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 global average, and it gets hit with an average of 20 typhoons a year. Energy equity is also a major concern as 10 percent of the Philippine population still lives in rural areas without access to electricity, and those that have electricity deal with frequent outages.
Fortunately, a small but mighty group of startups is helping the Philippines forge a clean energy future. According to research by New Energy Nexus (NEN), a founding partner of Third Derivative, and RMI, 15 young companies are helping transform the climate crisis — and close the region’s energy access gap — with renewable energy and clean-tech solutions.
The good news is that these startups are not acting alone. Public and private leaders across the Philippines are working to create a cleaner, more accessible and reliable energy system. Already policymakers have announced a moratorium on new coal projects and are aiming for 35 percent clean energy by 2030.
But it’s going to take far more innovation and investment to meet that target. Coal-fired power capacity has increased since 2008, and now contributes to 57 percent of the country’s energy mix. And the nation’s renewables currently account for less than a quarter of supply, with variable renewables like wind and solar significantly less prevalent (2 percent) than hydropower and geothermal.
All this signifies major ecosystem opportunities — along with major barriers — for energy innovation.
Ilocos, Philippines. Photo by Brett Andrei Martin, via Unsplash
5 Regional Needs & Opportunities
Following, we explore five takeaways from NEN’s Philippines Energy Ecosystem Map report, including key traits of today’s startup scene; funding, policy and institutional drivers; and the general landscape of support.
- Startups and other early indicators reveal a clean tech ecosystem with room to grow
The Philippines is home to an array of clean energy game-changers, 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 suppliers with contestable customers to make energy affordable and accessible for all Filipinos
- Smartermeter, an energy management system for households and rental business 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 impact startup that provides solar generator systems for low-income families
These and other efforts are backed by a supportive ecosystem including 200 energy professional 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, along with 141 new energy research projects spanning 11 research laboratories and eight universities.
Bottom line: The Philippine clean energy ecosystem is still building to a critical mass. We see room for even more startup players, considering the larger setting of innovation.
- Funding is on the rise, though not yet up to market need
Overall, we’re seeing outsized market demand for cost-effective clean energy solutions. Off-grid solutions like standalone solar and minigrids will be key to closing the energy gap for the 24,556 un-electrified communities in the Philippines.
But this can only happen with additional funding.
Currently, the country’s funding landscape encompasses 27 bank loans for energy startups and projects, six grant providers, 11 venture capital firms, five crowdfunding platforms, two insurance programs, six angel and investor networks, five green bonds, and 6,943 micro-cooperatives.
While these are promising numbers, current funding levels won’t cut it. Our analysis shows that with an investment of $354 million, 1.25 million households could tap into minigrid-generated electricity by 2030. And an investment of $897 million would give an additional 2.5 million households standalone solar by then.
Bottom line: There is opportunity to grow in terms of market interest and need, but it’s going to take more substantial investment.
- Philippine policy is trending in favor of clean energy
Supportive policy and 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.
A few notable examples include:
- The Electric Power Industry Reform Act (EPIRA), which privatized the power sector to support competitive pricing, more reliable electricity, and better-quality power
- The Renewable Energy Act of 2008, which includes a renewable portfolio standard, feed-in-tariff system, green energy option program, and duty-free importation of renewable energy materials
- The Energy Efficiency and Conservation Act (EECA) of 2019, which calls for an interagency energy efficiency and conservation committee as well as energy efficiency certifications, standards, and labeling
- The Energy Virtual One-Stop Shop, which aims to reduce red tape by streamlining permitting process of power generation, transmission, and distribution
Bottom line: Policymakers have shown clear support for opening pathways to clean, affordable energy, an encouraging sign for energy startups.
- Institutional inefficiencies pose a challenge
According to the International Trade Administration, the Philippines needs about 43 GW of additional capacity by 2040, and is “clearly behind schedule in developing solutions.”
Utilities and electricity companies are central to the effort, including 198 electric generation companies, 22 private distribution utilities, 6 LGU-owned utilities, 120 electric cooperatives, 67 retail electricity suppliers, 2,089 contestable consumers or end-users, and 396 transport cooperatives.
But major inefficiencies are slowing progress in the energy supply sub-sector. Utility and electricity company leaders grapple with a complex and slow approvals process, non-optimal market mechanisms, and institutional capacity issues.
Bottom line: Don’t expect smooth sailing in terms of institutional buy-in and adoption of even the most proven and cost-effective clean energy solutions.
- Clean energy networking opportunities abound
A spirit of innovation is evident not just in the startups and research organizations themselves, but also in groups and events seeking to elevate communication and collaboration in the Philippine clean energy world.
By our count, there are 18 inspirational events, 15 capacity building initiatives, two startup validation programs, 22 fab labs, 15 networking events, 49 incubators and accelerators, two pitch and demo events, and 25 evangelists.
For example, RebootPH and Our Energy 2030 are youth-led coalitions advocating for awareness and capacity building on renewable energy.
Bottom line: Third-party organizations are helping startups and other clean energy innovators get the word out about breakthrough work.
Plotting 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 major institutional barriers and regulatory challenges. Still, opportunities exist and are growing thanks to market need, increasing research and development efforts, and a supportive policy environment.
New Energy Nexus calls on accelerator programs, policymakers, and funding entities alike to step up efforts to support energy startups in the Philippines, and together help achieve a 100 percent clean energy economy for 100 percent of the population.
Are you a climate technology startup? Learn how Third Derivative, a global accelerator, can help you drive success and speed to market for your climate innovation, and apply to join our next climate tech accelerator cohort.
Featured photo by Hitoshi Namura on Unsplash
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