Following the removal of foreign ownership cap on renewable energy (RE) investments, Senator Sherwin Gatchalian is upbeat more investors are coming in to boost the local RE industry.
Gatchalian foresees investments in RE to “rise substantially” in the wake of the Department of Justice’s (DOJ) opinion affirming natural resources including solar, wind, hydro and ocean or tidal energies are “not covered by the constitutional limitation on foreign ownership.”
The senator is upbeat that junking the 40 percent foreign ownership cap is “a game changer,” Gatchalian predicted, “This will set the country on the right path of creating an investment climate that would enhance the establishment of more renewable energy facilities amid global efforts to address climate change and ongoing conflict between Russia and Ukraine.”
The senator expects that, “Wider adoption of RE in the country could progressively bring down power rates for the benefit of consumers and create more jobs within the communities concerned.”
Sitting as vice chairman of the Senate Committee on Energy, Gatchalian views the absence of foreign ownership limitation on RE facilities “augurs well” with a recent decision of the Department of Energy (DOE) to increase the percentage of RE utilization for on-grid areas from 1 percent to 2.52 percent and in line with DOE’s vision of powering up communities with clean and sustainable energy systems, noting that the increase of 2.52 percent shall take effect in 2023.
Gatchalian added that the increase would also help the country lessen its dependence on energy derived from fossil fuel and coal-based power plants.
To date, a total of 998 RE contracts, generating around P270 billion of investments have been approved by DOE. Such contracts have an aggregate installed capacity of 5,460 megawatts (MW) and a potential capacity of 61,613.81 MW.
According to Gatchalian, any increase in the use of RE could also enhance the development of other RE sources that are yet to be harnessed in the country such as the ocean or tidal energy, green hydrogen, off-shore wind, among others.
“Ang anumang mapagkukunan ng enerhiya sa loob ng bansa ay magiging malaking tulong sa mga consumers at sa ating ekonomiya. Ito ay lalong kritikal ngayong nakakaranas tayo ng pabago-bagong presyo ng enerhiya na maaaring makapigil sa paglago ng ating ekonomiya,” Gatchalian added.
DOE earlier said it is working on the necessary amendments in the RE law following the legal opinion of the justice department 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, DOJ 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 40percent 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 pants for the conversion of hydropower is open to foreign ownership. -30-