[Vantage Point] Why green energy is failing

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Congress, through Republic Act (RA) 12144, sought to broaden the franchise of Davao Light and Power Company to include the Garden City of Samal, the municipalities of Asuncion, Kapalong, New Corella, San Isidro, Talaingod, and the City of Tagum in Davao del Norte; and the municipalities of Laak, Mabini, Maco, Maragusan, Mawab, Monkayo, Nabunturan, New Bataan, and Bantukan in Davao de Oro.

Although he did not veto it, President Ferdinand “Bongbong” Marcos Jr. did not sign the bill seeking to grant franchise to Davao Light and Power. According to Section 27 (1), Article VI of the 1987 Constitution, a bill becomes a law if the President fails to sign or veto it within 30 days. The prescribed period ended on April 6 of this year, and the statute has taken effect.

The Northern Davao Electric Cooperative (Nordeco), which franchise has been revoked, is asking the Supreme Court to issue a temporary restraining order (TRO) on the execution of RA 12144, arguing that the law is unconstitutional and a violation of its rights.

However, it looks like the affected communities welcome the implementation of the law without delay and the immediate takeover by Davao Light and Power of the franchise areas.

Weighing in on the issue, energy consumer advocacy group ILAW says that the law is “a vital and long-overdue step toward addressing” the power interruptions that come with increasing regularity, wreaking havoc on the daily lives of people, as it pertains to health, education, social services, and business.

According to Beng Garcia and Francine Pradez of ILAW, Nordeco’s failure to live up to its franchise requirements has resulted in financial losses to firms operating in the provinces, even the outright closure of some of them. They claim that, in Samal alone, revenue losses from the tourism sector amount to P50 million a year. (READ: Thousands stage rally against Davao del Norte’s relatively high power rates)

Setting aside the court issue, what’s happening in this region is not an isolated case.

In recent years, the Institute for Climate and Sustainable Cities (ICSC) has raised warnings on the inadequacy of the country’s power supply, most critically between the months of April and June. This has been a recurring issue for the country’s energy sector, year after year.

Although elevated electricity demand during the summer contributes to the power supply issues experienced in these months, ICSC has consistently emphasized that the forced outages of key baseload power plants exacerbate the situation. Baseload power plants, which are designed to operate 24/7, have faced cyclical issues with unplanned shutdowns. These outages often occur at critical times, such as during the summer months, when reliable power supply is most needed. The yellow alert raised over Luzon on March 5, 2025, further underscores the vulnerability of the grid. Previous analyses by ICSC have shown that, even without the heightened demand typical of summer months, the planned and unplanned outages wreak havoc on the affected people’s lives and the local economy.

For ordinary residents, the on-again, off-again power service results in the breakdown of appliances. It also takes a toll on people’s health as they suffer sleepless nights with their air-conditioners or electric fans failing to function when they are most needed.

ILAW stressed that the poor power service, if allowed to persist due to delay in the implementation of the law, will further drive away investors, leading to stunted economic growth and loss of jobs and livelihood opportunities.

“The problem arising from frequent and prolonged blackouts is killing tourism, which is the lifeblood of business and industry in the provinces,” Pradez said. “It threatens sustainability and long-term growth, leaving many firms with no choice but to shut down, with terrible consequences on employment and livelihood.”

ILAW appeals to the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) to sanction electric cooperatives, especially those operating in tourism zones, for failure to provide adequate service. It suggests the imposition of penalties on erring cooperatives — penalties that should go to the affected firms in the form of compensation for their losses.

The group also recommends that the DOE and ERC spur investments in renewable energy, community microgrids, and energy storage systems to provide communities with a more reliable power source.

Green energy flops

The call for increased investment in green energy, as ILAW pushes, is not being heeded. Despite the headlines, diplomatic tours, and aggressive courtship of foreign capital, the Philippines’ once-vaunted renewable energy (RE) investment story is quietly collapsing.

