THE DEVELOPMENT of the solar photovoltaic (PV) manufacturing industry in the Philippines could boost its gross domestic product (GDP) by as much as $175 million in seven years, the Asian Development Bank (ADB) said.
In its Renewable Energy Manufacturing report, the ADB said the Philippines could aspire to establish a 3-5 gigawatt (GW) scaled module assembly facilities by 2030. Half of the output would supply domestic demand.
“To achieve this, investment of $150 million to $250 million would be required over three to five years,” it said. “Realization of this ambition has the potential to generate in 2030 $100 million to $175 million uplift in GDP.”
The solar PV manufacturing industry could potentially generate between 8,000 and 12,000 new jobs, 4,000 to 7,000 of which would be direct jobs, the ADB said.
The industry would also result in about $100 million to $140 million in cost savings annually.
“It is estimated that workforce training and operational excellence, together with achievement of 3-5 GW scale, could enable a 5% to 10% reduction in the Philippines’ production costs to a level comparable with regional leaders,” the ADB said.
“Achieving this cost competitiveness would be key to the viability of the industry and to unlocking its potential benefits for the country,” it added.
Southeast Asia is a solar PV manufacturing hub, but production is mainly in Cambodia, Laos, Thailand and Vietnam.
In the Philippines, Maxeon manufactures cells.
The ADB noted that solar PV demand in the Philippines is mainly hindered by its grid infrastructure.
“While the Philippines has a supportive regulatory environment for renewables and strong near-term renewable energy (RE) targets, its grid would require investment in capacity expansion to accommodate solar PV capacity additions,” it said.
“The Philippines’ grid infrastructure is constrained and unable to accommodate additional solar generation. Government permits for project development and grid connection take a long time to obtain.”
Another barrier to boosting solar PV demand is the Philippines’ low supply of quick-start generation and energy storage solutions.
On the other hand, the ADB said the Philippines’ supportive regulatory environment would help support demand for solar PV manufacturing. The country recently opened the renewable energy sector to full foreign ownership.
However, the ADB said to attract more investments in solar PV manufacturing, the Philippines must also improve ease of doing business by designating zones for the industry, create conducive policies for imports and exports and streamline Customs processes.
The ADB also recommended partnering with industry leaders to train workers in solar PV manufacturing, reducing costs to original equipment manufacturers through fiscal incentives and expanding grid capacities for higher renewable penetration.
“In export markets, cost competitiveness will be critical. The market for solar PV modules is relatively commoditized, and price is a key buying factor for solar developers,” it added.
The ADB noted China still has the lowest cost of production for solar panels, while Vietnam and Malaysia are estimated to produce at a 15-20% higher cost than China.
Less established manufacturing hubs like the Philippines are estimated to produce solar PVs that are 25-35% higher than China, it added.
The costs of manufacturing solar PVs in the Philippines are higher mainly due to transport costs of inputs, lower buying power of raw materials due to small scale, higher electricity costs and lower yield on input factors.
“Manufacturers cited higher costs and wait times to export modules out of the Philippines versus Malaysia and Vietnam due to lower container traffic volumes. The Philippines also faces challenges with transportation between islands,” the ADB said.
From 2017 to 2021, Southeast Asian manufacturers supplied about a third of global PV module exports.
The ABD said revenues from low-carbon mobility and clean power segments in the region could reach $90 billion to $100 billion by 2030.
“Southeast Asia already is well-positioned to meet the demand for manufactured inputs into these sectors, as it already produces 9%-10% of the world’s solar PV cells and modules, 50% of global nickel output, and 6%-10% of all electric two-wheelers today,” it said.