August 5, 2019 | 10:39 pm
THE energy-efficiency industry is
calling for incentives being considered by the Board of Investments (BoI) to be
incorporated into the implementing rules and regulations (IRR) of the energy
efficiency and conservation law.
Noting the need for predictability
of returns for major investments, the Philippine Energy Efficiency Alliance,
Inc. or PE2 said: “This much-needed predictability would certainly be enhanced
if the [Board of Investments] guidelines were fully and explicitly incorporated
in Section 57 of the IRR.”
PE2 was commenting on the draft
rules being prepared by the Department of Energy (DoE).
PE2 President Alexander Ablaza said
the group’s comments were based on the review of the needs of the industry and
the experiences of members worldwide. PE2 is a non-stock, non-profit
organization of energy efficiency market stakeholders.
The comments are in response for a
request for comment from the DoE, which is currently drafting the IRR of
Republic Act 11285, An Act Institutionalizing Energy Efficiency and
Conservation, Enhancing the Efficient Use of Energy, and Granting Incentives to
Energy Efficiency and Conservation Projects.
Mr. Ablaza made reference to the
draft guidelines of the BoI, which he said was shared to the DoE and the
association last month.
Under the BoI guidelines, energy
efficiency and conservation (EE&C) projects that will involve installation
of new equipment, systems or components in existing plants or facilities, and
will realize substantial energy savings based on a third-party energy audit may
qualify for registration as new projects.
They will be entitled to capital
equipment incentives and income tax holidays. The third-party energy audit is
to be done by the DoE or DoE-certified parties.
The proposed BoI guidelines offer
various levels of income tax holiday to self-financed or third-party EE&C
project developers depending on their energy savings. For instance, a facility
by a third-party project developer with more than 15% energy savings or has
more than 1,000,000 kilowatt-hour energy savings in a year is entitled to a
100% tax holiday.
“Investors of long-term equity
capital in portfolios of several energy efficiency projects would however need
more certainty in the commercial returns ensured by the predictability of cash
flows after fiscal incentives over the initial time horizon of at least 10
years,” PE2 said.
“Otherwise, the BoI guidelines
remain vulnerable to internal periodic reviews and revisions, which may serve
to prevent the investments from attaining the commercial returns initially
targeted when the investment decision was made,” it added.
PE2 also said the two government
agencies would need to explicitly indicate a specific timeline to complete the
DoE endorsement and BoI registration process, consistent with the timelines
prescribed by Executive Order No. 30 (EO 30) and the Anti-Red Tape Act (ARTA).
EO 30 created a council that
certifies so-called Energy Projects of National Significance (EPNS). These
projects enjoy a streamlined approval of permits and licenses within a maximum
period of 30 days. ARTA sets the registration process at 20 days.
“The improved guidelines, are now
more realistic and responsive to the needs of the economy to mobilize local and
foreign investments in energy efficiency projects. The coverage of more energy
efficiency measures across more end-use sectors were clearly broadened by the
latest guidelines. Instituting reasonable energy savings thresholds shall also
help preserve the developmental intent of energy efficiency projects,” PE2
said. — Victor V. Saulon
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