Exploring Renewable Energy: Sustainable Solutions for the Philippines

The Philippines, rich in natural resources, is uniquely positioned to become a leader in renewable energy by harnessing its ample sunlight, strong wind currents, and vast geothermal reserves. These advantages allow the Philippines not only to meet its energy demands but also to promote sustainable practices on a global scale.

• What is Renewable Energy?
• What are the Types of Renewable Energy?
• What are the Benefits of Renewable Energy?
• What are the Government Initiatives to Promote Renewable Energy?
• What are the Tax Incentives for Renewable Energy Companies
• How to Register a Renewable Energy Company in The Philippines
• Frequently Asked Questions

What is Renewable Energy

Renewable energy is derived from natural resources that replenish rapidly, including sunlight, wind, water, geothermal heat, and organic matter. Unlike finite fossil fuels such as coal and oil, these energy sources are both sustainable and virtually inexhaustible. By utilizing them, we can produce energy without exhausting resources or causing environmental harm.

What are the Types of Renewable Energy

Understanding the different types of renewable energy is essential to appreciating their role in building a sustainable future. These energy sources, derived from nature’s endless cycles, offer practical solutions to meet global energy demands while protecting our planet. Let’s explore the key forms of renewable energy and their unique benefits.

1. Solar Energy

Solar energy captures sunlight to generate electricity using solar panels or to heat water and air through solar thermal systems. As one of the most abundant and widely accessible renewable energy sources, it provides an endless supply of clean power. From residential rooftop installations to expansive solar farms, the sun serves as a reliable energy resource for various applications.

2. Hydro Power

Hydroelectric power, also known as hydropower, utilizes the energy of flowing water from rivers or controlled dam releases to produce electricity. As one of the earliest renewable energy technologies, it remains a reliable source for stable, large-scale power generation.

The Philippines relies on two primary methods of harnessing hydropower, namely through dams and run-of-river systems. Prominent dams can be spotted in areas such as Bulacan, Benguet, and Laguna. On the other hand, run-of-river plants are widely distributed across Benguet, Bohol, and the Davao Region.

3. Wind Energy

The Philippines hosts seven wind power plants, with four located in Ilocos Norte. Wind turbines in these areas and beyond harness the kinetic energy of moving air to generate electricity. Today, wind farms, both onshore and offshore, are an increasingly familiar sight across the globe. With continuous advancements in technology, wind power has rapidly become one of the most cost-efficient and fastest-growing energy sources worldwide.

4. Geothermal Energy

The immense heat beneath the Earth’s surface serves as a reliable energy source, capable of generating electricity and providing direct heating. Geothermal power plants harness this sustainable resource to produce consistent energy that is unaffected by changes in weather.

The Philippines has significant geothermal potential due to its location within the Pacific Ring of Fire. Currently, the country has notable geothermal plants such as the Mayon Volcano in Albay and Mount Apo in North Cotabato.

5. Biomass Energy

Biomass energy is derived from organic materials like wood, crop residues, and animal manure, which can be burned or processed to generate electricity, heat, or biofuels. When used responsibly, biomass serves as a sustainable and carbon-neutral energy source.

Around 40 biomass plants are in operation across the Philippines, including prominent ones in Negros Occidental, where electricity is generated from sugarcane.

What are the Benefits of Renewable Energy

Renewable energy provides environmental, social, and economic benefits, making it an intelligent and sustainable choice for individuals, businesses, and entire communities. It supports environmental conservation and fosters energy independence and long-term economic growth.

Below are the benefits of utilizing renewable energy:

1. Environmental Benefits

Renewable energy sources such as solar, wind, and hydropower produce electricity without emitting harmful greenhouse gases. This plays a crucial role in combating climate change, enhancing air quality, and preserving ecosystems. Unlike fossil fuels, these resources naturally replenish, helping to reduce pollution and conserve vital natural resources for future generations.

2. Economic Benefits

 Adopting renewable energy can lead to substantial long-term savings on energy bills. With the decreasing costs of technologies like solar panels and financial support through tax incentives or net metering, the initial investment becomes more manageable. Furthermore, the growth of the renewable energy sector generates employment opportunities in fields such as system installation, upkeep, and technological advancements, contributing to stronger local economies.

3. Social Benefits

Renewable energy improves access to electricity, particularly in remote or underserved regions, enabling communities to achieve greater energy self-sufficiency. It also strengthens energy security by decreasing dependence on imported fuels and reducing the risk of supply interruptions. On a societal level, the shift to clean energy fosters healthier living conditions by cutting down on air and water pollution.

By embracing renewables, communities can pave the way for a healthier environment, resilient economies, and a more stable future.

What are the Government Initiatives to Promote Renewable Energy

Governments worldwide, including the Philippines, are enacting laws and policies to promote renewable energy and reduce reliance on fossil fuels. By exploring these government initiatives, we can see how legislative frameworks play a critical role in driving the renewable energy movement forward.

