Offshore Wind: A Costly Gamble the Philippines Can’t Afford?

The World Bank estimates the Philippines has a technical offshore wind (OSW) potential of 178 gigawatts (GW).

Tapping into this resource has already begun, with the the Department of Energy (DOE) awarding 87 service contracts in July 2025. These amount to roughly 68,000 megawatts (MW), spanning key sites in Mindoro, CALABARZON, Ilocos Norte, Cagayan, and several Visayan provinces.

To expand these projects, the DOE is set to launch its first OSW-only auction, the Fifth Green Energy Auction (GEA 5), targeting 3,300 MW of fixed-bottom capacity by 2028 to 2030.

The Global Wind Energy Council (GWEC) Philippines hailed the auction as a “defining moment,” emphasizing that political will, private sector drive, community engagement, and technological innovation could turn the country’s OSW potential into “clean, reliable power for generations.”

However, global OSW development is currently facing setbacks, raising questions about project viability.

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Global challenges for OSW

OSW projects worldwide are under pressure from inflation, high interest rates, and supply chain bottlenecks, with maintenance now eating up nearly a quarter of total costs, the International Energy Agency (IEA) warns, squeezing investment in the sector.

Australia’s $10-billion Gippsland Dawn OSW project was scrapped by developer BlueFloat Energy, citing poor commercial prospects. The Spain-based company is also exploring sales across its global OSW portfolio, including projects in the UK, Italy, Spain, the Philippines, and Taiwan, saying further investment is “no longer commercially viable in the short and medium term.”

In the US, President Donald Trump’s halt on New York’s Empire Wind project sent shockwaves through the OSW wind sector, freezing new developments and reviewing prior approvals. Although developer Equinor eventually resumed work, the company faced significant losses and later abandoned its Bass Strait project off Tasmania.

Meanwhile, the Netherlands scaled back its 2040 OSW target from 50 GW to 30 to 40 GW, citing rising costs and weak hydrogen demand. Climate Minister Sophie Hermans stressed the need for “realism” in “planning the roll-out of offshore wind energy.”

Cost: OSW’s biggest hurdle

According to GWEC, OSW projects in the Philippines are expected to be costly, particularly for early developments, due to limited infrastructure, underdeveloped supply chains, and a lack of operational scale.

A 2024 Asian Development Bank (ADB) study found that minimum tariffs for these projects could range from ₱9.1 to ₱16.4 per kilowatt-hour (kWh), with floating foundations in Luzon projected to be far more expensive than fixed-bottom installations. GWEC warned that due to these high costs, OSW projects “are expected to have a hard time competing with other RE and thermal technologies for offtake contracts with DUs/ ECs (distribution utilities/electric cooperatives) or in the WESM.”

By contrast, solar PV delivers electricity at just ₱2.50 to ₱3.50 per kWh, making ISW at least over four times more costly.

Globally, OSW remains the most expensive utility-scale renewable, with levelized costs ranging from $72 to $140 per megawatt-hour (MWh), well above onshore wind at $24 to $75 per MWh. When full system costs, including backup and storage, are considered, onshore wind can rise to $291 to $483 per MWh, compared with $78 to $90 per MWh for coal.

In the Philippines, fixed-bottom projects demand capital expenditures of $3 million to $7 million per MW. Although the DOE lowered performance bond requirements from 20% to 5%, the initial investment needed to build projects remains prohibitively high.

“Even now, potential lenders for offshore wind projects in the Philippines are struggling to find a viable financing model,” Manila Bulletin’s Myrna Velasco wrote. “Some banks are proposing longer contracts, beyond the standard 20-year power supply agreements (PSAs), as a way to offset high upfront costs and prevent ‘rate shock’ for consumers.”

To secure capital, the GWEC recommended creating stronger financial safeguards for developers, including concessional funding or guarantees from multilateral lenders, development finance institutions, and export credit agencies. It also urged the rollout of insurance for typhoon and marine risks, foreign exchange hedging, and mechanisms to reimburse transmission costs. Although costs may gradually decline as the supply chain develops, early OSW projects will remain costly without targeted support.

