The Department of Energy (DOE) is studying the prospects of opening up the renewable energy (RE) sector to 100% foreign ownership, mainly in the field of solar and wind farm installations, for the manufacturing sector.
Energy Secretary Raphael PM Lotilla raised the possibility as he recognized the need to address the high cost of electricity for the manufacturing sector, whose investment potential has been hampered by the high cost of electricity in the country.
“One way to do this is to open up renewables, for example, to 100% foreign ownership; so that foreign locators can also develop their own energy sources,” Lotilla said.
The energy chief further noted that subsidizing the cost of electricity for the manufacturing sector is not a feasible option given the government’s fiscal situation, therefore, there must be other means of reduce electricity tariffs for industrial users in the country.
In other economies, deployments of solar technology solutions are widely adopted by commercial and industrial (C&I) end users as it has been a way for them to save on costs, especially for energy-intensive industries.
For the Philippines, however, the restrictive foreign ownership policy is seen as a major impediment to capital flow when it comes to renewable energy investments.
Under the Duterte administration, 100% foreign ownership of other renewable energy technologies, primarily geothermal which had been classified as a “mineral resource”, had already been permitted under the Financial and (ALEA), although this comes with a condition that the minimum capital to be channeled by foreign investors must exceed $50 million for integrated exploration of steam resources and installation of power plants.
For hydropower, full foreign ownership is permitted in the power plant component while the use of water resources is still subject to restrictions, in favor of Filipino companies or entities. Biomass technology is also open to 100 percent foreign ownership.
In the area of solar and wind farm developments, however, energy officials are still weighing whether they can come up with a “technical justification” that will allow for a higher percentage of foreign investor stakes in renewable energy projects. .
The DOE and the National Renewable Energy Board (NREB) have previously indicated that any policy adjustments to be made must be consistent with the requirements of the Philippine Constitution relating to the exploration and exploitation of indigenous resources.
It was pointed out that if a technical legal justification could not be established, the only way to expand foreign ownership in these emerging RE technologies would be through constitutional amendments.
In many renewable energy projects in the country, the injection of capital and the deployment of technologies are often supported by foreign investors, but until the limitation of ownership is resolved, it may take more time in the Philippines to regain its appeal on renewable energy investments given the fierce competition it has been facing with Asian neighbors.
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