The Department of Energy (DOE) announced it is working with government and financial sector partners to design new low-interest financing models for renewable energy (RE) developers to accelerate the hybridization of off-grid areas served by the Small Power Utilities Group (SPUG).
The DOE is looking to implement a hybridization project for SPUG diesel power plants using RE resources through private sector participation.
DOE Undersecretary Rowena Cristina Guevara said the true cost of generation (TCGR) in SPUG areas averages about P18 per kilowatt-hour (kWh) and can go as high as P62 per kWh in some locations. These figures cover generation costs alone.
However, consumers in these off-grid areas pay only around P7 to P8 per kWh, in line with the subsidized rates approved by the Energy Regulatory Commission (ERC).
She said the difference—roughly P10 to P11 per kWh on average—is covered by subsidies collected from all electricity consumers 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,” Guevara said. “But to make this happen, we need to address and deal with one major challenge: financing.”
“We are here to explore a bold possibility of enabling low-interest financing for renewable energy developers without sovereign guarantees and without the usual required power supply agreements,” she added. “As we enter retail competition and open access, where contracts are shorter, this might seem ambitious—but it is possible and would surely help transform how we scale RE in the Philippines.”
Guevara said hybridization makes sense for SPUG from a practical and technical standpoint, pointing out that battery-plus-solar solutions now cost much less than the average P18 per kWh TCGR and deliver additional environmental benefits.
“If we consider both the economics and the environmental additionality, it clearly makes sense to put hybridization in our SPUG areas,” she said.
The DOE, National Power Corporation (NPC), Philippine Solar and Storage Energy Alliance (PSSEA), Philippine Hydro Inc. (Phil Hydro), Wind Energy Development Association of the Philippines (WEDAP), multilateral banks and RE developers gathered in Taguig City on Thursday for a focused discussion to advance hybridization efforts in off-grid and missionary areas served by SPUG.
Participants presented potential models, instruments and financing pathways that may be adapted for SPUG contexts, while also outlining practical bottlenecks and risks that hinder project deployment, particularly in small-scale and geographically dispersed off-grid systems.
“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, noting that beyond commercial returns, projects in SPUG areas deliver profound social benefits by serving some of the poorest communities in the country.
NPC president and chief executive 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 said.
Created by the Electric Power Industry Reform Act of 2001, SPUG is responsible for generating power and operating associated systems in areas not connected to the national transmission grid. These isolated grids often face very high generation costs and have difficulty attracting private investment due to their remoteness and limited demand.
