Renewable energy law to woo investors in the Philippines

Perks like tax breaks to boost self-sufficiency in the Philippines
Alastair McIndoe, Straits Times 20 Dec 08;

MANILA: The Philippines has passed legislation to boost investment in renewable energy via tax breaks and other credits. The move is aimed at both helping the country become more energy self-sufficient and at cutting greenhouse gas emissions.

President Gloria Arroyo said the Renewable Energy Act, which she signed into law this week, was the 'first and most comprehensive renewable energy law in South-east Asia'.

Green groups agreed, saying this was a 'landmark' for the region. It took almost 20 years to get the Bill passed.

Greenpeace energy expert Amalie Obusan said she hoped Asean would be able to formulate a 'shared vision' on renewable energy and emissions reductions for its leaders' summit, to be held in Thailand in February.

The package of measures to encourage the production and consumption of renewable energy in the Philippines includes a reduced corporate tax rate of 10per cent - a third of the normal level - for power producers using renewable energy.

The Philippines is the world's second largest producer of geothermal power after the United States.

Energy experts and environmentalists say it is among the countries in the region that have the highest potential for developing renewable energy on a large scale.

'It has a particularly high potential to develop wind and solar power, which currently makes up just 1per cent of the energy mix,' said Ms Obusan.

The new measures require utilities to source a certain amount of their electricity from renewable energy sources.

Mrs Arroyo said the incentives should enable the Philippines to capture a slice of the rising global investments in renewable energy, which totalled US$71 billion (S$103 billion) last year.

'With our Renewable Energy Act, we can move aggressively to develop these resources,' she said.

'This is also timely because it mitigates climate change. All of these efforts are working to improve the overall quality of life of the Filipino people,' she added.

Among Asean's larger economies, Vietnam and the Philippines are the bloc's biggest users of renewable energy, accounting for about 22 per cent of their energy mixes, according to a report by the Asian Institute of Technology, using data from 2000.

Next comes Malaysia with 7 per cent, followed by Indonesia at 5.9 per cent, Thailand at 2.8 per cent, and zero per cent for Singapore.

The Philippines still relies heavily on coal and oil - both imported - for power, which, in roughly equal measure, together account for nearly half of the country's energy mix.

Over the years, the country has managed to substantially reduce its oil imports by developing indigenous oil and gas sources off the western island of Palawan.

Even so, US$7.5billion was spent on oil shipments last year, representing about 5per cent of the country's gross domestic product.

Mrs Arroyo has set a target for the Philippines to become 60percent self-sufficient in energy by the time her terms ends in 2010.

The reported level in 2005 was 56.6 per cent.