The Department of Energy (DOE) is laying down the guidelines and requirements for energy efficiency (EE) ventures seeking tax incentives with the Board of Investments (BOI).
The DOE has recently issued an initial draft of the Circular, but this will still be subject to consultations with relevant stakeholders before its finalization and the formal issuance of the guidelines by the Office of the Secretary.
“To qualify for the availment of the fiscal incentives allowed under the EEC (Energy Efficiency and Conservation) Act, the energy efficiency projects must be certified by the DOE and registered with the BOI,” the department stated.
In the proposed policy, the DOE emphasized that the array of EE projects that it will endorse for BOI perks, shall include: installation of equipment or system for new construction facility, plant or establishments; and retrofit projects that shall involve the installation of equipment, devices or system.
The others are: modifications or expansions of an existing plant, facility or establishment that shall involve the installation of equipment, devices or system; ventures of which energy savings and project cost must meet the minimum project boundary as prescribed under the DOE Circular; pioneering energy efficiency projects for new construction facility, plants or establishments subject to Article 17 of Executive Order 226 or the Omnibus Investment Code of 1987; and energy efficiency projects that are initiated by energy service companies (ESCOs).
ESCO-initiated projects are ventures that result in energy savings, productivity and overall cost reduction. It will also be the ESCO, often a private company, that will fund the project and at no cost to the owner of the facility; and payment of services rendered by the ESCO shall be derived from the generated savings.
As decreed by the DOE, for energy efficiency projects to be endorsed for BOI incentives, they must be “able to meet the minimum 15-percent boundary and a minimum project investment cost of P10 million.”
The agency explained that “the 15-percent boundary refers to the absolute value of energy savings computed from the reference energy consumption to the new consumption or after the efficiency project has been installed and on its full commercial operation.”
The DOE further noted that “EE projects may qualify as pioneer enterprise,” and that “the rate of the income tax holiday (ITH) shall be reckoned from the start of operation of the project.”
The department has also listed all the requirements, processes and document submissions that EE investors must adhere to before their projects could be qualified and subsequently endorsed for BOI incentives’ application.
“For the availment of fiscal incentives, the DOE shall endorse energy efficiency projects that passed the technical and the economic evaluation criteria,” the agency has specified.