Renewable Energy Act of 2008

Case Overview and Summary

Summary of Republic Act No. 9513 (Renewable Energy Act of 2008):

Declaration of Policies (Section 2):
- Accelerate exploration and development of renewable energy (RE) resources to achieve energy self-reliance and reduce dependence on fossil fuels.
- Increase utilization of RE by promoting its efficient and cost-effective commercial application.
- Encourage development and utilization of RE resources to prevent harmful emissions.
- Establish necessary infrastructure and mechanism to carry out the Act's mandates.

Renewable Portfolio Standard (RPS) (Section 6):
- The National Renewable Energy Board (NREB) shall set the minimum percentage of generation from eligible RE resources and determine to which sector RPS shall be imposed on a per grid basis within one year from the Act's effectivity.

Feed-In Tariff System (Section 7):
- A feed-in tariff system for electricity produced from wind, solar, ocean, run-of-river hydropower, and biomass is mandated.
- The Energy Regulatory Commission (ERC), in consultation with NREB, shall formulate and promulgate feed-in tariff system rules within one year from the Act's effectivity.

Renewable Energy Market (REM) (Section 8):
- The Department of Energy (DOE) shall establish the REM, and direct the Philippine Electricity Market Corporation (PEMC) to implement changes to the Wholesale Electricity Spot Market (WESM) Rules to incorporate the rules specific to the operation of the REM.
- PEMC shall establish a Renewable Energy Registrar within one year from the Act's effectivity and issue, keep, and verify RE Certificates corresponding to energy generated from eligible RE facilities.

Green Energy Option (Section 9):
- The DOE shall establish a Green Energy Option program which provides end-users the option to choose RE resources as their sources of energy.
- End-users may directly contract from RE facilities their energy requirements distributed through their respective distribution utilities.

Net-Metering for Renewable Energy (Section 10):
- Distribution utilities shall enter into net-metering agreements with qualified end-users who will be installing RE systems.
- The ERC, in consultation with NREB and electric power industry participants, shall establish net-metering interconnection standards and pricing methodology within one year from the Act's effectivity.

Transmission and Distribution System Development (Section 11):
- The National Transmission Corporation (TRANSCO) or its successors-in-interest or its buyer/concessionaire and all Distribution Utilities (DUs) shall include the required connection facilities for RE-based power facilities in the Transmission and Distribution Development Plans.

Off-Grid Areas (Section 12):
- Within one year from the Act's effectivity, the National Power Corporation-Small Power Utilities Group (NPC-SPUG) or its successors-in-interest and/or qualified third parties in off-grid areas shall source a minimum percentage of its total annual generation from available RE resources in the area concerned, as determined by the DOE.

Government Share (Section 13):
- The government share on existing and new RE development projects shall be equal to 1% of the gross income of RE resource developers, except for indigenous geothermal energy, which shall be 1.5% of gross income.
- The government waives its share from the proceeds of micro-scale projects for communal purposes and non-commercial operations not greater than 100 kilowatts.

Environmental Compliance (Section 14):
- All RE explorations, development, utilization, and RE systems operations shall be conducted in accordance with existing environmental regulations prescribed by the Department of Environment and Natural Resources (DENR) and/or any other concerned government agency.

Incentives for Renewable Energy Projects and Activities (Section 15):
- RE developers of RE facilities shall be entitled to the following incentives:
- Income Tax Holiday (ITH) for the first seven years of commercial operations (Section 15(a)).
- Duty-free importation of RE machinery, equipment, and materials within the first ten years upon issuance of certification (Section 15(b)).
- Special Realty Tax Rates on equipment and machinery not exceeding 1.5% of their original cost less accumulated normal depreciation or net book value (Section 15(c)).
- Net Operating Loss Carry-Over (NOLCO) during the first three years from the start of commercial operation (Section 15(d)).
- Corporate Tax Rate of 10% on net taxable income after seven years of ITH (Section 15(e)).
- Accelerated Depreciation if the project fails to receive an ITH before full operation (Section 15(f)).
- Zero Percent Value-Added Tax Rate on the sale of fuel or power generated from RE sources and on purchases of local supply of goods, properties, and services needed for the development, construction, and installation of plant facilities (Section 15(g)).
- Cash Incentive of 50% of the universal charge for power needed to service missionary areas where the RE developer operates (Section 15(h)).
- Tax Exemption of Carbon Credits (Section 15(i)).
- Tax Credit on Domestic Capital Equipment and Services equivalent to 100% of the value-added tax and custom duties that would have been paid on the RE machinery, equipment, materials, and parts had these items been imported (Section 15(j)).

Environmental Compliance Certificate (ECC) (Section 16):
- It would be sufficient for the RE developer to secure the ECC from the corresponding regional office of the DENR.

