The Department of Energy (DOE) is working on the necessary amendments in the renewable energy (RE) law following the legal opinion of the Department of Justice declaring that RE is not subject to the 60:40 rule on foreign ownership.
“The DOE is preparing the necessary amendments to Rule 6, Section 19 of the IRR of the RE Law,” said DOE Secretary Raphael Lotilla.
According to the DOE, Justice Secretary Crispin Remulla said that 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.
“We believe that the EDU [exploration, development, and utilization] of solar, wind, hydro and ocean or tidal energy should not be subjected to the 40-percent foreign equity limitation under Section 2, Article XII of the Constitution because such energy resources are beyond the ambit of the term ‘natural resources’ as used in the said Section and that the term ‘all forces of potential energy,’ also mentioned in the said Section is to be understood in its technical sense, which necessarily excludes kinetic energy,” stated the legal opinion released last September 29.
RE sources such as solar, wind, hydro and ocean or tidal energy sources are considered kinetic energy sources.
The DOJ noted, however, that the Implementing Rules and Regulations (IRR) of Republic Act No. 9513 must be amended to conform to its opinion. “We, however, emphasize that this opinion is subject to the following qualifications that the executive construction, as provided in Section 19 of the IRR of RA No. 9513, that solar, wind, hydro and ocean or tidal energy is subject to the 40 percent foreign equity limitation, would remain, unless amended.”
The DOJ also noted that the “appropriation of waters, direct from the source, for power generation” shall continue to be subject to the foreign ownership restriction in the Water Code. Generation plants for the conversion of hydro power are open to foreign ownership.
According to the DOE, foreign ownership restrictions hamper the flow of investments in the RE sector. This may now be relaxed following the legal opinion that exploration, development, and utilization of inexhaustible RE source are not subject to the 60:40 foreign equity limitation as provided under Section 2, Article XII of the Constitution.
“We express our appreciation to DOJ Secretary Crispin ‘Boying’ Remulla and his legal team for this favorable development which will pave the way for the opening of foreign investments in renewable energy development,” said Lotilla.
The DOE also said that the opinion accelerates the attainment of President Ferdinand Marcos Jr.’s programs to develop the country’s indigenous and renewable energy.
Rule 6, Section 19 (B) of the IRR of the RE Law stipulates that “the exploration, development, production and utilization of natural resources shall be under the full control and supervision of the State.”
It further states that “the State may directly undertake such activities, or it may enter co-production, joint venture or co-production sharing agreements with Filipino citizens or corporations or associations at least 60 percent of whose capital is owned by Filipinos. Foreign RE developers may also be allowed to undertake RE development through an RE service/operating contract with the government, subject to Article XII, Section 2 of the Philippine Constitution.”
“Private sector investments are central in 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. This will certainly contribute to our target share of renewable energy in the power generation mix of 35 percent by 2030 and 50 percent by 2040,” added Lotilla.