Challenges to investment
The Philippines National Renewable Energy Plan (NREP) 2020-2040 set a target of at least 35% renewable energy (RE) in the power generation mix by 2030. However, RE’s share in the power generation mix averaged only about 2% from 2010 to 2019. The low deployment of RE generation was related to two major barriers. First, traditional transmission planning was often misaligned with the rapid scale-up of RE. Large-scale wind and solar projects could be deployed in a year or less, but transmission planning and development stretched over a decade. Second, the Philippines faced the circular dilemma: RE generator needed financing and financiers demanded transmission access to support their investment. However, transmission access required regulatory approval and regulators required certainty on cost-recovery from the potential RE generators. That dilemma left RE investment at a standstill.
Approach
On 18 September 2018, the Department of Energy (DOE) issued a Department Circular (DC) titled “Establishment and Development of Competitive Renewable Energy Zones in the Country”. The DC established a process that facilitated proactive transmission planning by identifying areas rich in economically viable RE resources. The DC designated Competitive RE Zones (CREZ) as geographic regions with abundant RE resources, suitable topography, appropriate land-use classification, and demonstrated interest for development. Identifying these CREZ would support the formulation and implementation of the NREP, along with national Transmission Development Plan (TDP). The initiative received financial support from the United States Agency for International Development (USAID) and technical assistance from the National Renewable Energy Laboratory (NREL).
Key Enabling Conditions
The CREZ program’s success was driven by several key factors. First, the program established clear processes outlining well-defined and transparent procedures for CREZ designation, selection, and buildout. Second, high-quality data (collected by NREL, working groups and the process-created Technical Advisory Committee) was essential for the decisions using the best available resource, land-use, and economic information. Next, strong stakeholder engagement (chaired by the DOE with support from USAID and NREL) actively aligned private developers, landowners, and government ministries. Additionally, the government integrated the CREZ transmission process into the regulatory framework, facilitating the construction of transmission projects. Finally, the CREZ process was modeled after a successful program in Texas, USA, where ten zones and corresponding transmission plans were developed by 2015.
Impact / Outcomes
The first phase of the CREZ initiative concluded in 2020, identifying 25 zones with an estimated gross capacity of 152 GW from new wind and solar photovoltaics sources. Moreover, the zones included approximately 365 MW of geothermal, 375 MW of biomass, and over 650 GW of hydropower capacity. The RE potential in these zones surpassed the Philippines’ Renewable Energy Roadmap goal of 20 GW by 2040, offering flexibility in cost-effective transmission build-out scenarios. From an investor perspective, these zones promised a high utilization and lower costs per MWh. These advantages translated into maximized MWh per unit of capital invested, reducing curtailment (intentional generation reduction) and optimizing transmission asset utilization. Finally, CREZ designation helped the Energy Regulatory Commission's review of transmission enhancements, ensuring access was directed to prime renewable energy areas and thereby reducing investors’ uncertainty about access. While the CREZ Phase II commenced on 27 January 2021, at the time of writing, the ensuing three subsequent activities were in progress.
Additional Sources
- Department of Energy (2018). Establishment and Development of Competitive Renewable Energy Zones in the Country, https://doe.gov.ph/sites/default/files/pdf/issuances/dc2018-09-0027.PDF
- NGCP (2021). Transmission Development Plan 2021-2040, https://www.ngcp.ph/Attachment-Uploads/Transmission%20Development%20Plan%202021%20-%202040%20Consultation%20Draft%20Report-2021-01-15-11-27-08.pdf
- NREB (2022). National Renewable Energy Program, 2020-2040, https://doe.gov.ph/sites/default/files/pdf/announcements/nrep_2020-2040.pdf
- NREL (2023). Transmission Planning with Renewable Energy Zones (REZ): Overview, Select Case Studies, and Key Enablers, https://www.nrel.gov/docs/fy23osti/85346.pdf
- USAID-NREL (2017). Renewable Energy Zone (REZ) Transmission Planning Process: A Guidebook for Practitioners, https://www.nrel.gov/docs/fy17osti/69043.pdf
- USAID-NREL (2020). Ready for Renewables: Grid Planning and Competitive Renewable Energy Zones (CREZ) in the Philippines, https://pdf.usaid.gov/pdf_docs/PA00X1N4.pdf