IMF says PHL needs PHP 10.7T in clean energy investments

In its “Philippines: Selected Issues” report, the International Monetary Fund (IMF) estimated the total investment requirement at PHP 10.7 trillion from 2029–2050—about 2% of 2024 gross domestic product per year over the period—to achieve the authorities’ clean energy targets.

The IMF framed the renewable energy transition as both a climate response and an economic strategy, arguing that cleaner and more resilient power systems can reduce exposure to extreme weather, fuel price volatility and energy supply disruptions that can weigh on growth and inflation.

The report linked the push to energy security and the balance of payments, noting the Philippines’ dependence on imported fossil fuels accounted for about 6.1% of GDP in 2022 and made up 50.6% of the country’s total primary energy supply that year.

Baseline projections cited by the IMF indicate that reliance on fossil fuel imports could rise to 61.1% by 2050, increasing vulnerability to global commodity price swings and creating risks for the trade balance and broader macroeconomic stability.

The IMF’s investment estimate comes as the Philippines faces intensifying climate hazards, including stronger typhoons, heavier rainfall, higher temperatures and rising sea levels, according to the report’s broader assessment of climate shocks and the economy.

Citing the World Bank, the IMF noted estimates that cumulative economic costs of climate change could reach 7.6% of GDP by 2030 and 13.6% by 2040, underscoring why climate resilience has been positioned as a cross-cutting development strategy in government planning documents.

The report said typhoons are the Philippines’ most frequent and costliest climate shocks, with the country experiencing the most intense Category 5 typhoons on average twice per year, and with a single Category 5 typhoon capable of inflicting losses equivalent to about 0.1% of GDP in the agriculture sector alone.

The IMF also reported that seven regions have more than a 15% probability of experiencing a Category 5 typhoon in a year, while four regions face more than a 25% likelihood, highlighting how risk is geographically concentrated in parts of the east and central Philippines.

Using regional data, the IMF said Category 5 typhoons tend to exert inflationary pressure, with regional headline and food consumer prices peaking about one quarter after a storm, rising by around 0.4% and 0.7%, respectively, while real GDP in the affected region falls by about 0.4% on impact and agricultural labor productivity declines by 2.5%.

The report said labor productivity impacts are widespread across sectors, with estimated declines of around 2% in utilities, mining, manufacturing and transportation and around 4% in construction, reinforcing concerns about how repeated typhoons can disrupt sectors that support the energy system and raise costs across supply chains.

Because mining and utilities sit upstream in production networks and often have relatively flexible pricing, the IMF said shocks in those sectors can quickly translate into higher prices elsewhere, strengthening the case for a more diversified and resilient power system.

On the fiscal side, the IMF reported that climate-related expenditures averaged 1.7% of GDP annually during 2022–2024, with programmed climate change adaptation spending at 3.9% of GDP for 2025 and proposed at 2.7% of GDP for 2026, and it listed sustainable energy among the main priority areas under that spending.

The IMF also cited the World Bank’s estimate that building new climate-resilient infrastructure—including energy assets—could cost about 0.6% of GDP, describing the figure as conservative because it excludes the cost of retrofitting existing infrastructure.

While the IMF said such investments involve fiscal trade-offs, it argued that renewable energy expansion can reduce dependence on imported fossil fuels and lower vulnerability to global price swings, but stressed that public funding alone will not be sufficient and mobilizing private investment will be critical to meeting targets.

The report said recent reforms have increased investor confidence, citing measures such as liberalizing the renewable energy sector by allowing 100% foreign ownership for certain renewable sources, the Energy Virtual One Shared System (EVOSS) and the Green Lanes for Strategic Investments initiative.

The IMF said the government’s Philippine Energy Plan 2023–2050 commits to increasing the renewable energy share to 50% by 2050 and, through its Energy Transition Program, to raising renewables’ share in the power generation mix to 35% by 2030 and 50% by 2050, aligning with the COP28 pledge to triple global renewable capacity by 2030.

The report said renewables accounted for 22% of total power generation as of 2024, while fossil fuels comprised 78%, with coal contributing 63% of power generation and natural gas 14.2%, even as peak electricity demand is projected to rise threefold from 16.6 gigawatts in 2022 to 68.5 gigawatts by 2050.

Electricity generation also accounts for 89% of the country’s total greenhouse gas emissions in 2023, the IMF reported, adding that the country’s nationally determined contribution for 2020–2030 targets a 2.71% unconditional reduction and a 72.29% conditional reduction of business-as-usual total emissions.

The IMF said the Philippines has substantial renewable resource potential, citing combined open-field solar, rooftop solar, offshore and onshore wind potential of about 1,200 gigawatts, estimated untapped hydropower potential of 13.097 gigawatts, and estimated geothermal potential capacity of 4.064 gigawatts, even as installed renewable capacity was around 9.5 gigawatts in 2024.

