Investment Opportunities in Europe’s Geothermal Energy Market: Country-by-Country Resources, Companies, Challenges, and Growth Prospects Europe is developing one of the world’s most diverse geothermal investment markets. The continent combines mature geothermal electricity industries in Italy, Iceland, and Türkiye with rapidly expanding district-heating markets in France, Germany, the Netherlands, Poland, Hungary, Denmark, and Switzerland. The most attractive European opportunities are not limited to power generation. Investors can participate in geothermal district heating and cooling, industrial heat, geothermal heat pumps, enhanced geothermal systems, closed-loop systems, thermal storage, lithium extraction, drilling services, equipment manufacturing, and integrated energy networks. The European Geothermal Energy Council reported that ten new geothermal district-heating and cooling systems began operation during 2025, adding approximately 70 MWth of capacity. New systems were report...
By Robert Buluma – June 8, 2026
In a landmark move that reinforces the Philippines’ position as a global leader in geothermal energy, Philippine Geothermal Production Co. Inc. (PGPC) — a wholly owned subsidiary of the Sy family’s SM Investments Corp. (SMIC) — has secured a government contract to develop a significant geothermal resource in Leyte.
The award, confirmed by Energy Secretary Sharon Garin on June 1, 2026, under the Department of Energy (DOE)’s fifth open and competitive selection process (OCSP5), marks a pivotal expansion for PGPC. The company won the rights to Pre-determined Area (PDA) 2, known as the Southern Leyte Geothermal Project, which has a potential capacity of 25 megawatts (MW) .
This article dives deep into the implications of this contract, the strategic importance of geothermal energy for the Philippines, and what it means for the future of renewable energy (RE) in the Asia-Pacific region.
The Southern Leyte Geothermal Project: At a Glance
The Southern Leyte Geothermal Project is located in one of the most geothermally active regions in the country. Leyte is already home to the famous Greater Tongonan Geothermal Field, which includes Upper Mahiao, Malitbog, and Mahanagdong. Together, these existing facilities power multiple plants with a combined capacity exceeding 700 MW.
Key project details include a location in Southern Leyte, a potential capacity of 25 MW, and a development status of contract awarded in June 2026. The project is classified as a Pre-determined Area (PDA) under the DOE’s OCSP5 process, with PGPC serving as the designated developer.
While 25 MW is considered a mid-range capacity compared to large baseload plants, it is a strategic addition. For context, 25 MW can power approximately 25,000 to 30,000 average Filipino households, assuming a consumption rate of 1 kW per home with appropriate diversity factors. More importantly, geothermal provides baseload power — unlike solar or wind, it runs 24 hours a day, 7 days a week, regardless of weather conditions.
The insight here is critical: the development of this 25 MW asset is not just about raw capacity. It is about grid stability in the Visayas region. Geothermal energy serves as the backbone that allows intermittent renewables like solar and wind to integrate more smoothly into the grid without risking blackouts or frequency fluctuations.
PGPC’s Expanding Portfolio: From Tiwi-MakBan to Leyte
PGPC is already a heavyweight in the Philippine geothermal scene. The company currently operates two major steam fields. The Tiwi Steam Field in Albay is one of the oldest and most reliable geothermal fields in the country. The Mak-Ban Steam Field, spanning Laguna and Batangas, is another legacy asset that has powered the Luzon grid for decades.
Together, these fields have a combined capacity of approximately 300 MW of steam supply. This steam is delivered to power plants owned and operated by the Aboitiz Group. The symbiotic relationship between PGPC as the steam producer and Aboitiz as the power generator is a classic Philippine energy partnership model that has worked successfully for years.
Concession Sites Across the Philippines
Beyond Tiwi-MakBan and the new Leyte contract, PGPC holds exploration and development concessions in multiple regions. In Northern Luzon, the company has sites in Kalinga, Benguet, and Cagayan. In Southern Luzon and the Bicol Region, PGPC has concessions in Quezon, Camarines Norte, and Camarines Sur.
