Philippines RE Law/Policy

Table of Contents

Last updated Jan. 30, 2024.

Electricity Sector Overview

The Philippines has three electrical grids—for Luzon, the Visayas, and Mindanao, with the highest installed capacity and energy demand in Luzon. 

The distribution component of the Philippines’ electricity sector is fully privatized. Meralco, a major utility, holds 80% of the market and the remaining 20% comprises a few regional players and 100+ electric cooperatives.

As of 2022, the share of the Philippines’ electricity coming from wind was 0.84%, and 1.61% from solar. Data show that the use of renewable sources has been fluctuating while coal use has been steadily increasing. Hydropower makes up the largest portion of the Philippines’ renewable electricity production at 7.78%.

In terms of renewable energy, the Department of Energy (DoE) is responsible for implementing the provisions in the two main RE laws (the Biofuels Act of 2006 and the Renewable Energy Act of 2008) and their respective implementing rules and regulations (IRR). Other government agencies are also involved in technical and procedural activities surrounding RE.

Since 2006, an independent market operator in the Philippines (originally Philippine Electricity Market Corporation (PECM); now Independent Electricity Market Operator of the Philippines (IEMOP)) has operated an electricity market called the Philippine Wholesale Electricity Spot Market (WESM).

On April 20, 2023, the United States Agency for International Development (USAID), the Energy Regulatory Commission (ERC), and the Department of Energy (DoE) launched a web-based monitoring platform for the Competitive Retail Electricity Market (CREM) to promote free and fair competition within the energy sector.

The following charts illustrate the Philippines’ electricity mix:

Note: “Other Renewables” includes waste, geothermal, wave, and tidal.

Source: OurWorldinData.org. Click to access interactive graphs.

References:

Summary of RE Laws/Policies

One of the two major pieces of legislation to promote renewable energy is the Biofuels Act of 2006, which promotes the development and mandates the use of locally-sourced biofuels by giving incentives such as tax exemptions and financial assistance for entities conducting biofuels-related activities such as production, storage, and handling. The biofuel mandates have received criticism noting that due to high production costs and low productivity of existing sugarcane distilleries, the Philippines would remain a net importer of fuel and existing biofuel suppliers would not be able to meet the required demand. Moreover, various social and environmental impacts are associated with biofuel production.

The Renewable Energy Act of 2008 promotes exploration and development of renewable energy sources including biomass, solar, wind, hydro, geothermal, and ocean, in large part through a Feed-in-Tariff (FiT) scheme for renewable energy developers.

The Philippines’ RE laws attempt to compensate for cost barriers to the expansion of RE through various fiscal incentives including income tax holidays, duty free importation of machinery and materials, zero percent VAT, and the Feed-in-Tariff scheme.

In 2022, then-President Duterte signed Executive Order No. 164 to begin the process of including nuclear power in the Philippines’ energy mix.1E.O. 164 Initiating Nuclear Energy Program Issued, Reevaluating Viability of Mothballed Bataan Nuclear Power Plant, Cruz Marcelo & Tenefrancia, https://cruzmarcelo.com/e-o-164-initiating-nuclear-energy-program-issued-reevaluating-viability-of-mothballed-bataan-nuclear-power-plant/.

On January 16, 2024, President Ferdinand “Bongbong” Marcos Jr. signed Administrative Order No. 15 “Directing the Accelerated Implementation of the Government Energy Management Program (GEMP),” to intensify energy conservation efforts.2Palace orders heightened enforcement of Government Energy Management Program, GMA News Online, https://www.gmanetwork.com/news/topstories/nation/894949/palace-orders-heightened-enforcement-of-government-energy-management-program/story/. The GEMP is a program to reduce the use and cost of energy in government agency facilities through energy efficiency.3GEMP: Standard for Energy Efficiency Ratio and Labeling Requirements, Philippine Department of Energy, www.doe.gov.ph/energy-efficiency/gemp.

