DOE plans loans to hybridize off-grid power areas

TAGUIG CITY — The Department of Energy (DOE) is developing new low-interest financing models to accelerate the hybridization of power generation in off-grid communities served by the Small Power Utilities Group (SPUG), aiming to cut costs and expand access to renewable energy.

The plan was discussed during a Nov. 20 stakeholder meeting attended by DOE officials, the National Power Corporation (NPC), multilateral lenders, and renewable energy industry groups, including the Philippine Solar and Storage Energy Alliance, Philippine Hydro Inc., and the Wind Energy Development Association of the Philippines.

DOE Undersecretary Rowena Cristina L. Guevara said the goal is to integrate renewable energy into SPUG-operated diesel plants by leveraging private-sector participation and new financing mechanisms.

“Hybridization of SPUG areas through the integration of RE can bring cleaner, reliable, and more affordable electricity in the long run for the Filipinos who need it most,” Guevara said.

She said financing remains the main challenge that must be addressed to scale up hybrid systems.

Currently, the true cost of generation in SPUG areas averages about PHP 18 per kilowatt-hour, with some sites reaching up to PHP 62/kWh.

However, consumers only pay between PHP 7 and PHP 8/kWh based on Energy Regulatory Commission-approved subsidized rates.

The difference—about PHP 10–11/kWh—is covered by universal subsidies collected from electricity users nationwide, placing pressure on public finances.

To reduce this burden, the DOE is studying financing structures that operate without sovereign guarantees and without the usual power supply agreements.

Guevara said shorter-term contracts under the retail competition and open access regime make the proposal both ambitious and viable.

“Hybridization already makes economic and technical sense,” she said.

She added that battery-plus-solar systems now cost less than the average true cost of generation, making hybridization a compelling option when both economics and environmental benefits are considered.

Banks, developers explore financial models

Participants in the meeting presented financing instruments suitable for small-scale, remote, and geographically dispersed energy systems.

The group also identified existing bottlenecks that delay project rollouts.

“With our partners from the government and financial institutions, we aim to identify viable financing structures and determine new potential collaborations so that we can collectively bring RE solutions to SPUG areas and accelerate our energy transition goals,” Guevara said.

NPC President and CEO Jericho Jonas Nograles said the initiative carries far-reaching impacts, describing it as “not just an energy transition strategy—it is a fiscal strategy, a climate strategy. And most importantly, it is a nation-building strategy.”

“NRC stands ready to work with the DOE, our development partners, and the private sector to accelerate hybridization and ensure that no community is left behind,” Nograles said.

SPUG, a mandate under the Electric Power Industry Reform Act of 2001, operates power generation and distribution systems in remote areas that remain unconnected to the national grid.

These areas often face high fuel and infrastructure costs and lack sufficient scale to attract conventional private investments.

The DOE said aligning regulatory innovation with financial reforms aims to shift SPUG from a subsidy-dependent model to a sustainable platform for inclusive, renewable-powered development.