Energy efficiency firms call for new law’s IRR to reflect BoI perks

By Victor V. Saulon – August 5, 2019 | 10:39 pm
from Business World


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.