How to make the Philippines’ offshore wind auction bankable

By Dianne Araral

THE PHILIPPINES recently launched the Fifth Green Energy Auction, or GEA-5, the country’s first auction dedicated to offshore wind, with a target of 3,300 megawatts of fixed-bottom capacity for delivery between 2028 and 2030. This is timely given the energy crisis. The Energy Regulatory Commission has approved a Green Energy Auction Reserve price of P11 per kilowatt-hour (kWh), the ceiling price for bids.

At P11/kWh, offshore wind is not cheap power today. But this first auction should not be judged only by today’s price. It should be judged by whether it creates a new infrastructure asset class for the Philippines: large-scale, clean, domestic, and eventually cheaper renewable power. The country remains heavily dependent on coal, accounting for about 57% of electricity generation in 2025, making it Southeast Asia’s most coal-dependent power system. 

Offshore wind can reduce this dependence. It can diversify supply, reduce exposure to imported coal and gas, and create a new industrial ecosystem around ports, marine services, grid upgrades, engineering, operations, and maintenance. The World Bank has estimated that the Philippines could install 3 gigawatts of offshore wind by 2040 under a low-growth scenario and 21 gigawatts under a high-growth scenario.¹

But potential is not bankability. Bankability means that lenders and investors believe a project can be financed, built, connected, operated, paid for, and protected from major risks. The central problem is that P11/kWh may be high for consumers but still insufficient for investors if the non-price risks are not solved.

The first risk is grid connection. Offshore wind projects are large. A 500-megawatt or 1-gigawatt project cannot wait for the grid to catch up. It requires transmission planning, offshore connection facilities, onshore landing points, grid reinforcement, system balancing, and clear rules for delays. If a project is ready to generate but the grid cannot take the power, who pays? If there is curtailment, is the developer compensated? If the answer is unclear, lenders will increase the cost of capital or refuse to finance the project.

The second risk is port readiness. Offshore wind requires heavy-lift ports, staging areas, blade-handling facilities, storage yards, specialized vessels, and marine logistics. The Philippines has many ports, but not all are offshore-wind-ready. Auction awards will not become operating projects unless ports are prepared before construction begins.

The third risk is foreign exchange. Offshore wind requires imported turbines, subsea cables, vessels, engineering services, and sometimes foreign-currency debt. But project revenues will be in pesos. If the peso weakens against the dollar or euro, project economics can deteriorate. Investors will therefore examine whether tariff indexation, hedging, or local-currency financing is available.

The fourth risk is extreme weather. The Philippines is typhoon exposed. Offshore wind turbines, foundations, substations, and transmission assets must be designed for local conditions. Typhoon risk affects engineering standards, insurance cost, expected availability, maintenance strategy, and lender confidence. It should be treated as a bankability issue, not merely as an engineering detail.

The fifth risk is contract quality. Investors will examine not only the tariff but also the power purchase agreement. They will ask whether the buyer can pay, whether payment security is strong, whether curtailment is compensated, whether termination payments cover senior debt, whether lenders have step-in rights, and whether disputes can be resolved credibly. A weak contract can make even a high tariff unbankable.

The ASEAN offers useful lessons. Vietnam shows what happens when resource potential is not matched by regulatory certainty. It has long been seen as one of Southeast Asia’s most promising offshore wind markets, but progress has been delayed by uncertainty over pricing, permits, seabed rights, offtake, and investor selection. In 2024, Equinor withdrew from Vietnam’s offshore wind sector and closed its Hanoi office, citing regulatory and political uncertainty. The lesson for the Philippines is direct: developers can manage technical complexity, but they cannot manage indefinite regulatory uncertainty.

Singapore offers a different lesson. It has no large domestic renewable resource base, but it has created a credible framework for regional clean electricity imports. Singapore aims to import around 6 gigawatts of low-carbon electricity by 2035, roughly one-third of expected electricity demand, and has used long-term licensing to improve investor confidence. The lesson is that investors need durable contracts when capital costs are high.

Indonesia offers a third lesson: technical potential alone is not enough. Like the Philippines, Indonesia has large renewable potential and growing interest in regional clean power exports. But large clean-energy projects require bankable offtake, grid coordination, cross-border regulation, permits, and credible commercial structures. Potential must be converted into financeable projects.

This is where the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank can play a decisive role. Their role should not simply be to lend money. Their more important role is to reduce risks that private capital cannot efficiently bear.

First, multilateral development banks (MDBs) can help finance grid and transmission upgrades. Offshore wind will fail if transmission is not ready. The priority should be grid planning, connection studies, transmission reinforcement, dispatch integration, and system-balancing capacity.

Second, they can support port readiness. Offshore wind ports have public-good characteristics because they can serve multiple projects over time. MDB loans can prepare priority ports before developers reach construction, reducing delay risk and lowering project costs.

Third, they can provide guarantees and credit enhancement. MDBs can help backstop payment risk, political risk, termination payments, or specific public-sector obligations. This can reduce the cost of capital and make projects financeable at lower tariffs.

Fourth, they can help manage foreign-exchange and local-currency risks through local-currency finance, hedging support, blended finance, or advice on indexation. This matters because offshore wind costs are partly foreign-currency-denominated while revenues are peso-denominated.

Fifth, MDBs can strengthen auction and contract design. They can help prepare model power purchase agreements, curtailment compensation, deemed generation clauses, step-in rights for lenders, termination payment rules, and transparent indexation mechanisms.

Sixth, they can support environmental and social safeguards. Offshore wind affects fisheries, marine biodiversity, navigation, coastal communities, and port areas. ADB has already approved a $500-million policy-based loan² to support the Philippines’ blue economy, including marine resource management, coastal resilience, and low-carbon development. This can complement offshore wind readiness through marine spatial planning, fisheries compensation, biodiversity safeguards, and coastal-community engagement.

The objective should be to reduce the risk premium embedded in the first P11/kWh offshore wind auction. If the Philippines can reduce grid, port, permitting, payment, foreign exchange, and climate risks, future auctions should attract more competition and lower prices.

The country should not try to win the offshore wind race by offering the highest tariff. It should win by offering the most credible project environment in the ASEAN: clear rules, bankable contracts, prepared ports, planned transmission, disciplined risk allocation, and consumer protection.

The Philippines has taken the first step by launching a dedicated offshore wind auction. The harder task is to convert auction awards into financially closed, constructed, and operating projects. That is where many emerging markets fail.

Offshore wind can become a pillar of Philippine energy security and industrial development. But only if the auction is designed not merely to award capacity, but to finance, build, and operate it. The Philippines does not just need green power. It needs bankable green infrastructure.

¹ https://tinyurl.com/24ppfgux

² https://tinyurl.com/259qqrd9

Dianne Araral is an infrastructure, energy and finance analyst based in Singapore.