Foreign investors who wish to fully own renewable energy projects in the Philippines are now free to do so, as the Department of Energy (DOE) has revised the manual governing renewable energy investments.
The DOE has issued Departmental Circular No. 2022-11-0034, which prescribes new Implementing Rules and Regulations (IRR) for Republic Act (RA) No. 9513, also known as the 2008 Act. on renewable energies (RE).
The new circular, signed by Energy Secretary Raphael Lotilla on November 15, amended Article 19 of the previous IRR. This effectively removed the foreign ownership restriction on companies aiming to exploit renewable energy sources which had previously been capped at 40%.
The new DOE circular takes effect 15 days after it is published in two general journals and filed with the University of the Philippines Law Center – National Administrative Registry Office.
“The country has vast potential in the development of renewable energies. Now that the restriction on foreign capital in the renewable energy sector has been eased, we expect an increase in investment in the sector, which would certainly contribute to our economy, provide jobs for our people and help achieve the objective increase in renewables in the power generation mix. 35% by 2030 and 50% by 2040,” Lotilla said in a statement.
“With the impressive amount of interest the Department of Energy has received from local and foreign investors in renewable energy development, particularly in offshore wind potential, the state can now directly undertake exploration , development, production and utilization of renewable resources or it may enter into RE service or operation contracts with Filipino and/or foreign citizens or Filipino and/or foreign corporations or associations,” a- he added.
Legal basis
This decision follows the legal opinion provided by the Ministry of Justice that the exploration, development and use of natural resources, as stipulated in Section 2, Article XII of the 1987 Constitution, covers only things capable of appropriation, thus excluding the sun, the wind and the ocean.
All energy forces, he said, should be interpreted to exclude “kinetic energy” or energy in motion.
Kinetic energy
As the DOJ explains, RE resources, including solar, wind, hydro, and ocean or tidal energy, are considered kinetic energy, while potential energy is referred to as rest energy.
But before foreign entities could take all the cake, he had advised the DOE to modify the IRR of RA 9513.
Lotilla pointed out that the appropriation of waters directly from the source would continue to be subject to the foreign ownership restriction in the Water Code.
In addition, Rule 6, Section 19(B) of the IRR of the RE Act states that “the exploration, development, production and use of natural resources shall be under the control and supervision of the state”.
He added that the state may “undertake such activities directly, or it may enter into co-production, joint-venture or co-production sharing agreements with Philippine citizens or corporations or associations in which at least 60% of the capital is held by Filipinos”. Foreign RE developers may also be permitted to undertake RE development through a RE service/operation contract with the government, subject to Article XII, Section 2 of the Constitution filipina.
The renewable energy sector has so far generated 270.8 million pesos of investment in June this year, with solar power accounting for 130.4 million pesos of the total.
A total of 998 renewable energy contracts with a combined installed capacity of 5,460.59 megawatts (MW) and potential capacity of 61,613.81 MW were also awarded to multiple parties.
To this day, coal-fired power plants remain the country’s main source of energy.
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