President Marcos has spent the past three years pitching the country as a clean energy frontier. But on the ground, foreign RE investors are staging a slow, quiet retreat. The reasons are damning: a toxic cocktail of bureaucratic dysfunction; entrenched corruption; financial self-sabotage, and policy instability.

This report, grounded on original reporting by energy journalist Myrna Velasco (Manila Bulletin, June 9, 2025), reveals a market unraveling in real-time. The green energy boom that was supposed to define the Philippines’ energy transition is now bleeding out.

Foreign capital — especially from firms subject to strict governance, ESG standards, and anti-corruption laws — is leaving, and with it, the credibility of the administration’s clean energy agenda. ESG, which stands for Environmental, Social, and Governance, refers to a set of standards used by investors and stakeholders to assess a company’s sustainability and ethical impact, or how its products and services contribute to sustainable development.

Market cold to to the floating solar and offshore wind

The clearest sign of distress is the quiet but persistent sell-off of foreign-held renewable energy assets. Velasco reports that a major investor in floating solar — once paraded as a “flagship deal” during Marcos’ 2023 ASEAN state visit — is now negotiating an exit. Interestingly, the buyer is a local group led by a former executive of a domestic energy giant, signaling that international players no longer see the Philippines as a viable long-term play.

In offshore wind — the segment with the largest theoretical upside — another high-profile European investor is looking to offload its interests, despite having secured multiple service contracts from the DOE. While internal corporate restructuring is the public-facing excuse, insiders point to more systemic frustrations: regulatory unpredictability, stalled environmental clearances, and a deteriorating business climate.

These are not isolated incidents. They are part of a pattern and a damning indictment of the government’s failure to deliver on its green energy promises.

Vantage Point resident analyst and Washington-based fund manager Eric Jurado has this to say in an email: “Renewable energy development requires clear rules, long-term planning, and enforceable regulatory frameworks. The Philippines currently offers none of these.”

“One of the most critical policy gaps,” he points out, “is the continued absence of finalized ‘no-go zones’ for offshore wind — areas that are off-limits due to biodiversity, navigational, or technical risks. Despite repeated warnings from the environmental and investor communities, the Department of Environment and Natural Resources (DENR) has failed to finalize marine spatial planning (MSP) guidelines.”

The result: offshore wind service contracts have been awarded over areas that may not even be buildable, including the ecologically sensitive Batangas-Mindoro corridor. This institutional negligence is now forcing investors to walk away, even after years of feasibility work. One major European firm pulled out last year, citing potential environmental dealbreakers that would render their project unfinanceable under the European Union’s compliance standards.

The signal this sends to global markets is catastrophic: the Philippines is awarding contracts before it even knows where infrastructure can be built legally and safely.

Corruption

Vantage Point believes that, beyond regulatory chaos, investors are facing deeply embedded corruption, especially at the local government unit (LGU) level. Although the Philippines has nominally improved its “ease of doing business” rankings, the real-world experience of developers tells a different story.

Permits are routinely delayed unless “facilitation payments” (read: bribes) are made. Land conversion approvals can take years, unless local politicians or their proxies are cut in as land brokers. Developers are pressured to source overpriced materials from politically connected suppliers. These practices are not isolated, nor are they under-the-table deals. They are openly discussed in industry circles as the real cost of doing business.

At a recent industry workshop, participants bluntly described the status quo as “grease or get stuck.” For foreign firms governed by the United States Foreign Corrupt Practices Act or the United Kingdom Bribery Act, these conditions are legally and reputationally untenable. Their only lawful option is to walk away.

This is more than anecdotal frustration. It is a systemic risk that has already deterred billions in capital.

Where corruption doesn’t kill the project, financial non-viability often does. The Philippine government’s green energy auction system, particularly the setting of reserve prices by the Energy Regulatory Commission (ERC), is actively pricing investors out of the market.

