The Philippines government has concluded the rules and regulations for renewable energy law, The Renewable Energy Act of 2008 (R.A. 9513). The new law seeks to improve the exploration and development of biomass, solar, wind, hydro, geothermal, ocean or tidal current energy and hybrid systems. These laws will also support to increase the renewable energy utilization, to reduce harmful emissions, and form the infrastructure and mechanism for renewable energy development and use.
The R.A. 9513 took around two years to finalize after President Arroyo signed the Biofuels Act, and took almost 20 years to enact.
With this new law, the Philippines Department of Energy (DOE) expects to generate 4,000 megawatts (MW) of renewable energy (RE) capacity in the medium term.
DOE expects that renewable energy is foreseen to provide up to 40% of the country’s primary energy requirements over the 10-year period beginning in 2003.
The law will assist reduce the unfavorable impact of climate change and will allow the country to achieve 60% energy self-sufficiency by 2010 and capture part of renewable energy investments which in 2007 amounted to $71 billion.
President Arroyo has quoted that the Philippines is the second-largest geothermal producer in the world, and has the highest wind power potential, a high solar power penetration, and many hydro power and biomass resources.
R.A. 9513 is expected to improve investments in the renewable energy sector due to incentives that include a seven-year exemption from income taxes; a corporate income tax of only 10% (instead of the present 35%) after the first seven years of income tax holiday; duty-free importation of RE machinery, equipment and raw materials and parts; a 100-% 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.
Currently, households spend as much as 20% of their monthly income on electricity. Industries spend anywhere from 8% to 15% of their total manufacturing on electricity.
Investors in RE will be given a 1.5% 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% value-added tax.
The developers will also get a rebate of 50% on the universal charge for providing renewable energy to far-flung or missionary areas.
The communities hosting renewable energy plants get 80% of the government’s share in such projects provided their monthly electricity consumption does not exceed 100 kilowatt hours per month.
The problem under this law is that retail users of renewable energy do not get enough incentives, except perhaps lower prices of products produced with renewable energy.
“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.
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% 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%.