DOE eyes 100% foreign RE ownership to spur manufacturing investments

by Myrna M. Velasco, Manila Bulletin

The Department of Energy (DOE) is studying prospects of opening up the renewable energy (RE) sector to 100 percent foreign ownership, primarily in the domain of solar and wind farm installations, for the manufacturing sector.

Energy Secretary Raphael P.M. Lotilla raised this possibility as he acknowledged the need to address the high cost of electricity for the manufacturing sector, which investment potential has been hampered by the country’s high cost of electricity.

“One way of doing that is to open up renewable, for example, to 100-percent foreign ownership; so that foreign locators can actually also develop their own sources of power,” said Lotilla.

The energy chief further noted that subsidizing the cost of power for the manufacturing sector is not a feasible option given the fiscal situation of the government, hence, there must be alternative ways to pare electricity rates for industrial users in the country.

In other economies, deployments of solar tech solutions are largely embraced by commercial and industrial (C&I) end-users because that has been a way for them to save on costs – especially for energy-intensive industries.

For the Philippines, however, the restrictive policy on foreign ownership is weighed up as a major hurdle to capital flow when it comes to RE investments.

Under the Duterte administration, 100 percent foreign ownership to other RE technologies, primarily geothermal which had been classified as “mineral resource”, had already been permitted within the ambit of the Financial and Technical Assistance Agreement (FTAA) albeit that came with a condition that the minimum capital to be funneled by foreign investors must top $50 million for integrated steam resource exploration and power plant installation.

For hydro, full foreign ownership is allowed in the power plant component while water resource utilization still has restrictions, in favor of Filipino companies or entities. Biomass technology is also open to a hundred-percent foreign equity.

On the sphere of solar and wind farm developments, however, energy officials are still assessing if they can come up with “technical justification” that will allow higher percentage of foreign investors’ shareholdings in RE projects.

The DOE and the National Renewable Energy Board (NREB) previously indicated that any policy adjustment to be carried out shall be in keeping with the prescriptions of the Philippine Constitution relative to the exploration and exploitation of indigenous resources.

It was emphasized that if a technical legal justification could not be established, the only way to widen foreign ownership in these emerging RE technologies shall be through Constitutional amendments.

In many RE projects in the country, capital injection and technology rollout are often buoyed by foreign investors, but until the ownership limitation is addressed, it may take longer time for the Philippines to win back its allure on RE investments given the stiff competition that it has been facing with Asian neighbors.