Under the government’s Clean Energy Scenario 2, the IMF said authorities remain optimistic about reaching renewable energy targets of 30.5 gigawatts of installed generating capacity by 2030 and 115.2 gigawatts by 2050.

The report said electricity prices have shown signs of easing, citing data from the Independent Electricity Market Operator of the Philippines that average annual electricity prices fell in the first half of 2025 to PHP 4.14 per kWh from PHP 5.58 per kWh in 2024, partly driven by growing renewable energy investments.

Successful rounds of the Green Energy Auction Program could further reduce average electricity prices by about 32% to approximately PHP 3.36 per kWh in Luzon by 2029, with similar reductions projected in the Visayas and Mindanao grids, the IMF reported.

The IMF described the investment requirements as substantial, estimating PHP 10.67 trillion—about 40% of 2024 GDP—during 2029–2050, including PHP 7.39 trillion under Clean Energy Scenario 1 and PHP 10.67 trillion under Clean Energy Scenario 2, driven largely by offshore wind followed by solar, hydropower and emerging technologies.

The report said the Philippine government’s move in 2022 to allow 100% foreign ownership of renewable energy projects led to the awarding of 65 renewable energy contracts totaling 17.84 gigawatts to fully foreign-owned companies for offshore and onshore wind and solar projects.

Three successful rounds of the Green Energy Auction Program have provided a combined total of 12 gigawatts in renewable energy capacities expected to generate power from 2025–2035, while as of May 2025 the Department of Energy had issued 104 certificates of authority with a total potential capacity of 20.42 gigawatts, the IMF said.

The IMF also said Bloomberg’s 2024 ClimateScope ranked the Philippines as the second most attractive market for clean power investments among emerging markets and within Asia and the Pacific, up from 30th in 2021.

Investment data cited in the report showed renewable energy investments reached PHP 987.12 billion in 2023—about 4.1% of GDP—and grew 231% year over year, driven by wind farm investments totaling PHP 804 billion, or about 3.3% of GDP, while 2024 investments in solar and wind plus additional hydropower investments brought total renewable energy investments to PHP 1.38 trillion.

Domestic investors dominated wind and solar development with PHP 651 billion in 2023, or about 2.7% of GDP, expanding by 2024 into wind, solar and hydropower totaling 3.7% of GDP, the IMF said.

Foreign investment, often through joint ventures and strategic partnerships, drove wind farm investments of PHP 330 billion in 2023 and PHP 314 billion in 2024, while investments in solar farms reached PHP 462 million in 2024 and were projected to reach PHP 905 million in 2025, the report said.

The IMF said the Green Lane for Strategic Investments initiative—launched in February 2023—facilitated PHP 5.93 trillion in total investments, or 22.4% of GDP, with renewable energy accounting for PHP 5.07 trillion, or 85.5% of the total, including PHP 3.43 trillion in domestic investments and PHP 1.35 trillion in foreign investments.

To help address financing constraints, the IMF said the Bangko Sentral ng Pilipinas increased the Single Borrower’s Limit for financing green or sustainable projects by 15% and began reducing the reserve requirement for sustainable bonds from 3% to 0% over a two-year period.

Despite progress, the IMF said major barriers remain, including limited grid infrastructure, delays and complexity in land acquisition, high capital costs, regional energy access gaps and a shortage of skilled workers needed for the renewable energy transition.

The report said renewable energy expansion is also tied to transmission and infrastructure upgrades, citing a transmission development plan that includes about 5,145 kilometers of transmission lines and 63,625 MVA of transformation capacity, alongside a Smart and Green Grid Plan intended to modernize the grid and enable integration of large-scale renewables including up to 50 gigawatts of offshore wind.

In public-private partnerships, the IMF said that as of October 2025 there were 251 PPP projects in the pipeline with an estimated total cost of PHP 2.61 trillion, or 9.9% of GDP, while PPPs for renewable energy projects accounted for PHP 98.5 billion, or 3.8% of the total pipeline cost, indicating a growing but still modest share.

The IMF said renewable energy investment has job-creation implications, citing Department of Energy estimates that every USD 1 million invested in renewables corresponds to an average of 4,862 job-years from project development through construction, and that the sector generated about 357,000 jobs from 2009–2022, including 203,378 in solar, 94,835 in hydropower, 27,340 in wind, 21,495 in biomass and 10,261 in geothermal.

Based on renewable targets and investments by 2050, the IMF cited projections of up to 388,600 jobs in solar, 767,300 in wind, 13,300 in hydropower, 6,100 in geothermal and 8,700 in biomass.

With climate risks intensifying, the IMF’s assessment positions clean and resilient energy systems as a core pillar of the Philippines’ economic strategy—one that will require sustained policy action and major private and public investment to overcome infrastructure, financing and workforce constraints while reducing exposure to climate shocks and imported fuel volatility.