'Green' energy open to foreigners – DoJ

By Franco Jose C. Baroña, Manila Times

October 4, 2022

FOREIGNERS can own 100 percent of renewable or "green" energy projects in the Philippines, the Department of Justice (DoJ) said.

In a legal opinion it issued on September 29, the DoJ said the renewable energy sector is not covered by the 60-40 ownership rule in Section 2, Article XII of the Constitution.

It said, "the Constitutional foreign ownership restriction on the exploration, development and utilization of natural resources only covers things that are susceptible to appropriation, thus excluding the sun, the wind, and the ocean."

The DoJ said the phrase "all forces of potential energy" in the Constitution should be interpreted to exclude "kinetic energy" such as renewable energy.

Potential energy is defined as "energy at rest," while kinetic energy is "energy in motion." Renewable energy sources like solar, wind, hydro, and ocean or tidal energy are therefore considered kinetic energy sources.

The DoJ said the investment cap only seeks to "preserve for Filipinos limited and exhaustible resources."

The "appropriation of waters, direct from the source, for power generation" should continue to be subject to the foreign ownership restriction, the DoJ said.

Before more foreign investments in renewables are allowed, the Implementing Rules and Regulations (IRR) of the Renewable Energy Act of 2008 (Republic Act 9513) must be amended to conform with the opinion, it said.

The government is planning to increase the share of renewable energy in the power generation mix to 35 percent by 2030, and increase it further to 50 percent by 2040.

Based on Department of Energy (DoE) data, renewables make up 22 percent of the generation mix, with coal having the biggest share at 58 percent.

As of June, a total of 998 renewable energy contracts with a combined installed capacity of 5,460.59 megawatts and a potential capacity of 61,613.81 MW have been awarded by the DoE.

Under current rules, foreign firms may go into renewable energy development through a service or operating contract with the government, but they cannot own more than 40 percent of a project.

In a statement, Energy Secretary Raphael Lotilla said the DoE is already revising the IRR of RA 9513 which places the exploration, development, production and utilization of natural resources under the government's full control and supervision.

"Private sector investments are central [to] 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," Lotilla said.

He thanked Justice Secretary Crispin "Boying" Remulla "for this favorable development which will pave the way for the opening of foreign investments in renewable energy development."

In 2020, the government allowed full foreign ownership of large-scale geothermal projects through financial and technical assistance agreements as long as the minimum investment amounted to $50 million.