This geographic diversification de-risks PGPC’s portfolio significantly. Should a volcanic event, natural disaster, or regulatory issue affect one region, the other production sites continue operating without interruption. Energy analysts consider this spread of assets a best practice in geothermal development, given the unpredictable nature of subsurface resources.
The expert consensus is clear: PGPC’s aggressive land banking of geothermal prospects is a long-term hedge against natural gas depletion. The Malampaya gas field, which has supplied a significant portion of Luzon’s power for decades, is in terminal decline. Geothermal offers the only indigenous, reliable baseload alternative that can replace that lost capacity without importing liquefied natural gas.
Understanding the DOE’s OCSP5 Bidding Process
The Department of Energy’s Open and Competitive Selection Process (OCSP) is a transparent mechanism for awarding Renewable Energy (RE) service contracts. OCSP5 is the fifth round of this process, launched specifically to accelerate the exploration and utilization of the country’s indigenous energy resources.
How OCSP Works Step by Step
The process begins with nomination, where the DOE identifies Pre-determined Areas (PDAs) that have confirmed RE potential based on preliminary geological surveys and existing data. Next comes bidding, during which qualified companies submit both technical and financial proposals outlining their development plans, drilling schedules, and capital commitments.
After bids are submitted, the evaluation phase begins. The DOE ranks applicants based on three main criteria: the comprehensiveness of their work program, their financial capability to fund exploration and development, and their technical expertise in geothermal operations. Finally, the award is made: the highest-ranked bidder secures the exclusive right to explore and develop the area under a renewable energy service contract.
Secretary Sharon Garin declared PGPC as a winning bidder for PDA 2, the Southern Leyte Geothermal Project, on June 1, 2026. The declaration was formalized via a DOE advisory, confirming that PGPC submitted the highest-ranked application among all competitors. For SEO purposes, this section targets long-tail keywords like “DOE OCSP5 winners 2026” and “Philippines geothermal bidding process.”
Why Geothermal? The Philippines’ Renewable Energy Backbone
The Philippines is the third-largest producer of geothermal energy in the world, ranking behind only the United States and Indonesia. However, the Philippines is arguably the most dependent on geothermal as a percentage of its total grid mix. According to the DOE, geothermal accounts for approximately 12 to 15 percent of the country’s total power generation.
Comparing Geothermal to Other Renewables
When evaluating geothermal against other renewable technologies, several key differences emerge. Geothermal offers true baseload capability, running 24 hours a day, seven days a week, regardless of weather. It requires a relatively low land footprint and is not weather-dependent. Its capacity factor — the actual output versus theoretical maximum — ranges from an impressive 85 to 95 percent.
Solar PV, by contrast, is intermittent by nature. It only generates power during daylight hours and is heavily affected by cloud cover. Its capacity factor is typically only 15 to 25 percent. Wind power is similarly intermittent, depending on wind speeds that vary by season and time of day, with a capacity factor of 25 to 40 percent. Hydroelectric power can provide baseload in run-of-river configurations, but large reservoir projects require massive land areas and are increasingly vulnerable to changing rainfall patterns due to climate change.
The Leyte Geothermal Cluster
Leyte is often called the “Geothermal Capital of the Philippines” for good reason. The Leyte Geothermal Production Field (LGPF) is one of the largest in the world. Existing plants in the region include Upper Mahiao at 125 MW, Malitbog at 232.5 MW, Mahanagdong at 180 MW, and the Optimized Power Solutions plant at 50 MW.
PGPC’s 25 MW project in Southern Leyte, while modest in size compared to these giants, will likely leverage existing transmission infrastructure connected to the Visayas grid. This proximity to existing power lines and substations will substantially reduce capital expenditure on new transmission assets, improving the project’s overall economics.
Investment and Capacity Goals: PGPC’s ₱3 Billion Expansion Plan
To support this new contract and other ongoing developments, PGPC has allocated approximately ₱3 billion for geothermal expansion in 2026 alone. This capital will be deployed across multiple activities: drilling new production wells, rehabilitating existing steam fields to restore or increase output, and developing new greenfield sites like the Southern Leyte project.
