The Department of Energy (DOE) will be working on immediate amendments to the implementing rules and regulations (IRR) of Republic Act 9513 or the Renewable Energy Act so foreign ownership restriction on renewable energy (RE) projects can finally be relaxed.
This developed after the Department of Justice issued a legal opinion favorably endorsing amendments to the IRR to remedy the impeded capital flow in the RE sector.
DOJ Opinion No. 21 series of 2022 still maintains the 40-percent equity limit for foreign investors in RE projects, but this can already be lifted once the RE Law’s implementing rules and regulations will be modified.
According to Energy Secretary Raphael P.M. Lotilla, the favorable legal opinion of the justice department “will pave the way for the opening of foreign investments in renewable energy development.”
Following that ruling from the DOJ, the energy chief indicated that “the DOE will now be addressing the 40-percent equity limit for foreign investors stipulated in the implementing rules and regulations of the RE Law.”
As clearly prescribed in the DOJ opinion, there is a need to amend the IRR of the law before the foreign ownership restriction on RE ventures can be cured.
Taking cue from that then, Lotilla said “the DOE is preparing the necessary amendments to Rule 6, Section 19 (B) of the IRR of the RE Law.”
That particular provision stipulates that “the exploration, development, production and utilization of natural resources shall be under the full control and supervision of the State.”
It was further stated that “the State may directly undertake such activities, or it may enter into co-production, joint venture or co-production sharing agreements with Filipino citizens or corporations or associations at least sixty percent (60%) of whose capital is owned by Filipinos. Foreign RE developers may also be allowed to undertake RE development through an RE service/operating contract with the government, subject to Article XII, Section 2 of the Philippine Constitution.”
There is no specific timeframe laid down by the DOE yet on when the IRR amendments can be delivered; but Lotilla hinted his department may pull a satisfying surprise to the foreign investors on this policy proposition.
At this stage, there is still no word also from the department if there would be prior consultations that shall be carried out with the industry stakeholders.
Lotilla, nevertheless, asserted that “private sector investments are central in achieving our renewable energy targets and vision for the Filipino people...this will certainly contribute to our target share of renewable energy in the power generation mix of 35-percent by 2030; and 50-percent by 2040.”
The players in the RE sector have been incessantly sounding off that they will be the solution to the country’s recurring predicament of tight electricity supply and protracted service interruptions – but this is a formula yet to be tested tangibly by the Philippine power sector.
Investment flows in the country’s RE projects stagnated for years compared to neighbors in the Asian region; and the equity limit on foreign companies had been partly pointed to as the culprit – that is in addition to troubles of project permitting; delayed implementation of transmission projects for grid integration of RE-generated capacities; and the inconsistent policy on incentives’ availments – including the 10-percent tax rate promised to the RE investors.