The Philippines’ RE laws include the following instruments to support RE development:

  • Feed-in tariff, including priority dispatch policy that prioritizes eligible RE resources in the purchase and injection to the grid
  • Renewable portfolio standard/quota
  • Net metering
  • Tradable renewable energy certificates
  • Tendering/auction/public competitive bidding
  • Capital subsidies, grants, rebates
  • Investment or production tax credits
  • Reductions in taxes (e.g. sales, energy, CO2, VAT, or other taxes)
  • Energy production payment
  • Public investment, loans, or grants

Key features of the major RE laws:

Source: The Renewable Energy Policy Debate in the Philippines

Initial Critique of RE Laws/Policies

The Philippines’ FiT scheme has been scrutinized for rates charged to consumers being relatively high compared to other countries and being fixed for 20 years, regardless of the lowering of costs of RE technologies as they become more ubiquitous.4Maureen Ane D. Rosellon, The Renewable Energy Policy Debate in the Philippines, Philippine Institute for Development Studies (2017), https://pidswebs.pids.gov.ph/CDN/PUBLICATIONS/pidsdps1717.pdf. Furthermore, a critical study of the net effect of the policy indicates that it has not led to the expansion of RE and is instead a burden of around 5 billion PhP on society.

The Philippines has a relatively robust policy support framework compared to other countries, including various regulatory policies and fiscal incentives for RE. (Specifics and comparison with selected countries are displayed in the renewable energy support policy checklist sourced from the Rosellon paper, adapted from GIZ and REN21 data, and features are listed below.) However, execution of the policies has been criticized as the government was slow to release implementing rules and regulations (IRRs), for example for Renewable Portfolio Standards and tradable green certificates.

The following factors lead to a lengthy permitting process:

  • Numerous permits and signatures required, including from concerned government officials and IP communities (up to 500-1300 signatures reported to have been required)
  • Varying interpretation of rules among offices of the same line agencies and across different agencies
  • Change of guidelines/policies upon assumption of a new head/officer
  • “First come, first served” policy—e.g. certificates of endorsement for the FiT scheme are only issued until the target is met

The following have been suggested to improve on the implementation of the Philippines’ RE laws:

  • Review FiT rates and validity period to account for the cost reduction of RE technologies over time
  • Review the “doing business” procedures to streamline the permitting process
  • Review the “first come, first served” policy, to safeguard against scenarios where companies that have made high investments in RE plants are not assured of eligibility for the FiT scheme
  • Monitor the impact of the priority dispatch policy on consumer electricity prices
  • Review the biofuels program implementation and formulate realistic targets

References

Policy and Regulatory Barriers to Chinese Investment

This analysis is attributed to colleagues at the Sunrise Project.

  • Short-Term PPAs vs. Long-Term PPAs
    Filipino investors prefer short-term power purchase agreements (PPAs) due to high and rising electricity costs, while foreign investors tend to prefer long-term PPAs for stability.
  • Policy Uncertainty and Inconsistency
    Although the Philippine government has set up incentive policies for renewable energy, these policies and regulations have undergone frequent changes and contain inconsistencies. These factors have led to an erosion of investor confidence and trust in the market.
  • Renewable Energy Act Implementation Deficits
    Implementation details and supporting policies for the Renewable Energy Act of 2008 remain incomplete.
  • Barriers to Foreign Ownership
    Executive Order No. 175, which was promulgated in 2022, allows foreign investors to establish enterprises with 100% ownership in industries not listed in the negative list. Although this allows for foreign ownership in renewable energy generation and most manufacturing, some areas remain restricted including water usage, energy transmission, and port operations.
  • Land Use Restrictions
    Acquiring private land involves complexities with multiple stakeholders and unclear land rights. Acquiring public land involves obtaining a Special Land Use Permit (SLUP), which is valid for three years and convertible to a Forest Land Agreement (FLAg) upon expiration. FLAg applicants need to be majority-owned by Filipinos.
  • Complex and Cumbersome Approval Processes
    Approval processes for RE projects involve multiple government departments and agencies, as well as consultations with local communities and environmental organizations. These result in higher costs and uncertainty.
  • Lack of Fiscal Incentives
    The existing tax incentives and subsidies are still insufficient to attract significant investment.

