Philippines Can Smoothly Transition To Net Zero By 2050 — Wärtsilä

Power system modeling company Wärtsilä has revealed that renewable-based power systems would enable the Philippines to reach net zero by 2050 while cutting the Levelized Cost of Electricity (LCOE) by more than 20% when accounting for likely future carbon taxes.

Wärtsilä’s modeling of the power system of the Philippines’ largest island, Luzon, shows that a combination of renewables plus flexibility, provided by balancing engines and energy storage, can reliably meet the region’s increasing power demand.

The company modeled two different scenarios: the “Business As Usual” (BAU) scenario – without an emissions limit – and a “Net Zero” scenario, where emissions were halved by 2040, before reaching net zero by 2050.

Critically, when factoring in the International Energy Agency’s (IEA)’s upper forecasted carbon price, the study shows that the LCOE in the “Net Zero” scenario is 23% lower than in the “Business As Usual” (BAU) scenario. This would equate to an annual saving of $6.5 billion USD.

Luzon: A critical region for the Philippines’ energy transition

Luzon represents around 72% of the Philippines’ total energy generation and around 72% of the Philippines’ peak demand, compared to 14% in Visayas and 13% in Mindanao. The modeled pathway for Luzon, published in the Rethinking Energy in Southeast Asia report, can serve as a blueprint for major islands in the regions of Visayas and Mindanao as well.

The Philippines has not yet explicitly communicated a net zero target, but its National Renewable Energy Program (NREP) sets out plans to power the grid with a 35% share of renewables by 2030 and 50% by 2040.

The modeled scenarios reveal that flexibility, in the form of energy storage and balancing engines, is the crucial technological fix to enable renewable energy to become the dominant source of power. To put Luzon on course for its target renewables, the island’s power system needs to rapidly accelerate the adoption of flexible balancing power plants, with 1.3 GW needed by 2030. By 2050, 14 GW of balancing power plants and 69 GW of energy storage would be required in Luzon’s power sector to achieve net zero emissions.

“As countries return to the climate negotiations table at COP27, it’s clear that a net zero commitment in the Philippines would send a strong signal to investors, helping the country attract the needed investment to achieve this transition. On the flip side, without a net zero goal, the Philippines risks detaching itself from an increasingly climate-conscious global community and worsening its own exposure to climate change. We hope that our report serves to assure energy leaders that, by creating a renewable and dynamic power system, the Philippines can increase energy self-sufficiency and mitigate climate risks, with the power sector continuing to support the economic development of the country,” said David Kayanan, Financial & Market Analyst, Wärtsilä Energy.