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OSW’s technical complexity

Manila Times columnist Charlie Manalo highlighted that OSW’s supposed advantage of producing more power is undermined by unstable sea conditions, making its output less predictable than onshore wind.

He also stressed the stark cost gap, noting that OSW farms are far cheaper and simpler to build and maintain. “Offshore, on the other hand, is a different challenge as each project requires heavy-duty foundations, specialized ships, subsea cables, offshore substations, and complex marine engineering,” he wrote. “Maintenance can also be costly and dangerous as it will involve helicopters and limited weather windows.”

In terms of infrastructure, the Philippine Ports Authority (PPA) conceded that purpose-built OSW ports will not be ready in time, with only one or two possibly operational by 2026 or 2027—far behind the needs of over 6 GW in awarded projects. This mismatch in timelines puts developers at risk of costly delays and even project cancellations.

The Makati Business Club (MBC) echoed that inadequate port infrastructure remains a critical obstacle, stating that the country lacks facilities that meet global logistics standards for OSW. “This is a critical bottleneck requiring two to three years for planning, design, and construction– even before accounting for permits,” it cautioned.

The GWEC confirmed that OSW takes far longer to build, with construction and commissioning stretching from 24 to 48 months, compared to roughly 18 months or slightly more for onshore developments.

Ben Kritz of the Manila Times pointed out that fixed-bottom OSW involves transporting enormous components such as 80 to 100-meter blades and multi-ton nacelles, which require specialized port facilities for staging, loading, and maintenance. However, most Philippine ports are not equipped to handle equipment of this scale.

OSW: A barrier to affordable energy

According to Dr. Eduardo Araral of the National University of Singapore, the steep upfront costs of OSW require strong investor confidence and substantial public funding, raising the risk that consumers could ultimately shoulder the burden. He warned that expensive port development “risks exacerbating economic inequality.”

Araral added that in countries facing energy poverty, low-income households already “spend 10 to 40% of income on energy,” and forcing them to absorb infrastructure costs would worsen their hardship.

Pilipino Star Ngayon’s Non Alquitran wrote, “Tama lang na mahalaga ang renewable energy at kailangan ng Pinas ng mas malinis na power sources. Pero bakit hindi natin pag-ibayuhin muna ang mas mura, mas praktikal, at mas maaasahang onshore wind at iba pang alternatibong pagkukunan ng kuryente? (It’s true that renewable energy is important and the Philippines needs cleaner power sources, but why don’t we first focus on cheaper, more practical, and more reliable onshore wind and other alternative energy sources?)”

Meanwhile, Manalo reiterated that in a country where many households still struggle to pay their power bills, the more realistic path is to scale up onshore wind first and phase in OSW projects only with strong safeguards on cost and environmental impact.

“Wind power is set to play a vital role in the Philippines’ clean energy future,” he wrote. “However, ‘clean’ should not come at the expense of affordability, and ‘renewable’ should not cause harm to communities.

Sources:

https://www.bworldonline.com/opinion/2024/10/07/626038/renewable-energy-transition-are-we-going-in-the-right-direction/

https://www.philstar.com/business/2025/09/11/2471870/more-offshore-wind-and-rising-inflation-there-connection

https://legacy.doe.gov.ph/press-releases/doe-kicks-green-energy-auction-fixed-bottom-offshore-wind

https://mb.com.ph/2025/09/15/tackling-offshore-winds-toughest-development-challenges

https://www.iea.org/energy-system/renewables/wind

https://www.abc.net.au/news/2025-07-16/blue-float-energy-pulls-out-of-gippsland-wind-farm-offshore/105495614

https://renews.biz/101876/bluefloat-owner-to-sell-off-uk-italy-projects

https://www.abc.net.au/news/2025-07-15/offshore-wind-industry-hit-by-global-headwinds/105520316

https://renews.biz/101878/netherlands-to-ditch-50gw-offshore-wind-target

https://www.gwec.net/financing-offshore-wind-in-the-philippines-risk-sharing-mechanisms

https://en.wikipedia.org/wiki/Cost_of_electricity_by_source