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Ways to Finance Solar Rooftops in the Philippines

**Let’s talk about solar setup expenses. The most important consideration of switching to solar is the upfront cost.

Let’s face it, not a lot of Filipinos have PHP 100,000+ ready to go. Luckily, local banks offer loans specifically for financing the Philippines Sustainable Energy Finance (SEF) Program. This program supports projects geared towards using renewable energy like solar power to power up. Some of the major banks that support this program are the Bank of the Philippine Islands (BPI) and Banco De Oro (BDO).

Now, you might think residential projects don’t count, and they usually don’t. But if you plan to sell your excess energy to the grid, then you qualify for the loan. The Development Bank of the Philippines also has a special program to fund net-metering schemes for homeowners.

Otherwise, you can just apply for a term loan in any bank and keep all the power to yourself as a self-supporting unit.

*How to Finance Solar Rooftops

Solar Technology is characterized by high capital cost requirements but have a low operating cost and a long service life. The ability to finance a solar system eases up the burden on the initial cost of procuring the system and spreads this cost over the long term while the system is already generating savings on electricity costs. This makes solar affordable to more users who cannot afford to pay upfront for the system in a single payment.

The two main financing options are the Term Loan and Equipment Lease.

Term Loan

A Term Loan from the bank can be used to purchase the solar system. Usually, 70% of the project cost is financed by the bank with 30% equity required from the lender. The loan term can be three (3) to seven (7) years or longer depending on the project requirement. Loan payments can be equal or unequal and tailor-fit to the project’s cash flow. Payment includes principal plus interest set in a monthly or quarterly basis. A grace period of 6 months to 1 year with the deferred payment on the principal can be offered during construction of the system. The interest rate depends on the prevailing market rates that can be on a variable or fixed basis. Typically accepted collateral are real estate mortgages on residential or commercial properties, chattel mortgage on equipment, and joint and/or several signatures of principal stockholders for corporate borrowers.


Leasing is a transaction whereby an owner of an asset (the Lessor) grants the use of the asset to a Lessee for a fee over a period of time. The asset is then turned over to the Lessee after the lease period. Leasing can either be a Direct Lease of equipment or Sale and Lease Back of the equipment with a term of up to 7 years. A Guaranty Deposit of around 20% or equivalent to the Residual Value of the equipment after the lease period is required. Full release of the net amount to be financed is done after payment of the Guaranty Deposit. The interest rate is composed of the Bank Base Rate plus Spread with rate-fixing option for 1 or 3 years. Lease payment is composed of the amortized principal plus Interest after the grace period. The Equipment financed serves as the Collateral subject to the standard conditions, representations, warranties, covenants, and events of default stated in the term loan agreement.

If the projected savings generated by the solar system is not enough to cover the amortization, the user has to show its financial capacity for the additional expense needed for the debt payment over the financing period. This additional expense can be recovered by the user on the savings generated over the rest of the service life of the system beyond the financing term.

Philippines Sustainable Energy Finance (SEF) Program

The SEF Program is both an investment and an advisory program being implemented by the International Finance Corporation (IFC) in different regions around the world. The Philippines SEF Program was launched in 2008, the first in the ASEAN region. SEF works with private banks to encourage lending to energy efficiency (EE) and renewable energy (RE) projects by supporting them through: 1) Technical Advisory (TA) services which help them build capacity to develop/establish this new business line (through training, product development, pipeline development); and 2) Risk Sharing Facility (RSF) where IFC covers 50% of the loan losses in case of default. With RSF, client banks are more inclined to finance EE/RE projects which enhances their portfolio build up. At present, PSEF has three (3) partner private banks: Bank of the Philippine Islands (BPI), Banco De Oro (BDO), and BPI Globe BanKO (BanKO), with BPI having access to the RSF.

More businesses investing in EE and RE technologies do not only mean cost efficiency and better processes but also less fossil fuel use which ultimately contributes to climate change mitigation. Since the launch of its Phase II in 2009 up to June 2013, PSEF has catalyzed investments in 87 sustainable energy projects.

These projects are projected to save 96,055 MWh/year from the EE projects and generate 843,613 MWh/year from the RE projects implemented. Overall, the investments are expected to reduce 967,447 tons of CO2/year.

