growth

The Philippines is home to many clean energy players, including startups, research labs, universities, media, and professional service providers.

Our research identified 15 promising new energy startups, including:

• Exora, a platform that connects retail electricity providers with questionable customers to make energy affordable and accessible to all Filipinos
• Smartermeter, an energy management system for households and commercial rental units to create a community of more informed consumers
• Circular Solutions, a waste management system to help residential communities with clean cooking fuel from biodegradable waste
• Light of Hope, an impactful startup that provides solar generator systems to low-income families

These and other efforts are supported by a supporting ecosystem comprising 200 professional energy service providers and 16 media outlets that promote energy-related news. And they’re surrounded by other innovators, with 240 active patents related to energy, clean energy, renewable energy and batteries, as well as 141 new energy research projects spanning 11 research laboratories and eight universities.

Conclusion: The Philippines’ clean energy ecosystem is still reaching critical mass. We see room for even more startups, given the larger scope of innovation.

2. Funding is on the rise, but not yet meeting market needs

Overall, we are seeing an inordinate market demand for cost effective clean energy solutions. Off-grid solutions such as off-grid solar power and mini-grids will be key to closing the energy gap in the 24,556 unelectrified communities in the Philippines.

But this can only happen with additional funding.

Currently, the country’s funding landscape includes 27 bank loans for startups and energy projects, six donors, 11 venture capital firms, five crowdfunding platforms, two insurance programs, six angel investor networks and investors, five green bonds and 6,943 micro-cooperatives.

While these numbers are promising, current funding levels will not reduce it. Our analysis shows that with an investment of $ 354 million, 1.25 million households could tap into the electricity generated by mini-grids by 2030. And an investment of $ 897 million would yield 2.5 million additional homes from autonomous solar by then.

Conclusion: There is an opportunity for growth in terms of market interest and need, but it will require larger investments.

3. Filipino policy shifts in favor of clean energy

A policy and support programs are always important for energy startups. Fortunately, Filipino policymakers have been incorporating clean energy provisions into the nation’s plans for more than a decade.

Here are some notable examples:

• The Electric Power Industry Reform Act (EPIRA), which privatized the electricity sector to support competitive prices, more reliable electricity and better quality energy
• The Renewable Energy Law of 2008, which includes a renewable energy portfolio standard, a feed-in tariff system, a green energy options program and duty-free importation of renewable energy materials
• The Energy Efficiency and Energy Conservation Act (EECA) of 2019, which provides for an interagency committee on energy efficiency and energy conservation as well as certifications, standards and labeling for ‘energetic efficiency
• The Energy Virtual one-stop-shop, which aims to reduce red tape by streamlining the authorization process for the production, transmission and distribution of electricity

Conclusion: Policymakers have clearly shown their support for opening pathways to clean and affordable energy, an encouraging sign for energy startups.

4. Institutional inefficiencies pose a challenge

According to the International Trade Administration, the Philippines needs around 43 GW of additional capacity by 2040 and is “clearly behind in developing solutions.”

Utilities and power companies are at the heart of the effort, including 198 power generation companies, 22 private distribution utilities, 6 LGU-owned utilities, 120 power co-operatives, 67 power suppliers. retail electricity, 2,089 consumers or questionable end-users and 396 transport cooperatives.

But major inefficiencies are slowing progress in the energy supply sub-sector. Utilities and power company executives grapple with a complex and slow approval process, sub-optimal market mechanisms, and institutional capacity issues.

Bottom line: don’t expect smooth sailing in terms of institutional membership and adoption of the most proven and cost effective clean energy solutions.

5. Clean energy networking opportunities abound

A spirit of innovation is evident not only in the startups and research organizations themselves, but also in groups and events seeking to elevate communication and collaboration in the Filipino clean energy world.

To our knowledge, there are 18 inspiring events, 15 capacity building initiatives, two startup validation programs, 22 fab labs, 15 networking events, 49 incubators and accelerators, two showcase and demonstration events, and 25 evangelists.

For example, RebootPH and Our Energy 2030 are youth-led coalitions that advocate for awareness and capacity building on renewable energy.

Bottom Line: Third-party organizations are helping startups and other clean energy innovators promote breakthrough work.

Tracing future energy innovation in the Philippines

Looking ahead, new market entrants and startups in the Philippines face the typical hurdles you’d expect anywhere: it takes a lot of time and a lot of capital to bring a promising idea from seed to market.

In the Philippines in particular, startups face significant institutional hurdles and regulatory challenges. However, opportunities exist and multiply thanks to market needs, increased research and development efforts and a favorable political environment.

New Energy Nexus calls on acceleration programs, policymakers and funding entities to step up efforts to support energy startups in the Philippines and together to contribute to 100% clean energy saving for 100% of the population.

Are you a climate tech startup? Find out how Third Derivative, a global accelerator, can help you succeed and accelerate the commercialization of your climate innovation, and apply to join our next cohort of climate technology accelerators.

Featured Photo By Hitoshi Namura on Unsplash

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