Doubling Capacity: The 5 to 7 Year Target
According to PGPC’s internal roadmaps as reported by The Philippine Star, the company aims to double its capacity over the next five to seven years. Currently sitting at 300 MW of steam supply, a doubling would bring them to approximately 600 MW of steam production capacity.
How will they achieve this ambitious goal? The Southern Leyte project is expected to contribute 25 MW, likely coming online between 2029 and 2030 based on typical geothermal development timelines of three to four years from contract award to commercial operation. The Kalinga and Benguet prospects are greenfield exploration sites with potential for 50 to 100 MW each, though these carry higher exploration risk. Finally, Tiwi-MakBan rehabilitation efforts — enhanced steam field management and strategic infill drilling — can increase output from existing assets without requiring entirely new well fields.
From a financial perspective, the ₱3 billion budget is significant but not excessive. Industry benchmarks suggest geothermal drilling costs range from ₱200 million to ₱500 million per well, depending on depth, rock conditions, and location. For a 25 MW plant requiring approximately five to seven production and injection wells, PGPC’s budget aligns well with standard industry norms.
Other Winners and Unsuccessful PDAs in OCSP5
PGPC was not the only winner in OCSP5. The DOE also announced awards to other companies pursuing different renewable energy technologies. Almanapower Corp. clinched PDAs for three separate hydroelectric power projects, continuing the growth of small to medium run-of-river hydro in the country. Sara Philippines Holdings Corp. won a PDA for wind energy development, adding to the growing list of wind projects in the Visayas and Luzon regions.
However, not every PDA found a taker. Four hydroelectric PDAs received no applications from interested developers. More notably for the geothermal sector, one geothermal PDA also received zero applications. Additionally, one wind resource bid was disqualified outright for failing to meet the DOE’s evaluation requirements.
What Happens to Unawarded PDAs?
Pursuant to existing DOE guidelines, the unawarded areas will be opened for direct application through the Energy Virtual One Stop Shop (EVOSS) . This online platform is designed to streamline permits and reduce red tape. It allows developers to apply for service contracts without undergoing another competitive bid round, provided no prior offers were accepted during the OCSP process.
The fact that one geothermal PDA received zero applications is worth noting. It suggests that particular area may have challenging terrain, smaller or less certain resource potential, or higher exploration risk than other available sites. This reality underscores the value of PGPC’s winning bid on Southern Leyte — the company has the technical capacity and financial strength to tackle complex geothermal projects that other developers choose to avoid.
Geothermal vs. Green Energy Auction: Key Differences
Many observers confuse the OCSP with the Green Energy Auction Program (GEAP) , but they serve fundamentally different purposes in the Philippine energy landscape.
The OCSP is designed to award exploration and development rights to RE resources. Its output is a service contract that gives the developer the exclusive right to explore, drill, and confirm the resource. The risk level is high because exploration wells may come up dry, and the typical winners are geothermal and hydro developers who have the technical expertise to manage subsurface uncertainty.
The Green Energy Auction Program , by contrast, is designed to award power supply contracts for already-developed plants. Its output is a power purchase agreement (PPA) with a fixed, pre-negotiated tariff. The risk level is low because the plant is already built and operating. Typical winners are solar, wind, and biomass operators who need guaranteed off-take agreements to secure project financing.
To use a concrete example: PGPC won the right to explore Southern Leyte via OCSP5. Once they successfully drill, build the steam field, and construct the power plant, they may later participate in a GEAP auction to sell that electricity to distribution utilities like Meralco at a guaranteed price.
The clarity here is essential for readers: the OCSP is about finding and drilling the steam. The GEAP is about selling the electricity. Both are critical and complementary parts of the renewable energy ecosystem.