Exemption from the Universal Charge (Section 17):
- Power and electricity generated through the RES for the generator's own consumption and/or for free distribution in off-grid areas shall be exempted from the payment of the universal charge.

Payment of Transmission Charges (Section 18):
- A registered RE developer producing power and electricity from an intermittent RE resource may opt to pay the transmission and wheeling charges of TRANSCO or its successors-in-interest on a per kilowatt-hour basis at a cost equivalent to the average per kilowatt-hour rate of all other electricity transmitted through the grid.

Hybrid and Cogeneration Systems (Section 19):
- The tax exemptions and/or incentives shall apply only to the equipment, machinery, and/or devices utilizing RE resources.

Intermittent RE Resources (Section 20):
- TRANSCO or its successors-in-interest, in consultation with stakeholders, shall determine the maximum penetration limit of the Intermittent RE-based power plants to the Grid.
- Qualified and registered RE generating units with intermittent RE resources shall be considered "must dispatch" based on available energy and shall enjoy the benefit of priority dispatch.

Incentives for RE Commercialization (Section 21):
- All manufacturers, fabricators, and suppliers of locally-produced RE equipment and components duly recognized and accredited by the DOE shall be entitled to the following incentives:
- Tax and Duty-free Importation of Components, Parts, and Materials (Section 21(a)).
- Tax Credit on Domestic Capital Components, Parts, and Materials (Section 21(b)).
- Income Tax Holiday and Exemption for seven years starting from the date of recognition/accreditation (Section 21(c)).
- Zero-rated value-added tax transactions (Section 21(d)).

Incentives for Farmers Engaged in the Plantation of Biomass Resources (Section 22):
- For a period of ten years after the Act's effectivity, all individuals and entities engaged in the plantation of crops and trees used as biomass resources shall be entitled to duty-free importation and be exempted from Value-Added Tax (VAT) on all types of agricultural inputs, equipment, and machinery.

Tax Rebate for Purchase of RE Components (Section 23):
- The Department of Finance (DOF), in consultation with the Department of Science and Technology (DOST), DOE, and Department of Trade and Industry (DTI), shall provide rebates for all or part of the tax paid for the purchase of RE equipment for residential, industrial, or community use.

Adoption of Waste-To-Energy Technologies (Section 30):
- The DOE shall encourage the adoption of waste-to-energy facilities such as biogas systems, in coordination with the DENR.

Incentives for RE Host Communities/LGUs (Section 31):
- 80% of the share from royalty and/or government share of RE host communities/LGUs from RE projects and activities shall be used directly to subsidize the electricity consumption of end-users in the RE host communities/LGUs whose monthly consumption does not exceed 100 kWh.

Creation of the National Renewable Energy Board (NREB) (Section 27):
- The NREB is created, composed of representatives from various government agencies and sectors, to evaluate and recommend the mandated RPS, monitor the implementation of the National Renewable Energy Program (NREP), and oversee the utilization of the Renewable Energy Trust Fund (RETF).

Renewable Energy Trust Fund (RETF) (Section 28):
- A RETF is established to enhance the development and greater utilization of RE, to be administered by the DOE as a special account in any of the Government Financial Institutions (GFIs).
- The RETF shall be funded from various sources, including proceeds from emission fees, a percentage of the net annual income of certain government agencies, contributions, grants, and donations.

Financial Assistance Program (Section 29):
- Government financial institutions shall provide preferential financial packages for the development, utilization, and commercialization of RE projects as duly recommended and endorsed by the DOE.

Prohibited Acts and Penalty Clause (Sections 35 and 36):
- Prohibited acts include non-compliance with RPS rules, refusal to undertake net-metering arrangements, falsification or tampering of public documents or official records to avail of incentives, failure to issue the required certificate, and non-compliance with DOE guidelines.
- Penalties include imprisonment of one to five years, or a fine ranging from ₱100,000 to ₱100,000,000, or twice the amount of damages caused or costs avoided for non-compliance, whichever is higher, or both.

Implementing Rules and Regulations (IRR) (Section 33):
- Within six months from the Act's effectivity, the DOE shall, in consultation with the Senate and House Committees on Energy, relevant government agencies, and RE stakeholders, promulgate the IRR of this Act.

Congressional Oversight (Section 34):
- The Joint Congressional Power Commission shall exercise oversight powers over the implementation of this Act.

Appropriations (Section 37):
- Such sums as may be necessary for the initial implementation of this Act shall be taken from the current appropriations of the DOE. Thereafter, the fund necessary to carry out the provisions of this Act shall be included in the annual General Appropriations Act.

Repealing Clause (Section 39):
- Any law, presidential decree or issuance, executive order, letter of instruction, administrative rule or regulation contrary to or inconsistent with the provisions of this Act is hereby repealed, modified, or amended accordingly.

Effectivity Clause (Section 40):
- This Act shall take effect fifteen days after its publication in at least two newspapers of general circulation.