Asia’s first, most comprehensive renewable energy law

The government finalized yesterday the implementing rules and regulations for Southeast Asia’s first and most comprehensive Renewable Energy Law.

R.A. 9513 comes almost two years after President Arroyo signed the Biofuels Act, making the Philippines at the forefront of climate change legislation and renewable energy development among Asian countries.

The Renewable Energy Act of 2008 seeks to accelerate the exploration and development of bio–mass, solar, wind, hydro, geother–mal, ocean or tidal current energy and hybrid systems; increase the utilization of renewable energy, encourage renewable energy to prevent or reduce harmful emissions, and establish the infrastructure and mechanism for renewable energy development and use.

The measure, which took almost 20 years to enact, will help mitigate the adverse impact of climate change, enable the country to attain 60 percent energy self-sufficiency by 2010 and capture part of soaring renewable energy investments which in 2007 amounted to $71 billion.

With the law, the Department of Energy hopes to generate 4,000 megawatts of renewable energy capacity in the medium term.

Renewable energy refers to energy resources that have no ceiling on their use and whose renewal is relatively rapid to consider their availability over an indefinite period.

According to President Arroyo, the Philippines is the second-largest geothermal producer in the world, and has the highest wind power potential, a high solar power penetration, and abundant hydro power and biomass resources.

R.A. 9513 was expected to spur investments in the renewable energy sector because of incentives that include a seven-year exemption from income taxes; a corporate income tax of only 10 percent (instead of the present 35 percent) after the first seven years of income tax holiday; duty-free importation of RE machinery, equipment and raw materials and parts; a 100- percent tax credit on value-added tax and customs duties on locally produced equipment; net operating loss carryover for seven years of losses in the first three years of operation; accelerated depreciation; and no tax on carbon credits generated from renewable energy sources.

The only problem is that retail users of renewable energy don’t get enough incentives, except perhaps lower prices of products produced with renewable energy. For instance, importation of solar panels will be tax-free. But buyers of solar panels for home use won’t get tax rebates. In America, the government refunds you part of the cost of buying and installing solar panels in your home.

Some renewable energy sources have untested viability. Take the windmills in Bangui, Ilocos Norte. They look nice. They are efficient. But its producer, Northwind Power Corp., does not make much money delivering electricity to a cooperative in the village.

RE will be good for rural communities which cannot be reached by the larger power generators and distributors. Since most rural communities are poor, RE will help alleviate poverty.

In the government’s rural electrification efforts, on the other hand, renewable energy sources such as solar, micro-hydro, wind and biomass resources are seeing wide-scale use.

Today, households spend as much as 20 percent of their monthly income on electricity. Industries spend anywhere from eight percent to 15 percent of their total manufacturing on electricity. Electricity in the Philippines is the highest-priced in Asia.

Investors in RE will be given a 1.5-percent real estate tax cap on the original cost of equipment and facilities used to produce renewable energy.

The law exempts power generated by RE sources from the 12 percent value-added tax.

Developers also get a rebate of 50 percent on the universal charge for providing renewable energy to far-flung or missionary areas.

Communities hosting renewable energy plants get 80 percent of the government’s share in such projects provided their monthly electricity consumption does not exceed 100 kilowatt hours per month.

“This measure will ultimately ensure a market for renewable energy, and provide a system that will allow consumers to choose green sources of energy in the long term,” said Energy Secretary Angelo Reyes.

Research by the World Wide Fund for Nature (WWF) and UP’s National Engineering Center estimate the country could possibly save more than $2.9 billion from non-importation of fossil fuel by increasing the country’s renewable energy share in generating power to 41 percent.

Based on current DOE projections, renewable energy is foreseen to provide up to 40 percent of the country’s primary energy requirements over the 10-year period beginning in 2003.

Although its share will decline in relation to the total energy supply, RE is estimated to grow at an average annual rate of 2.4 percent in absolute terms. Biomass, micro-hydro, solar and wind will remain being the largest contributors to the total share of renewable energy in the energy mix with an average share of 27.5 percent. –Tony Lopez, Manila Times

biznewsasia@gmail.com