Future Outlook: Geothermal’s Role in the Philippine Energy Transition
With the Philippines Energy Plan (PEP) 2023-2050 targeting a 50 percent renewable energy share by 2040, geothermal is indispensable to achieving that goal. However, the sector faces both significant challenges and substantial opportunities.
Challenges Facing the Sector
The high upfront capital requirements are perhaps the biggest barrier. Drilling a single geothermal well can cost between $5 million and $10 million, and a typical 25 MW project requires multiple wells. Exploration risk is another major factor: not all drilled wells produce commercial steam, meaning developers must absorb the cost of dry holes with no revenue to show for it. Permitting delays persist despite the EVOSS system, as local government unit approvals and community consultations can still take years to complete.
Opportunities on the Horizon
On the opportunity side, corporate backing is a powerful advantage for PGPC. SM Investments is one of the largest conglomerates in the Philippines, with deep financial resources and a long-term investment horizon that can weather the ups and downs of geothermal exploration. Technology advances are also helping: binary cycle plants now allow lower-temperature resources that were previously uneconomical to generate power, expanding the pool of viable geothermal sites. Finally, carbon credits offer a new revenue stream. Geothermal projects earn high-quality carbon offsets under international mechanisms such as Article 6 of the Paris Agreement, which can be sold to companies seeking to offset their emissions.
SMIC’s Strategic Move
For SM Investments Corporation, owning PGPC is a strategic diversification away from the company’s traditional core businesses of retail (SM Malls) and banking (BDO Unibank). Energy infrastructure provides several corporate benefits. First, it offers predictable, regulated returns that are not subject to the same competitive pressures as retail. Second, it serves as a hedge against inflation, as electricity prices tend to rise with the consumer price index. Third, it provides ESG credentials — environmental, social, and governance metrics — that help attract global institutional investors who increasingly screen for sustainable investments.
As of June 2026, SMIC has not publicly disclosed the exact tariff or construction timeline for the Southern Leyte project. However, industry analysts expect commercial operation by 2029 at the earliest, assuming exploration drilling confirms the expected resource and permitting proceeds without major delays
Conclusion: A Small But Symbolic Victory for Philippine Geothermal
PGPC’s winning bid for the Southern Leyte Geothermal Project at 25 MW under DOE’s OCSP5 is more than just a contract announcement. It is a signal of three important trends in the Philippine energy sector.
First, the Philippines remains open for geothermal business despite past regulatory shifts and policy uncertainties. The OCSP5 process demonstrated that transparent, competitive bidding can successfully award complex geothermal projects. Second, the Sy family through SM Investments is committed to long-term, indigenous baseload renewables. This is not a short-term financial play but a strategic bet on the country’s energy future. Third, Leyte’s geothermal potential is far from tapped, with more PDAs likely to be offered in future OCSP rounds as the DOE continues to identify and de-risk promising areas.
As the DOE prepares for OCSP6 and beyond, and as PGPC works methodically toward its goal of doubling capacity by 2033, one thing is clear: Geothermal energy is the sleeping giant of the Philippine energy transition, and it is finally waking up.
Frequently Asked Questions (FAQ)
How much electricity will the Southern Leyte Geothermal Project generate?
Approximately 25 MW, which is enough to power 25,000 to 30,000 typical Filipino homes.
When will PGPC start construction on the Leyte project?
Construction is likely to begin in 2027 or 2028, following exploration and feasibility studies required by the DOE service contract.
Is PGPC a subsidiary of SM Investments?
Yes. PGPC is wholly owned by SMIC, the holding company of the Sy family.
What is OCSP5?
It is the fifth Open and Competitive Selection Process conducted by the DOE for awarding renewable energy service contracts.
Does geothermal energy produce emissions?
Very minimal. Modern geothermal plants emit less than 5 percent of the carbon dioxide per megawatt-hour compared to coal-fired power plants.
What happens if exploration wells fail to find steam?
The developer absorbs the loss. This exploration risk is why geothermal requires patient capital and why the OCSP process is designed to award contracts to the most technically and financially capable bidders.
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