Jurado chimed: “In the second green energy auction (GEA-2) held in 2023, participation was dismal. Why? The Green Energy Auction Reserve (GEAR) prices — the maximum tariffs developers could receive for power — were so low that hitting even modest internal rate of return (IRR) targets became mathematically impossible. This was not a technical miscalculation. It was a structural flaw in how the ERC designed the auction mechanism.”

Based on the ERC’s April 2025 price previews, the outlook for GEA-4 now looks even worse. Developers of capital-intensive technologies like floating solar and IRESS (Integrated Renewable Energy Systems) have already sounded the alarm. Their view: the financial returns are dead on arrival.

When investors cannot model a viable return, financing collapses. When financing collapses, projects stall or never get built. The government’s insistence on artificially low prices — under the guise of affordability — is choking the very industry it claims to support.

Lotilla and a fractured energy governance landscape

Amid escalating investor anxiety, the Philippines has undergone one of the most chaotic and disruptive Cabinet reshuffles in recent memory. At the center of the energy sector storm is the rumored comeback of Rafael Lotilla as secretary of energy — contradicting prior reports that Energy Undersecretary Sharon Garin was poised to take the role. As of this writing, Lotilla remains with the DENR.

Lotilla is an experienced technocrat and previously held the same post under the Arroyo administration. His return brings a degree of institutional memory, but it also underscores the lack of strategic continuity within the energy bureaucracy. Key agencies are now in flux, not just in personnel, but in vision, priorities, and execution.

This power vacuum is particularly evident at the ERC. Chairperson Monalisa Dimalanta has reportedly been asked by Malacañang to resign. In response, she is said to be seeking a simultaneous resignation of all commissioners — a move that, if realized, would decapitate the ERC at a time of maximum volatility.

Such developments are not mere political theater. They directly impact investor behavior. Capital markets demand predictability, especially in infrastructure investments with long gestation periods and sensitive risk profiles. But in the Philippines, rules change with leadership — and leadership changes without warning.

Lotilla’s return may stabilize some factions within the DOE, but unless accompanied by wholesale reform of energy policy architecture, this reshuffle risks being yet another case of musical chairs, not systemic renewal.

Public market performance signals investor capitulation

According to Jurado, if macro headlines and anecdotal exits were not enough, a closer look at the earnings and cash flow performance of the country’s five pure renewable energy companies tells the same bleak story — in brutal financial clarity.

As of June 9, 2025, the collective earnings of the five publicly listed RE developers — SP New Energy Corp. (SPNEC), Alternergy Holdings (ALTER), NexGen Energy (XG), Repower Energy Development Corp. (REDC), and Raslag (ASLAG) — have collapsed by a staggering 1,823% over the past three years. From modest profits, the group is now posting a combined net loss of ₱1.6 billion. The optimism that once fueled lofty valuations is gone.

Even more damning is the cash flow reality, often a better indicator of economic health than accounting earnings. For the 12 months ended March 31, 2025 (or December 31, 2024, in SPNEC’s case), all five companies posted negative free cash flows

SPNEC: Net loss of ₱1.8 billion, Free Cash Flow: -₱7.6 billion
ALTER: Net loss of ₱23.6 million, Free Cash Flow: -₱3.4 billion
XG: Net income of ₱1.5 million, Free Cash Flow: -₱37.2 million
REDC: Net income of ₱129.5 million, Free Cash Flow: -₱950.8 million
ASLAG: Net income of ₱46.1 million, Free Cash Flow: -₱280.6 million

The Marcos administration’s clean energy narrative is now in direct conflict with on-the-ground realities. Far from being a rising green energy star in Southeast Asia, the Philippines is increasingly seen as a high-risk, low-return market riddled with policy incoherence, systemic corruption, and regulatory decay.

Foreign investors have seen enough. The data backs their exodus. The market has spoken — and it’s proclaiming with conviction: “no confidence!”

Unless deep structural reforms are urgently undertaken, the Philippines risks being remembered, not as a green energy success story, but as a textbook case of how not to run a renewable energy market. – Rappler.com