DOE to amend foreign ownership restrictions in RE

MANILA, Philippines — The Department of Energy (DOE) is preparing to amend the implementing rules and regulations (IRR) of the country’s renewable energy (RE) law to boost investments in the sector by easing foreign ownership limit.

The DOE, in a statement yesterday, said foreign ownership restrictions that hamper the flow of investments in the renewable energy sector may now be relaxed following the legal opinion provided by the Department of Justice (DOJ).

The DOJ, in its Opinion 21 series of 2022 released on Sept. 29, stated that exploration, development, and utilization of inexhaustible renewable energy source are not subject to the 60:40 foreign equity limitation as provided under Section 2, Article XII of the Constitution.

The DOE said the opinion accelerates the attainment of President Marcos’ programs to develop the country’s indigenous and renewable energy.

“We express our appreciation to DOJ Secretary Crispin Remulla and his legal team for this favorable development, which will pave the way for the opening of foreign investments in renewable energy development,” Energy Secretary Raphael Lotilla said.

The DOJ opined that the constitutional foreign ownership restriction on the exploration, development, and utilization of natural resources only covers things that are susceptible to appropriation, thus excluding the sun, the wind, and the ocean.

The intent of the constitutional foreign ownership restriction was to preserve for Filipinos limited and exhaustible resources, and as such, the compelling reason behind the foreign ownership restriction finds no application to inexhaustible renewable energy sources, it said.

The DOJ also opined that the phrase “all forces of potential energy” also mentioned in Section 2, Article XII of the Constitution should be interpreted to exclude “kinetic energy.”

Renewable energy sources such as solar, wind, hydro and ocean or tidal energy sources are considered kinetic energy sources, which is “energy in motion,” while potential energy is “energy at rest.”

The DOJ, however, said the IRR of Republic Act 9513 or the Renewable Energy Act of 2008 must be amended to conform to the opinion.

It also said that the “appropriation of waters, direct from the source shall continue to be subject to the foreign ownership restriction in the Water Code,” while “generation plants for the conversion of hydro to power is open to foreign ownership.”

The DOJ, however, said the IRR of Republic Act 9513 must be amended to conform to the opinion.

It also said the “appropriation of waters, direct from the source, for power generation” shall continue to be subject to the foreign ownership restriction in the Water Code.

With the DOJ articulation, Lotilla said the DOE would now address the 40-percent equity limit for foreign investors stipulated in the IRR of the RE Law.

“The DOE is preparing the necessary amendments to Rule 6, Section 19 of the IRR of the RE Law,” he said.

Rule 6, Section 19 (B) of the IRR of the RE Law stipulates that “the exploration, development, production and utilization of natural resources shall be under the full control and supervision of the state.”