AS early as the 1970s, government already recognized the need to lessen the country’s dependence on coal and petroleum products, both imported from big producers abroad, and develop its own renewable energy sector.
This awakening was in step with the world’s transition to clean and renewable energy sources — geothermal, hydro, wind, biomass and solar energy — which the Philippines fortunately has an abundant supply of, to make up for its lack of significant deposits of fossil fuels.
The Department of Energy (DOE) has its National Renewable Energy Program which aims to develop small and medium-sized hydropower plants, both run-of-river and reservoir-based, even as it capitalizes on the country’s being the second largest producer of geothermal energy in the world, after the United States, until 2018. The Department’s Power Sector Roadmap for 2021-2040 is being implemented to include generation, transmission, distribution, supply, electricity market, off-grid development, and total electrification.
‘Tax breaks for RE investors will ultimately redound to the benefit of consumers, in the form of lower electricity rates, stable supply, increased economic activity and job generation.’
The recent power outages in Western Visayas, particularly in Panay island towns and Iloilo City, point to the fact that our system of power generation and distribution is prone to failure, with plant shutdowns and lack of supply still bedeviling the industry. While we have developed operational wind farms in Bangui, Ilocos Norte and Pililla, Rizal and are developing two wind projects in Laguna, and solar energy facilities in Central Luzon, we have not really improved the current energy mix which highly favors coal, natural gas, and oil, accounting for 74 percent of the country’s total electrical energy needs. This is partly because renewable energy is still costly to produce in the Philippines, and we have to depend on foreign experts and technology to harness our natural sources.
The Bangko Sentral ng Pilipinas and the Board of Investments (BOI) have recently come up with policies that will promote clean and sustainable energy projects among private firms, which elicited praises from the DOE, which underscored the vital role of a whole-of-government approach to fast-track the country’s energy transition.
Energy Secretary Raphael Lotilla welcomed the move of the Bangko Sentral ng Pilipinas (BSP) to expand financing for green projects, which include transition financing for decarbonization. The BSP has increased the single borrower’s limit for green loans by 15 percent and the gradual reduction of applicable reserve requirement for green bonds from 3 percent to zero over two years.
Renewable energy projects “would entail big investments where private sector funds, including equity investments, green bonds or loans would be needed. We are therefore pleased with this development noting that clean energy investments over the next decade will be carried out by the private developers,” Lotilla said.
According to BSP, renewable energy, energy efficiency and green building projects are among the top five green projects supported by universal and commercial banks in the country.
Lotilla also lauded the new BOI policy of giving more incentives to registered projects that will build their renewable energy (RE) facilities to supply their power requirement. BOI’s Memorandum Circular 2023-006 provides income tax holiday and duty exemption on the importation of capital equipment, raw materials, spare parts or accessories.
Tax breaks for RE investors will ultimately redound to the benefit of consumers, in the form of lower electricity rates, stable supply, increased economic activity and job generation. Lotilla noted that these recent policies of the BSP and BOI show the government works harmoniously to move forward the country’s energy transition program.
The government targets RE share in the energy mix to reach 35 percent by 2030 and to 50 percent by 2040 — which is really a long way to go — but with a number of government agencies and private sector institutions cooperating, this goal which is contained in the Philippine Energy Transition Program has a better chance of success.
