By Lenie Lectura -July 19, 2018
THE National Geothermal Association
of the Philippines (NGAP) is asking the government to exempt Republic Act (RA)
9513, or the Renewable Energy Act of 2008 (RE law), from the coverage of the
second package of the Comprehensive Tax Reform Program (TRAIN 2) of the Duterte
administration.
The group, which organized on
Thursday a forum on “Promoting Growth through Policies and Technologies”
in Pasig City, said the Tax Reform for Acceleration and Inclusion (TRAIN)
2 runs counter to the purpose of the RE law to accelerate the development
of RE resources, such as geothermal energy.
“TRAIN 2 will further decrease the
competitiveness of the Philippines in attracting investors in geothermal energy
due to the current proposal to apply a single menu of incentives that may not
be responsive to the needs of the industry,” it said.
For the past 30 years, the
Philippines has been recognized as the second-highest installed geothermal
capacity in the world. Last year the country’s standing dropped to third after
Indonesia took over the second spot.
NGAP Counsel Fernando Penarrovo said
reclaiming the second spot will be a tougher challenge if TRAIN 2, as proposed,
is passed by Congress. He cited the risks involved in geothermal energy
development, with the high costs and uncertainties of exploratory drilling and
associated works, plus the long gestation period from exploration to
commissioning, making it difficult to attract and retain capable investors.
The current cost of drilling and
development is estimated to be in the range of $5,000 per kilowatt (kW). Fiscal
incentives are key in most investment decisions since they lower the cost of
doing business.
“If TRAIN 2 is implemented, the
fiscal regime of the geothermal industry will no longer be attractive. That’s
why we want to lobby before Congress to exempt the RE law from the TRAIN law,”
said Pennarovo.
NGAP President Noel Salonga, who is
also the vice president of the Energy Development Corp. (EDC),
said geothermal players seek support from the government to develop the
remaining geothermal fields in the country.
EDC is the country’s
largest geothermal producer in the country. It operates five geothermal
plants in Leyte. These are the 112.5-megawatt Tongonan, the 125-MW Upper
Mahiao, 232.5-MW Malitbog and the 180-MW Mahanagdong power plants, and the
51-MW optimization plants.
In Negros Island the EDC operates
two geothermal steam field projects and two geothermal plants under Bacman
Geothermal Inc. These are the two units of Panlipinon geothermal facility
(112.5 MW and 60 MW) and the 49.4-MW Nasulo geothermal plant.
The EDC also operates one geothermal
steam field project in Mindanao, which delivers steam to two EDC-owned
geothermal power plants on Mount Apo, which have capacities of 52 MW and 54 MW.
“The remaining geothermal fields are
difficult to develop because it will require deeper drilling. A lot of efforts
are now focused on technology development to bring down the cost of materials
and the drilling expenses. We need more incentives than ever. We have
identified 1,500 MW more but the areas are smaller, deeper and challenged with
technology,” Salonga said.
NGAP urged Congress to reconsider
the blanket approval in rationalizing the fiscal incentives and exempt the RE
law from the coverage of TRAIN 2, since the survival and growth of the
geothermal industry depends on this landmark legislation. NGAP proposes a
targeted approach in laying the foundation for future incentives across
industries.
The group pointed out that a sudden
change in the existing fiscal incentives regime for the geothermal-energy
industry will affect investor confidence since investors seek consistency,
predictability and transparency.
“While NGAP acknowledges TRAIN 2 as
a needed reform to manage tax leakages, the government should strike a balance
between revenue generation and the long-term outlook for the development of a
vital industry that powers the economy.
The success of geothermal energy
development is intricately linked with effective government energy policies,
predictable rules and regulations, simple and coordinated permitting process,
and a competitive set of incentives that promote geothermal investments,” the
group added.
House Energy Committee Chairman Rep.
Lord Allan Jay Velasco of Marinduque said during the forum that he will study
NGAP’s proposal. “All suggestions are welcome. We are talking to experts.
I want NGAP to explain further why the RE law should be exempted. But I told
them that we will look into it,” the lawmaker said.
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