DOJ sustains 40% foreign RE ownership rule
By MYRNA M. VELASCO
A legal opinion rendered by the Department of Justice (DOJ) has sustained the 40-percent ownership restriction being enforced on foreign investors for the exploration, development and utilization (EDU) of renewable energy (RE) resources in the country.
DOJ Opinion 21, Series of 2022 issued by Justice Secretary Jesus Crispin Remulla on September 29 this year, stated “as provided in Section 19 of the IRR (implementing rules and regulations) of Republic Act 9513, that solar, wind, hydro and ocean or tidal energy is subject to the 40 percent foreign equity limitation, would remain unless amended.”
RA 9513 is the Renewable Energy Law which sets forth the policy framework on the flow of investments for various RE installations in the domestic energy market.
The DOJ further stated “the Water Code and jurisprudence limiting to Filipino citizens or juridical persons the appropriation of waters, direct from the source, for power generation shall continue to prevail, unless repealed or reversed.”
The legal opinion was sought by the Department of Energy (DOE) so it can have legal guidance on how it will resolve the bid of many foreign companies for the government to relax the ownership restriction on RE projects.
The DOE, in particular, sought clarity relating to contextual precepts of the terms “natural resources”; “all forces of potential energy” and “kinetic energy” -- as stipulated in the 1987 Philippine Constitution relative to the targeted participation of foreign investors in the RE sector.
The DOJ expounded that the legal opinion “must be understood in the context of the IRR of RA 9513, which include inexhaustible natural resources within the meaning of natural resources in Section 2, Article XII of the Constitution.”
If anchored on that specific provision of the RE Law’s IRR and in keeping with the prescription of the 1987 Constitution, it was emphasized that the reference to “all forces of potential energy” shall include “kinetic energy from water, marine current and wind; and thermal energy from solar, ocean, geothermal and biomass.”
The justice department acknowledged that “this interpretation of natural resources as contemplated under Article 2, Section XII forestalls foreign investors from setting up renewable energy projects in the country.”
On DOE’s part, it highlighted that “there is considerable lack of capital outlay for renewable energy projects in the country, further aggravated by the nationality requirement imposed upon businesses engaged in the EDU of solar, wind, hydro and ocean or tidal energy sources.”
The ownership constraint on foreign investors had been pointed to as the main reason why the Philippines has been lagging behind Asian neighbors when it comes to the competition of cornering capital on RE investments.
Even the DOE has been sounding off the need for more aggressive entry of foreign direct investments for RE developments, especially in line with the country’s energy transition agenda which targets to increase the share of RE in the power mix to 35-percent by 2030; and 50-percent by 2040.