DOE eyes P27-B microgrid investments despite funding hurdles

The Department of Energy (DOE) is seeking up to P27 billion in private investments to expand microgrid development across the Philippines.

However, financing constraints, weak investor appetite and costly diesel dependence remain major hurdles to bringing electricity to remote communities.

At the Philippine Energy Investment Forum on Thursday, the agency presented that the investment pipeline covers 369 unserved and underserved areas across 23 provinces, that could potentially benefit 101,468 households as the government pushes to achieve full electrification by 2028.

DOE Electric Power Industry Management Bureau (EPIMB) Director IV Luningning Baltazar said attracting private developers remains challenging due to the limited commercial viability of projects in isolated areas and insufficient subsidy support.

“We saw this the private sector’s low appetite because of the viability of the projects and that there is limited funds in terms of the UCME,” Baltazar said.

The Universal Charge for Missionary Electrification (UCME), collected from electricity consumers, helps subsidize power supply in off-grid communities.

Baltazar said the government also does not directly provide capital for microgrid development, leaving private developers to shoulder substantial upfront investments.

“There’s no financial support in terms of the actual infusion of the capital from the government,” she said.

The funding challenges come as the Philippines seeks to connect at least 2.1 million more households to electricity by 2028, with the national household electrification rate currently at 95 percent.

“Our archipelagic nature requires extensive effort in terms of electrifying the many islands that we have. And so far, we are only at 95 percent energized in terms of the households and we are yet to energize — our projection is we need to energize at least 2.1 million households by 2028,” Baltazar said.

Under the Microgrid Systems Act, private developers can compete to supply electricity to remote communities through systems combining solar power, battery storage and diesel generation.

Winning developers must integrate at least 35 percent renewable energy into their systems and provide round-the-clock electricity under a 20-year cooperation period.

However, Baltazar said operators remain dependent on diesel generators to maintain reliable electricity when solar and other variable renewable energy sources are unavailable.

The dependence exposes developers to fluctuating fuel prices, while limited generation capacity and sudden increases in electricity demand can result in power interruptions.

The DOE also identified regulatory concerns, financing limitations and insufficient government resources among the industry’s continuing challenges.

Despite these constraints, the agency sees opportunities for renewable energy and battery storage investments as the industry gradually shifts away from diesel-heavy power generation.

The 24 microgrid systems currently under development are expected to deliver 6,593 kilowatts of solar capacity, 7,564 kilowatt-hours of battery storage and 3,751 kilowatts of diesel capacity.

Solar’s share of generation capacity is projected to increase to 64 percent in projects under development, compared with 27 percent in existing operational systems.

The DOE said regulatory reforms under Republic Act 11646, or the Microgrid Systems Act, have helped streamline project approvals and clarify the responsibilities of government agencies and private developers.

At present, 11 microgrid systems are operational, serving 9,090 households, while another 24 projects are under development, targeting 11,600 households.