More foreign investments in RE projects expected

THE Philippines’ efforts to replace coal with renewable energy (RE) will likely get a boost after the Department of Justice (DoJ) issued a legal opinion stating that RE investments are not subject to foreign ownership restrictions.

The Department of Energy (DoE) on Sunday said foreign ownership restrictions on investments in the RE sector may be eased after the DoJ’s legal opinion that “exploration, development, and utilization of inexhaustible RE sources are not subjected to the 60:40 foreign equity limitation, as mandated by the Section 2, Article 12 of the 1987 Constitution.”

“This would further facilitate the increased shift to renewable power from coal/oil/petroleum to reduce carbon emissions/footprint and also reduce reliance on imported oil/coal/petroleum,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Mr. Ricafort noted relaxing foreign restrictions would encourage more investments, particularly in the RE sector, which in turn would increase power supply and bring down prices.

In DoJ Opinion No. 21 series of 2022, the department said the Constitutional restriction on foreign ownership of natural resources “only covers things that are susceptible to appropriation, thus excluding the sun, the wind and the ocean.”

China Banking Corp. Chief Economist Domini S. Velasquez, said via Viber that this move will also help increase the foreign direct investment (FDI) into the Philippines

“Opening up renewable energy to greater foreign ownership will help increase FDIs to the Philippines. Supplemented by other liberalization laws, such as the amendments to the Public Service Act and Retail Trade Liberalization Act, among others, we expect to attract more foreign investors to the country,” she said via Viber.

With the DoJ opinion, the DoE will have to revise the implementing rules and regulation (IRR) of the Renewable Energy Act of 2008, which expressly limits foreign investment in RE to 40%.

“The DoE is preparing the necessary amendments to Rule 6, Section 19 of the IRR of the RE Law,” Energy Secretary Raphael P.M. Lotilla said in a statement.

The section states that “the State may directly undertake such activities, or it may enter co-production, joint venture or co-production sharing agreements with Filipino citizens or corporations or associations at least sixty percent (60%) of whose capital is owned by Filipinos. Foreign RE developers may also be allowed to undertake RE development through an RE service/operating contract with the government, subject to Article XII, Section 2 of the Philippine Constitution.”

“Private sector investments are central in achieving our renewable energy targets and vision for the Filipino people and this is a welcome development for our foreign investors to invest in renewable energy production here in our country. This will certainly contribute to our target share of renewable energy in the power generation mix of 35% by 2030 and 50% by 2040,” Mr. Lotilla said.

Pedro H. Maniego, Jr., senior policy advisor of the Manila-based climate and energy policy group Institute for Climate and Sustainable Cities (ICSC), said they support the move to allow 100% ownership of solar, wind, biomass, and ocean energy projects.

“However, we opined that 100% ownership of hydro and geothermal projects should be limited to the power generation component,” Mr. Maniego said.

In its legal opinion, the DoJ said: “Appropriation of waters, direct from the source shall continue to be subject to the foreign ownership restriction in the Water Code. Generation plants for the conversion of hydro to power is open to foreign ownership.” — A.O.Jose