The Department of Energy (DOE) is developing new low-interest financing models aimed at enabling renewable energy (RE) developers to hybridize off-grid areas served by the Small Power Utilities Group (SPUG), a move seen to ease the high cost of power generation in isolated communities.

The initiative was discussed in a meeting on November 20 in Taguig City, where the DOE convened the National Power Corporation (NPC), multilateral banks, and industry groups including the Philippine Solar and Storage Energy Alliance, Philippine Hydro Inc., Wind Energy Development Association of the Philippines, and several RE developers. The DOE is preparing a hybridization program that will use private-sector participation to integrate RE into existing SPUG diesel power plants.

DOE Undersecretary Rowena Cristina L. Guevara said the true cost of generation (TCGR) in SPUG areas averages around PHP 18 per kilowatt-hour, reaching as high as PHP 62/kWh in some locations. Consumers, however, pay only PHP 7–8/kWh, in line with subsidized rates approved by the Energy Regulatory Commission. The difference of about PHP 10–11/kWh is covered by universal subsidies collected from electricity users nationwide.

“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. But to make this happen, we need to address and deal with one major challenge — financing,” Guevara said.

She added that the DOE is exploring financing structures “without sovereign guarantees and without the usual required power supply agreements,” noting that shorter contracts under retail competition and open access make the effort ambitious but feasible.

Guevara said hybridization already makes economic and technical sense, with battery-plus-solar systems now costing less than the average TCGR. “If we consider both the economics and the environmental additionality, it clearly makes sense to put hybridization in our SPUG areas,” she said.

Participants presented financing models and instruments that could be applied in small-scale and geographically dispersed off-grid systems, while identifying bottlenecks that slow project rollout.

“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, “SPUG hybridization is not just an energy transition strategy—it is a fiscal strategy, a climate strategy. And most importantly, it is a nation-building strategy.”

 “NPC 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,” he added.

SPUG, created under the Electric Power Industry Reform Act of 2001, is mandated to generate power and operate systems in areas not connected to the main transmission grid, many of which face high fuel costs and limited prospects for private investment.

What are your thoughts on the DOE’s push to unlock new financing for off-grid hybridization? Let’s discuss.

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