1. Renewable Energy Act of 2008. The Renewable Energy Act of 2008, or RA No. 9513, is a key piece of Philippine legislation aimed at advancing the development, use, and commercialization of renewable energy resources. It offers various incentives for renewable energy projects, such as feed-in tariffs and tax exemptions, while also creating the Renewable Energy Management Bureau to ensure its effective implementation.
2. Feed-In Tariff (FIT) System Mandates. FIT ensures a stable, predetermined rate for electricity produced from renewable sources such as wind, solar, and hydropower. This approach is designed to encourage renewable energy growth by offering producers a secure and consistent revenue over the long term.
3. Biofuels Act of 2006. The Biofuels Act of 2006, or RA No. 9367, requires the use of biofuels in the Philippines to cut dependence on imported fuels, support sustainability, and boost economic growth. It also creates the National Biofuel Board (NBB) to manage the program, assigns responsibilities to government agencies, and offers incentives to promote biofuel production.
4. Philippine Clean Air Act of 1999. The Philippine Clean Air Act of 1999, or RA No. 8749, is a pioneering legislation aimed at improving air quality, minimizing pollution, and protecting public health. It introduces a nationwide strategy for managing air pollution, prioritizing prevention over mitigation, and fostering collaboration among government bodies, industries, and citizens.
5. Electric Power Industry Reform Act of 2001. The Electric Power Industry Reform Act of 2001 (EPIRA) restructured the Philippine energy sector to promote competition and provide affordable, reliable electricity. It privatized National Power Corporation assets, created an independent regulator, and introduced the Wholesale Electricity Spot Market (WESM) for market-driven pricing. EPIRA boosted private sector participation, cut government subsidies, and improved energy efficiency.
6. Energy Efficiency and Conservation Act. The Energy Efficiency and Conservation Act, or Republic Act No. 11285, promotes sustainable energy use by reducing waste and adopting efficient practices. It mandates energy audits, requires large companies to implement energy management, and sets performance standards for appliances. The Act aims to cut costs, protect the environment, and strengthen energy security.

What are the Tax Incentives for Renewable Energy Companies

The Revenue Regulations No. 7-2022 issued by the Bureau of Internal Revenue provided the guidelines for the availment of tax incentives granted under the Renewable Energy Act of 2008.

Registered renewable energy companies may avail of several tax incentives such as;

1. Income Tax Holiday (ITH) for the first seven years of operations; thereafter subject to a 10% corporate tax rate;
2. Net-Operating Loss Carry-Over (NOLCO) of the renewable energy developer during the first three years from the start of commercial operation for the next seven consecutive taxable years immediately following such loss;
3. Accelerated depreciation for the plant, machinery, and equipment used in utilizing the renewable energy resources in lieu of ITH;
4. Zero-rated VAT for sale of power or fuel generated from renewable sources of energy and purchases of local goods and services needed for utilization of renewable energy;
5. Tax exemption of Carbon Credits upon sale of Carbon Credits;
6. Duty-free importation of renewable energy machinery, equipment, and materials for the first 10 years;
7. 1.5% Special Realty Tax Rate on equipment, machinery, and other improvements;
8. Cash incentives for missionary electrification for energy developers equivalent to 50% of the universal charge; and
9. Tax credit on domestic capital components, parts, and materials.

How to Register a Renewable Energy Company in The Philippines

Registering a renewable energy company in the Philippines is a valuable opportunity to support the nation’s sustainability goals and take part in a fast-growing, government-backed sector.

By adhering to the latest guidelines and regulations, you can ensure a solid foundation for success. Here’s an overview of the essential steps and considerations.

1. Choose an Energy Type. Decide on the type of renewable energy your company will focus on, such as solar, wind, geothermal, biomass, or hydro energy. This will influence the specific requirements and incentives applicable to your business.
2. Register Business. To legally operate your renewable energy company, you need to register your business name with the Department of Trade and Industry if it is a sole proprietorship or the Securities and Exchange Commission if it is a corporation or partnership. After registering your business name, secure local government permits such as a Mayor’s Permit and Barangay Clearance to comply with local regulations and requirements.
3. Apply for RE Contract. To proceed with renewable energy operations, you need to submit an application to the Department of Energy for an RE Contract, which grants the authority to explore, develop, or utilize renewable energy resources. The Department of Energy has simplified this process under the Revised Omnibus Guidelines, which also cover the issuance of Certificates of Authority for pre-feasibility activities, ensuring a more efficient application experience.
4. Secure Necessary Permits. Obtain environmental compliance certificates from the Department of Environment and Natural Resources and secure any additional permits required for your project, such as those related to land use, water rights, or grid connection.
5. Secure Energy-Related Licenses. To operate in the renewable energy sector, apply for accreditation or permits from the Department of Energy, which may involve registration as a renewable energy developer and accreditation under the Renewable Energy Act of 2008 that offers incentives for companies engaged in renewable energy production. Prepare and submit necessary documents, including feasibility studies, technical plans, and environmental compliance certificates.
6. Consider Additional Permits Depending on the Energy Source. Different energy sources may require specific permits:
   • For solar farms, documentation of land use rights may be needed.
   • Wind resource assessments and land agreements are often required for wind projects.
   • For hydroelectric projects, water rights from the National Water Resource Board (NWRB) must be secured
7. Enroll in Support Programs. Leverage government programs and incentives such as:
   • Feed-in-Tariff (FiT) system
   • Renewable Portfolio Standards (RPS)
   • Green Energy Oxption Program (GEOP)

*Note: Check if your business qualifies for tax exemptions, reduced duties, or other fiscal benefits.

8. Set Up Banking and Financial Accounts. Open a corporate bank account with a trusted bank in the Philippines to efficiently manage investments, secure project financing, and handle transactions critical to your operations.