Eligible projects include EE measures in buildings (retrofit or replacement of lighting, space cooling, air compression, and building management systems) and industrial/manufacturing processes (boiler upgrades, motors, manufacturing equipment, etc.) in order to save energy, and renewable energy projects (biomass, biogas, mini-hydro, wind energy and solar energy, including solar roof tops) for electricity generation, thereby maximizing energy use, reducing the use of fossil fuels, and cutting greenhouse gas emissions.

Aside from working with the banks, IFC has also built partnerships with other key stakeholders in the value chain, such as end-users, service and technology providers, industry associations, non-profit organizations, regulatory agencies, and other business groups to further advance awareness and develop the EE and RE markets.

Typical process flow for RE financing is as follows:

  1. Introduction of SEF program
  2. Submission of Project Information Memo or PIM
  3. Data validation by the bank through site visit and PIM review
  4. Presentation of RE project assessment and financing recommendation
  5. Financing

After going through the abovementioned stages, bank client decides on whether to pursue bank financing. SEF client bank/s goes through its usual financing procedure. IFC SEF team assists the bank at all levels of the workflow.

Development Bank of the Philippines – Loan Window for Net Metering Project

Renewable energy development is among the priority thrust of the Development Bank of the Philippines. Even prior to the passage of the Renewable Energy Act of 2008 (R.A. 9513), DBP has been in the fore-front of financing renewable energy projects such as hydro, wind, solar and biomass since early 1990s. For solar projects, it was mostly solar home systems for rural electrification wherein the borrowers were associations/cooperatives. DBP also funded several solar water heaters on industries to promote the use of renewable energy. And on recent years, DBP financed projects in hydro, biomass and wind contributed to an estimated165 MW additional capacity to the grid and off-grid. To balance the investment cost and affordability of solar technology, DBP uses Official Development Assistance Funds sourced from multi-lateral and bilateral funders to be able to provide long-term financing of up to 15 years. DBP has assisted various private companies, electric cooperatives, and local government units in the development of their respective renewable energy projects.

With the approval of the Net-Metering scheme by the Energy Regulatory Commission, DBP can provide term loan to eligible borrowers using the Environmental Development Project or other internally generated funds. The loan repayment can be structured based on the savings (kilowatt-hours produced) derived from the project which would typically require five (5) to seven (7) years tenor. During project construction/installation, grace period on principal amortization can be extended while interest charges can form part of the borrower’s equity. The borrower has also the option to avail fixed or variable interest rate based on prevailing market rate. Other financing option being explored by DBP to assist project proponent is the Lease Arrangement. The lease fee will likely be structured based on the savings derived from the project.

Environmental Development Project (EDP)

EDP is a policy-based lending facility funded by the Japan International Cooperation Agency (JICA) intended among others, to support viable environmentally-sound and profitable investment projects on renewable energy such as but not limited to hydro, wind, solar, biomass, biofuels, geothermal and other emerging technologies.

Eligible borrowers for the facility are private corporation/enterprises, Renewable Energy Service Companies/Corporations, Qualified Third Parties (QTPs) for Energy Projects, Private Utility Operators, Local Government Units (LGUs), Non-Governmental Organizations (NGOs), Electric Cooperatives (ECs), and Participating Financial Institutions (PFIs). Eligible expenditures under the facility include project preparation activities, capital investment, working capital, interest during construction period, and consultant’s services.

The loan facility offers a repayment term of up to fifteen (15) years with up to three (3) years grace period based on project cash flows. The equity requirement for private companies is minimum of 20% of the totalproject cost, while for LGUs, ECs, NGOs is minimum of 10% on the total project cost.

Future plans for net-metering

With the approval of the Net-Metering scheme by the Energy Regulatory Commission (ERC), there is a potential market to be developed for residential and commercial customers. As a Bank for the environment and to further reduce our carbon footprint portfolio, DBP will embark on Net-Metering scheme to encourage other electricity end-users, most specially our borrowers and depositors, to participate in the Net-Metering program of the government. Presently, DBP is in the process of crafting a Net-Metering financing program for residential.


Sources: Directly Quoted from *Department of Energy and **Yugatech



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