Report Calls for Renewable-Led Overhaul of Philippines’ Off-Grid Power Systems

SINGAPORE, January 22, 2026 – A new policy paper by Climate Smart Ventures has outlined how the strategic deployment of renewable energy (RE), energy storage systems (ESS) and smart grid technologies could accelerate the Philippines’ off-grid energy transition, particularly in remote and missionary areas served by electric cooperatives (ECs).

The study highlights that off-grid ECs are central to the country’s electrification agenda, playing a frontline role in delivering power to isolated islands and communities that remain unconnected to the national transmission network. While the Philippines has committed to achieving 100 per cent electrification by 2028 and sourcing 50 per cent of power generation from renewables by 2040, progress in off-grid areas continues to be constrained by legacy planning models and heavy reliance on diesel-based generation, which is both costly and emissions-intensive.

Diesel dependence and subsidy exposure

According to the report, most off-grid ECs remain anchored to diesel generation systems that depend heavily on subsidies from the Universal Charge for Missionary Electrification (UCME). This structure exposes cooperatives to fuel price volatility and undermines long-term commercial viability.

The study argues that transitioning to RE-based hybrid systems — integrating solar, wind or small hydro with ESS — has become a commercial necessity rather than a purely environmental objective. Falling battery costs, particularly for lithium-ion systems, have strengthened the economic case for storage-backed renewables in off-grid settings, allowing ECs to reduce fuel consumption while improving reliability and resilience.

Smart grids as an enabler of higher renewable penetration

Beyond generation and storage, the report underscores the importance of smart grid modernisation in transforming the operational role of ECs. Unlike traditional passive distribution systems, smart grids enable two-way energy flows, real-time monitoring and faster fault isolation, allowing cooperatives to manage higher shares of intermittent renewable energy more effectively.

For off-grid systems exposed to extreme weather and logistical constraints, smart grids are positioned as a critical tool to maintain service continuity, improve asset utilisation and support decentralised energy models that are more adaptable to local demand patterns.

Regulatory and operational bottlenecks

Despite a supportive national policy framework — anchored by the Electric Power Industry Reform Act (EPIRA) and the Renewable Energy Act — the report identifies several bottlenecks slowing RE and ESS deployment among off-grid ECs. These include fragmented regulatory oversight, limited technical capacity within cooperatives, and financing constraints that make it difficult to undertake capital-intensive projects.

The study notes that while off-grid ECs have multiple procurement pathways — ranging from power supply agreements and self-developed embedded projects to microgrid systems under the Microgrid Systems Act — many lack the in-house capabilities to assess, negotiate and manage these options effectively.

Business model transformation needed

At the core of the report’s findings is the call for a fundamental shift in EC business models. Rather than functioning primarily as cost centres reliant on public subsidies, off-grid cooperatives need to evolve into commercially viable, tech-enabled and climate-resilient utilities.

To support this transition, the paper recommends harmonising regulatory action across energy and financial sectors, expanding access to concessional and blended finance, and institutionalising continuous capability-building programmes for EC leadership and technical staff.

Pathway to resilient, low-carbon electrification

The report concludes that the convergence of RE, ESS and smart grid technologies presents a viable pathway to decarbonise off-grid power systems while advancing the Philippines’ universal electrification goals. However, realising this potential will require coordinated policy reform, stronger institutional capacity and deliberate investment strategies that recognise off-grid ECs as long-term partners in the country’s energy transition.

For climate and energy policymakers, the study positions off-grid cooperatives not as peripheral actors, but as critical enablers of a just, inclusive and low-carbon transition in one of Southeast Asia’s most geographically complex power markets.