The Philippines' wind and solar sectors will lead renewable capacity growth over the coming 10 years following robust governmental support and investor interest, Fitch Solutions said Monday.

According to Fitch Solutions, the Philippines' non-hydropower renewables sector will experience the "greatest expansion" from 2022 to 2031.

Data from the US think tank said the country's renewable sector would grow by 6.8 giga-watts at an annual average rate of 10.4 percent, surpassing conventional thermal increase of 5.8 gigawatts.

About 86 percent of this net non-hydropower renewables capacity growth will be from the solar photovoltaic sector.

Fitch Solutions added that 10 percent would come from the onshore wind power sector.

Within Fitch Solutions' Key Projects Database, there are already 127 non-hydropower renewable power projects in development, totaling 21.4GW in capacity, 78 of which are solar PV projects.

Tailwinds for the sector's growth will largely come from "strong governmental support" to meet its ambitious targets of 35 percent renewable electricity and 15.3GW of renewable energy capacity by 2030 (including hydropower).

In June 2022, the market's Department of Energy launched its first round of renewable project tenders, totaling about 2.0GW and encompassing solar PV, wind, hydropower, and biomass and waste power projects in order of capacity allocated.

"We expect more such tenders to be launched whilst increasing demand for renewable power projects is signaled by interest from the domestic and international private sectors," Fitch Solutions said.

Non-hydropower renewables to shift

Fitch Solutions also expects the Philippines to go through with its policy of allowing foreign companies full ownership of renewable power projects.

"(This would attract) more foreign investment for the development of the sector," the US think tank mentioned.

In September 2022, the Philippines' Department of Justice proposed that renewable power projects should not be limited to 40 percent foreign ownership.

Fitch Solutions said that this opens up the renewables sector to larger ownership by foreign companies and may reach 100 percent.

At the start of November 2022, the DoE announced that it aims to open the sector to full foreign ownership by the end of November after gathering public consultation for amendments to the Renewables Energy Act.

"We expect this legislation amendment to go through, attracting more foreign investment into the sector, either through consortiums, single-owners, or even cooperation with local companies," Fitch Solutions said.

Earlier in February 2022, the Philippines also passed the Senate Bill 2094, allowing 100 percent foreign ownership of public utilities including electricity transmission and distribution.

According to the think tank, the move would promote private sector involvement and foreign direct investments in the Philippines.

It would further diversify the competitive landscape and provide much-needed capital to improve the power sector.

"By promoting competition in the power sector, domestic companies will face increasing pressure to innovate and adapt to compete with international peers," said Fitch Solutions.

It added: "We believe this is part of the government's plan to accelerate the privatization of the power market, which started with the Electric Power Industry Reform Act in 2001."