THE Department of Energy’s (DOE) moratorium on endorsements for new coal-fired power plants coupled with performance-based fiscal incentives under the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act will pave the way for attracting investments in renewable energy in the country, Finance Secretary Carlos G. Dominguez III said.
This comes days after Dominguez told the 7th Asia Pacific Climate Change Adaptation Forum that the country aims to shift investments to clean energy and green technologies.
“The Philippines seeks to decrease reliance on carbon-based energy through various policy actions geared toward promoting investments toward greener sources of energy. The DOE recently imposed a moratorium on new coal-fired power plants. This, in conjunction with CREATE’s performance-based fiscal incentives, will steer private capital toward new investments in renewable energy,” he said in a message to finance reporters on Monday.
Moreover, Dominguez said the Finance department’s commitment to strong climate action is already reflected in the provisions of the proposed CREATE bill, certified as urgent by the President.
Specifically, he said the CREATE bill will give “generous, performance-based incentives to investments under the Strategic Investment Priorities Plan, which is set to include the renewable energy sector.” However, he was quick to point out that the sector’s incentives under Republic Act 9513 or Renewable Energy Act of 2008 will be retained.
Apart from this, he said renewable-energy firms stand to benefit from enhanced income tax deduction for research and development as they develop new technologies and innovations.
“The enhanced deduction is designed to boost innovations, such as efficient power generation and improved battery technology,” he said.
The bill, he added, will also provide for “enhanced income tax deduction for training, which will incentivize developing highly skilled workers especially during this transition toward the Fourth Industrial Revolution, which necessarily includes green jobs.”
If passed into law, the CREATE bill will drastically bring down corporate income tax to 25 percent, from 30 percent. On the other hand, it will rationalize incentives, including the 5-percent tax on gross income earned paid in lieu of all local and national taxes, granted to investors.
Last week, the DOE said it will no longer endorse new coal power plant projects after the periodic assessment of the country’s energy requirements revealed the need for the Philippines to shift to a more flexible power mix.
This move, DOE said, will build a more sustainable power system that will be resilient in the face of structural changes in demand and will be flexible enough to accommodate the entry of new, cleaner and indigenous technological innovations.
As of 2019, the Philippines still had the highest renewable-energy share in the total primary energy supply among countries within the Association of Southeast Asian Nations (Asean) region.
The country’s power mix is dominated by coal, being the cheapest among the technologies available. Based on DOE figures, coal’s share in the capacity mix stood at 40.5 percent, followed by oil at 16.8 percent, natural gas at 13.4 percent, and renewable energy at 29.3 percent. The share of coal-fired power could increase to 60.2 percent by 2029 from last year’s 54.6 percent, according to a Fitch Solutions report last September.
Based on DOE data, there are seven indicative coal power plant projects in Luzon. These, if approved by the DOE, will add 8,275 MW of additional capacity.
There are four indicative coal power plant projects in the Visayas and Mindanao, with a total additional capacity of 763 MW.
Image credits: AP/Sam McNeil