The Philippines needs power.

With an attractive mix of bustling cities and beautiful landscapes, the country’s population is growing and tourism is booming. However, an important resource for doing business — electricity — has been constrained as a result of this growth. And, as the Philippines grapples with how to rectify the country’s energy shortage, it must also balance the risks of climate change.

The Philippines is situated along the Western Pacific tropical storm region and the volcanic Pacific Ring of Fire, and is among the most disaster-prone countries in the world. An average of 20 tropical cyclones affect the country each year, which trigger floods, landslides, and storm surges that frequently result in the loss of lives, livelihoods, houses, and other critical infrastructure, like health centers, schools, roads, energy and water systems. The effects of climate change are causing cyclones to intensify more rapidly and unpredictably.

In the face of these climate and infrastructure-related issues, the need to have secure, stable, resilient and diversified energy sources to meet the ever-growing population’s rising demand for energy is more important than ever.

That’s why the Government of the Philippines created a plan to both reduce emissions and achieve a more diversified energy mix — by setting targets of a 35% renewable energy mix, and a 75% reduction of greenhouse gas emissions by 2030.

For more than 50 years, USAID has helped develop the energy sector in the Philippines, ranging from scaling renewable energy and increasing efficiency to strengthening utility performance and overall sector resilience. Equipped with decades-long relationships and global knowledge in the energy sector, USAID was poised to help the Philippines Department of Energy in implementing the country’s first national renewable energy auction.

In a renewable energy auction, private sector companies bid against each other for contracts to generate energy. This transparent process allows countries to obtain clean energy at a competitive price.

USAID has significant experience supporting successful renewable energy auctions in places like Colombia and Mexico. In the Philippines, there was an opportunity for an auction to break down significant barriers to entry into the energy market for the private sector, and create cost-effective renewable energy options that can compete with coal and other traditional sources of energy.

In 2022, USAID’s Energy Secure Philippines program supported the Philippines Department of Energy in the country’s first renewable energy auction. The Agency helped design the auction’s electronic bidding platform and trained the private sector in bidding best practices.

This first auction facilitated $2.35 billion of investment, awarding 1,866 megawatts of renewable energy into the country’s energy mix and attracting 24 bidders based in the country. The auction was so successful that 109 bidders came out for the second auction in summer of 2023 — and awarded an impressive 3.6 gigawatts of new solar and wind projects through $4.3 billion of investment.

Combined, both rounds of auctions will avoid 69.7 million tons of greenhouse gas emissions (CO2e) over 15 years, and the power generated will make up 20% of the total power system in the country.

These continuing rounds of renewable auctions are a win-win-win for stakeholders in the Philippines. The private sector has a new opportunity for reliable investment; consumers have access to cheaper and cleaner energy; and the energy mix in the country is more diversified, stable, and resilient. Most importantly, the auctions are providing energy democracy in the Philippines.

Production and management of energy resources for the auctions are being managed on the local level in a just and equitable way. This is essential as countries realize the importance of having energy security and reducing reliance on expensive fossil fuel imports in the face of difficult geopolitical situations, like Russia’s invasion of Ukraine.

Moving away from imported energy sources also paves the way to create green jobs in communities that will support the clean energy infrastructure from renewable energy auctions. As an added benefit, the communities that host the generation facilities receive a share of revenues generated from the sale of electricity. Additional auction rounds will require expansion of the transmission grid to accommodate new renewable energy sources, and USAID will be supporting the plans to make this change.

USAID will continue to partner with the Government of the Philippines and the private sector to work on attaining the country’s renewable energy and greenhouse gas emission reduction targets by 2030. With creativity, expertise, and country context — these stakeholders are well poised to create a healthy enabling environment for the market and to unlock continued energy capability for the country.

About the Author

Ali Syverson is a Communications and Knowledge Management Specialist supporting Built Environment in DDI/EEI.