Approval Process for RE Projects

The following bullet points briefly list the steps in obtaining approvals for renewable energy projects in the Philippines.

  1. Project planning, feasibility studies, site selection, and land acquisition
  2. Department of Energy (DoE) certification, environmental impact assessment (EIA), Environmental Compliance Certificate (ECC), and National Grid Corporation of the Philippines (NGCP) approval
  3. Local Government Unit (LGU) permits, construction permits, business licenses, community consultations, and social licenses
  4. Financing and investment approvals; Engineering, Procurement, and Construction (EPC) contracts; and construction and operation permits, which include safety inspections and compliance verifications

Renewable Energy Targets

Renewable Energy Laws/Policies

General Laws

  • Republic Act No. 9513 aka “Renewable Energy Act of 2008”
    • HTML Text / Summary/Info / Backup PDF
    • Intended to promote, accelerate, and enable renewable energy development.
    • Promoted energy sources include biomass, solar, wind, geothermal, ocean energy, and hydropower.
    • Corresponding circular: Department Circular No. DC2015-07-0014
      • PDF / Backup PDF
      • “Prescribing the policy for maintaining the share of renewable energy (RE) resources in the country’s installed capacity through the wholistic implementation of the pertinent provisions of Republic Act No. 9513 or the RE Act on Feed-In Tariff (FIT) System, priority and must dispatch, among others”
    • Related Implementing Rules and Regulations:
      • Implementing Rules and Regulations for RA 9513 (2009)
      • Rules and Guidelines for Renewable Portfolio Standards for On-Grid Areas (2017)
  • Biofuels Act of 2006 (Republic Act No. 9367)

General Policies

  • The Philippines’ NDCs
  • Philippine Energy Plan 2020-2040
  • Accelerating Household Electrification through Regulated Solar Home Systems
  • Feed-In Tariff for Electricity Generated from Biomass, Ocean, Run-of-River Hydropower, Solar and Wind Energy Resources
  • Investment Priorities Plan (IPP)
  • New and Renewable Energy Programme (Exec. Order 462)
  • National Renewable Energy Program 2020-2040

Incentives for Renewable Energy

Nuclear Power

Energy Efficiency

  • Republic Act No. 11285 aka “Energy Efficiency and Conservation Act”
  • Administrative Order No. 110
    • PDF / Backup PDF
    • Amended by Administrative Order No. 110-A
    • Directing the Institutionalization of a Government Energy Management Program (GEMP)
    • GEMP is a program aimed at promoting conservation and efficient use of energy in government agency facilities
  • Administrative Order No. 126, s. 2005
    • HTML Text / Backup PDF
    • Strengthening Measures to Address the Extraordinary Increase in World Oil Prices, Directing the Enhanced Implementation of the Government’s Energy Conservation Program, and for Other Purposes
  • Administrative Order No. 15, s. 2024
  • Administrative Order No. 183
    • PDF / Backup PDF
    • Directing the Use of Energy Efficient Lighting/Lighting Systems (EELs) in Government Facilities (Palit-Ilaw Program)
  • DOE Circular 93-03-05: Energy Consumption Monitoring
  • DOE Circular 2008-09-0004: ESCO Accreditation System
  • The Philippine Energy Efficiency and Conservation Roadmap 2023-2040

Contextual Laws

  • Republic Act No. 9136 aka “Electric Power Industry Reform Act of 2001”
    • PDF / Backup PDF
    • Intended to ensure and accelerate the total electrification of the country, among other related policies.
  • Republic Act No. 9729 (RA 9729) and its Implementing Rules and Regulations (IRR, Administrative Order No. 2010-01)
  • Republic Act No. 11646 aka “Microgrid Systems Act”
    • Info / PDF / HTML Version
    • Promotes microgrid development in unserved/underserved areas.
    • States that “low cost, indigenous, renewable, and environment-friendly sources of energy” will be prioritized.
  • Republic Act No. 7638 aka “Department of Energy Act of 1992”
    • HTML Text / Backup PDF
    • The act that formed the Philippine Department of Energy and stipulates its structure and functions.

Encouragement/Facilitation for MSMEs in RE

References