Philippines urged to lift foreign equity limit in renewable energy sector

MANILA, Philippines — Foreign investors are asking the government to lift the foreign ownership limit in renewable energy projects to attract more investments into the sector.

“The good news is there is strong interest from foreign investors to enter and invest in renewable energy projects here in the Philippines, provided that we are able to increase the equity or ownership for foreigners,” Energy Secretary Raphael Lotilla said.

“So those, for example, who has experience in offshore wind like Denmark and Norway, they’re interest here is very strong. Several private companies have also indicated their interest,” Lotilla said.

The Department of Energy (DOE) 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 agency recently received a favorable development through a legal opinion provided by the DOJ, which it said would pave the way for the opening of foreign investments in renewable energy.

The DOJ said 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 DOJ, however, said the implementing rules and regulations (IRR) of Republic Act 9513 or the Renewable Energy Act of 2008 must be amended to conform to the opinion.

To address the 40-percent equity limit for foreign investors stipulated in the IRR, the DOE is preparing the necessary amendments to Rule 6, Section 19 of the IRR of the RE Law.

To further entice foreign investors in the country’s renewable energy space, Lotilla said the government must ensure the availability of adequate transmission lines to bring the renewable energy from where it is plentiful to area where it is needed.

“We are listening to the needs of the investors because we don’t want renewable energy projects to be built and then, as what happened in Negros, they cannot be used at all. It is wasted because there are no transmission lines to transmit the power out of Negros island,” Lotilla said.

The DOE has recently made significant steps forward in the country’s push for the development of renewable energy.

The agency has made all qualified and registered renewable energy generating plants as preferential dispatch in the wholesale electricity spot market (WESM), a move that is expected to accelerate the development and utilization of indigenous renewable energy resources.

This means that all qualified and registered generating units utilizing renewable energy sources may now enjoy the option of preferential dispatch in the WESM, a platform for centralized trading of electricity.

“Giving preferential dispatch to renewable energy-generating plants will also encourage investments for additional capacities in geothermal, biomass or impounding hydroelectric power plants because of guaranteed dispatch in the grid at their full available capacities under merchant pricing, allowing recovery of investments,” Lotilla said.

The DOE has also raised the percentage of the utilization of renewable energy for on-grid areas from one percent to 2.52 percent as part of the government’s goal of transitioning toward a sustainable and clean energy future.

The hike in the country’s renewable portfolio standards (RPS) requirement is expected to attract more new investments as it creates a larger market for the renewable energy industry.

The RPS is a policy mechanism under Republic Act 9513 or the Renewable Energy Act of 2008 designed to increase the use of renewable energy sources for electricity generation.

It requires electricity suppliers, particularly the distribution utilities, to source or produce a specified fraction of their power supply from eligible renewable energy resources.

The market-based policy is also a mechanism designed to provide a guaranteed market for renewable energy.

From the current 22 percent, the DOE is targeting to increase renewable energy’s share in the country’s power generation mix to 35 percent by 2030 and 50 percent by 2040.