TOKYO -- Closed since the onset of the pandemic, Commonwealth High School in Metro Manila has been making a contribution to the local community of Quezon City through its solar panels.
Installed in May last year, the panels can produce around 100,000 kilowatt-hours per year -- enough to power the campus and some surrounding areas.
The installation was the first in an ambitious plan by the government of Quezon City to shift all public buildings to renewable energy by 2030. After pilot projects at Commonwealth High School and nearby Balara High School -- two of the nation's largest high schools -- the city is looking to solarize around a dozen government offices, 146 public schools, three city-run hospitals and over 100 community-level "barangay" halls.
The environmental impact of metropolises and their potential to address climate change was recognized at this month's COP26 summit, which dedicated a daylong program to cities. Quezon City -- Metro Manila's most populous municipality -- has pledged a 30% reduction in greenhouse gas emissions by 2030.
"One of our major projects is energy because it's a big component of our greenhouse gas inventory," said Andrea Villaroman, director of the city's environmental protection department. The United Nations estimates that 75% of global carbon dioxide emissions come from cities.
But as international climate finance is typically geared to national governments, subnational actors face a bottleneck of funding for climate adaptation and mitigation projects. Cities in developing Asia are hampered by underdeveloped municipal bond markets and lack the technical capacity to design financially viable projects attractive to private investors.
"Often, national governments are acting as the recipients of overseas development assistance and climate finance," said Bjoern Surborg, acting country director for the Philippines at GIZ, the German international development agency.
To get Quezon City's solar project off the ground, GIZ provided capacity-building assistance through C40 Cities, a global alliance of mayors to tackle climate change. Tokyo, Hong Kong and Dhaka in Bangladesh are among the founding members. The facility trained Quezon City staff on technical design, financial structuring and contracting with the utility provider to credit excess solar power to each school's electric bill.
In Bangalore, India's tech center and fifth-largest city, the facility supported upgrading the bus fleet to electric vehicles, saving an estimated $700,000 per day in fuel costs and eliminating 51,000 metric tons of carbon dioxide per year. A similar program is underway in Jakarta.
"If you target the megacities of the world, that's where a lot of energy is being used [so] you can have a large impact," said Surborg.
Quezon City put up the capital for solarizing the two public schools, where the cost was about 45,000 pesos ($892) per kilowatt. Even with technical know-how in hand, the high upfront costs for renewable energy are daunting for many developing cities.
"Many small-island developing states aren't low-income, so their ability to access concessional loans for climate projects is constrained," said Lorena Gonzalez, senior associate for climate finance at the World Resources Institute. "The least developed countries are still building the capital and legal markets infrastructure to attract private finance for their climate projects," she added.
At COP26, a group of private financial institutions announced $130 trillion in assets under management that could be directed toward climate finance.
"That money will not reach countries that need it without de-risking, guarantees and credit enhancement," said Sara Jane Ahmed, adviser to the finance ministers of 20 climate-vulnerable countries, known as the V20 Group.
Villaroman said Quezon City had received proposals for public-private partnerships to expand its solar energy program to 50 public schools at a time, as well as the three public hospitals.
But if COVID continues to keep schools closed, "they might have to install some five or 10 in one batch, and that will not be attractive anymore to a PPP investor," said Ferdinand Larona, senior adviser for renewable energy at GIZ.
"Project size is an issue for investors because of the lengthy compliance requirements, which is a problem for cities as well as [small island developing states]," said Ahmed.
Save for a national government-led scaleup, a solution would be to bundle and aggregate climate projects in multiple cities to attract private capital. GIZ has worked with Pasig, a neighboring municipality to Quezon City, and Batangas, a major port city two hours south of Manila, on similar solar projects.
Some private financial institutions are seeking ways to ease the capital bottleneck. Japan's Sumitomo Mitsui Banking Corp., a major project financier to Southeast Asia, is collaborating with blockchain startup Banyan Infrastructure on a digital platform to assess risk and securitize small-scale renewable energy projects.
"Utility-scale solar is easily financeable. The question is how to finance community solar projects," said Tad Neeley, co-founder and president of Banyan Infrastructure.
Quezon City plans to solarize the first 50 schools next year, with or without private capital. The city, Metro Manila's second wealthiest, can draw from its own budget including a green trust fund raised from a two peso ($0.04) fee on single-use plastic bags. The surcharge has amassed 300 million pesos ($5.9 million) since 2012 to fund climate adaptation and mitigation efforts.
"We do not want [climate efforts] to be just for whenever we have enough funds for it, but really intentional budgeting by the city government to move forward to decarbonize Quezon City," said Villaroman.
Shifting the 50 schools to solar power could deliver cost savings of 30% to 50%, according to city estimates. Afterward, the city could list the project, either as a municipal bond or a green bond, to raise money for other projects, suggested Ahmed.
"The Philippines has a generally good capital bond market, so there's an opportunity to develop a green bond market," she said. "We just need to get municipalities up to the mark to list their bonds."