The Department of Energy (DOE) has finally issued the Circular that will ultimately open up the renewable energy (RE) sector to 100 percent foreign ownership, primarily for installations in the wind and solar investment space.
Department Circular No. (DC) 2022-11-0034 issued by Energy Secretary Raphael P.M. Lotilla on Tuesday, Nov. 15, essentially amends Section 19 of the implementing rules and regulations (IRR) of Republic Act 9513 or the Renewable Energy Law.
Section 19 in the law’s IRR proved to be an inexpedient barrier to the entry of offshore-based capital in the country’s renewable energy sector because that limited foreign investors’ stake in RE projects to just 40-percent.
Foreign investors typically have the deep pockets needed to advance projects to commercial fruition. They also possess the technical know-how in the installation as well as the operation of such clean energy technologies.
Lotilla reiterated the “impressive amount of interests” that many foreign companies have been sounding off to the Philippine government when it comes to investments in the RE sector. Hence, the modification in the RE Law’s IRR had been the policy response of the State on such whetted appetite for capital infusion.
The issuance of the Circular was based on an earlier legal opinion of the Department of Justice (DOJ) which stipulated that “constitutional foreign ownership restriction on the exploration, development and utilization of natural resources only covers things that are susceptible to appropriation, thus, exclude the sun, the wind and the ocean.”
When it comes to hydropower installations, however, Lotilla stated that “the appropriation of waters direct from the source shall continue to be subject to foreign ownership in the Water Code.”
In particular, Rule 6, Section 19 (B) of the IRR prescribed that “the exploration, development, production and utilization of natural resources shall be under the full control and supervision of the State,” and the majority interest of 60-percent shall be reserved to Filipino entities or citizens.
The Philippines' energy transition agenda heavily leans on RE investments to balance power mix portfolio with the share of RE targeted to be hitting 35-percent by 2030, and 50-percent by 2040.
It remains to be seen though if the IRR amendment to the RE Law would be good enough to entice investments given the fact that investors are still complaining also of other project development issues, primarily on hurdles to project permitting, as well as the slow-paced decision of other government agencies on the availment of investment incentives.