Out-Law News 1 min. read

Philippines DOJ: foreigners should be able to own 100% of renewable energy projects

Foreign investors in renewable energy projects in the Philippines should be able to hold 100% ownership of a project and not be restricted to a 40% share, according to the Philippines Department of Justice (DOJ).

The DOJ has issued an opinion on what it believes is the meaning of the reference to “all forces of potential energy” in the Philippine Constitution, according to a report. The DOJ said this phrase should not include “kinetic energy”. Accordingly, the restrictions in the Constitution on foreign ownership of “potential energy” should not include solar, wind, hydro and ocean or tidal energy sources, which are kinetic energy. The DOJ said the country’s department of energy (DOE) must change relevant laws to put this opinion into effect.

Energy transition and climate change expert John Yeap of Pinsent Masons said: “The announcement by the DOJ is to be welcomed. The Republic of Philippines has an aggressive renewable energy programme and if the DOJ opinion is implemented through the required regulatory measures that will open up the renewable sector to a far wider pool of capital, which will greatly assist the nation’s net zero ambitions.”

“The distinction being drawn between potential energy and kinetic energy not only has merits in physics but should also be consistent with the intent of constitutional drafters at the time the Constitution was drawn up. After all, at that time, the use of kinetic energy for power production was generally limited to hydro, and the wide scale commercialisation of wind and solar energy for power production across Asia was still some years away. Unlike potential energy, which is finite and limited to the resource in the ground, kinetic energy from solar irradiation and wind is unlimited,” he said.

Under the existing rules, foreign developers can only develop renewable energy by entering into service or operating contracts with the government and their ownership share is capped at 40%.

In July, the Philippines’ DOE published its national renewable energy programme (NREP) for the period 2020 to 2040, setting out its goals of 35% renewable energy generation by 2030 and 50% by 2040.

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