Gov’t approves PHP 10.07-B geothermal derisking facility

The Philippine government has approved a PHP 10.07-billion financing facility designed to reduce exploration risks for geothermal projects, attract private investment, and strengthen the country’s long-term energy security.

The Philippine Geothermal Resource Derisking Facility was approved during the Economy and Development Council’s 10th meeting, chaired by President Ferdinand R. Marcos Jr., according to the Department of Energy.

The facility establishes a government-backed cost-sharing mechanism for geothermal exploration drilling, widely regarded as the riskiest, most capital-intensive, and most uncertain stage of project development.

By sharing exploration costs with developers, the government expects more companies to pursue prospective geothermal sites and expand the country’s pipeline of indigenous renewable energy projects.

“Geothermal development requires significant investment long before a single kilowatt is delivered to consumers. Through the Philippine Geothermal Resource Derisking Facility, the government is helping de-risk the exploration stage so that viable prospects can move more quickly from resource confirmation to project development,” Energy Secretary Sharon S. Garin said.

The facility addresses a longstanding financing barrier because developers must spend heavily to confirm an underground geothermal resource before knowing whether a site can support a commercially viable power plant.

The Asian Development Bank said the derisking program seeks to revive greenfield geothermal investment by sharing resource exploration costs and risks with private developers.

The Department of Energy said the facility supports the government’s target of raising renewable energy’s share of the power generation mix to 35 percent by 2030 and 50 percent by 2040.

Those targets are incorporated into the Philippine Power Development Plan 2023–2050 as the reference scenario for the country’s generation-capacity expansion.

Geothermal plants can provide continuous baseload electricity because their output is not dependent on weather conditions, allowing them to complement intermittent renewable sources such as solar and wind.

The use of an indigenous energy resource could also limit the country’s exposure to fluctuations in global fossil-fuel prices and improve power-system reliability.

“By de-risking exploration and enabling more projects to move from uncertainty to confirmation, we are widening the pipeline of investible geothermal opportunities, strengthening the resilience of our power system, and reducing our exposure to volatile imported fuel prices,” Garin said.

The approval builds on the Department of Energy’s efforts to establish a dedicated geothermal derisking program.

In 2022, the department partnered with the Asian Development Bank to develop a national geothermal derisking roadmap addressing high upfront costs and exploration uncertainty.

The resulting roadmap outlined measures for mitigating early-stage risks that have constrained investments in new geothermal fields. (⁠Asian Development Bank)

The Philippine Geothermal Resource Derisking Facility converts those plans into a financing mechanism intended to accelerate geothermal exploration and project development nationwide.

The Asian Development Bank lists the geothermal resource derisking project as active and said it aims to reactivate greenfield investment that has been largely stalled since 2001.

The Department of Energy also views the facility as an opportunity to restore the Philippines’ standing among the world’s leading geothermal power producers.

The Philippines ranked second globally in installed geothermal power capacity for many years before Indonesia overtook it in 2018.

The government hopes the financing mechanism will unlock untapped geothermal resources and encourage a new generation of exploration and power-development projects.

“The Philippines has long been blessed with abundant geothermal resources. This facility gives us the opportunity to unlock more of that potential, attract greater investments, and pave the way for the next generation of geothermal projects that will deliver cleaner, more reliable, and more affordable energy for every Filipino,” Garin said.