The document discusses legal and regulatory issues affecting the Philippine geothermal industry under the Renewable Energy Act of 2008. It identifies several key challenges, including the government's ambivalence towards foreign ownership, complex rules for obtaining consent from indigenous peoples, lack of transmission infrastructure, and delays in establishing clear feed-in tariff rates. It recommends that regulators address these issues to provide greater policy certainty and incentives to attract more private investment needed to meet the country's renewable energy targets.

1. Renewable
Energy
Act
of
2008:
Hits
and
Misses
for
the
Philippine
Geothermal
Industry
Atty.
Fernando
S.
Penarroyo
World
Geothermal
Congress
Melbourne,
Australia
20
April
2015
Puno
&
Peñarroyo
Law
OfNices

2. Presentation
Outline
• Energy
Outlook
• Geothermal
Energy
Development
in
the
Philippines
• Legal
and
Regulatory
Issues
• Recommended
Policy
Considera>ons
for
Philippine
Regulators
• Conclusion

3. ENERGY
OUTLOOK

5. Global
Economic
and
Investment
Outlook
(Macquarie
Research,
2015)

6. Cost of Doing Business
• Capital costs: US$4-5M per installed MW
• Operating and maintenance cost: US$0.03
to $0.05/kWh
• Tariff: no FIT rates & reflects costs incurred
to obtain market-based financing prices
(≈US$0.19/kWh); mainly contracted on
Php/kWh; base rate escalated by inflation
and forex indices
• Volume: plants are baseload with 90%
capacity factor but will depend on the
contracted kilowatt hours
• Government share: 1.5% of gross income

8. LOCATION
COMMISSIONING YEAR
2013-2015 2016-2020 2021-2025 2026-2030
LUZON 20 800 65 -
VISAYAS 30 150 - 60
MINDANAO - 230 90 20
Total 50 1,180 155 80
TOTAL Geothermal Capacity Addition (2013-2030): 1,465 MW
Targeted
Geothermal
Capacity
Addition
(in
MW),
by
Grid

10. Status
of
Renewable
Energy
Law
Because
of
regulatory
delays,
the
Energy
Regulatory
Commission
only
established
in
July
2012
the
FIT
rates
applicable
to
each
type
of
renewable
energy
resource
but
were
significantly
lower
than
those
applied
for
by
the
Na>onal
Renewable
Energy
Board.
Consumers
have
started
to
pay
star>ng
January
2015,
an
addi>onal
P0.0406
per
kilowaP-­‐hour
(kWh)
in
electricity
rates,
represen>ng
so-­‐called
feed-­‐in
tariff
allowance
(FIT-­‐All).

11. GEOTHERMAL
ENERGY
DEVELOPMENT
IN
THE
PHILIPPINES

12. Hamaguchi
,
2013

13. Investment
Trends
• ODA loans from WB and JBIC for exploration to
plant commissioning for state energy and
power companies
• BOT for power generation, EPIRA, privatization
of EDC
• Foreign equity under RE Law
• Traditional energy companies (EDC, Chevron,
Aboitiz) and new greenfield developers
• Company equity and risk capital financing for
new developers
• Role of Philippine local banks

14. Cost
of
Doing
Business
• Capital costs: US$4-5M per installed MW
• Operating and maintenance cost: US$0.03 to
$0.05/kWh
• Tariff: no FIT rates & reflects costs incurred to
obtain market-based financing prices (≈US
$0.19/kWh); mainly contracted on Php/kWh;
base rate escalated by inflation and forex
indices
• Volume: plants are baseload with 90%
capacity factor but will depend on the
contracted kilowatt hours
• Government share: 1.5% of gross income

15. LEGAL
AND
REGULATORY
ISSUES

16. Legal
and
Regulatory
Issues
• Foreign
ownership
-­‐
The
government’s
ambivalence
in
opening
the
geothermal
sector
to
foreign
ownership
is
a
test
of
its
resolve
and
seriousness
in
aPrac>ng
investments
that
will
compete
with
established
local
companies.
• Environment
-­‐
Government
administrators
must
work
doubly
hard
to
address
cogni>ve
barriers,
which
relate
to
the
low
level
of
awareness,
understanding
and
aPen>on,
afforded
to
the
complex
array
of
policy,
regulatory,
technical
financing
and
organisa>onal
factors
affec>ng
geothermal
projects
and
their
wider
economic
and
environmental
benefits.

17. Legal
and
Regulatory
Issues
• Local
government
-­‐
The
legal
issue
of
local
autonomy
in
rela>on
to
the
explora>on,
development
and
u>liza>on
of
natural
resources
vis
a
vis
the
power
of
control
by
the
execu>ve
over
LGUs
will
only
be
sePled
by
judicial
interpreta>on.
• Indigenous
Peoples
-­‐
Given
the
complexity
in
applying
the
concept
of
free
and
prior
informed
consent,
development
agencies
and
the
private
industry
are
more
inclined
to
adopt
the
standard
of
'free,
prior,
and
informed
consulta3on
resul3ng
in
broad
community
support’
where
'broad
community
support'
is
interpreted
as
requiring
'good
faith
nego>a>on
with
and
informed
par>cipa>on
of
indigenous
peoples'.

18. Legal
and
Regulatory
Issues
• Transmission
Access
-­‐
To
meet
the
challenges
brought
about
by
lack
of
transmission
infrastructure,
delays
in
grid
connec>on,
and
curtailment
of
output
in
loca>ons
where
current
policies
and
grid
management
systems
undermine
integra>on,
government
guarantees
on
electricity
dispatch
or
priority
connec>on
must
be
put
into
place.
A
loan
guarantee
program
for
electricity
transmission
infrastructure
expansion
would
support
large-­‐scale
capital
investment
and
as
a
cost
reduc>on
and
risk
mi>ga>on
tool.
• Taxa>on
-­‐
The
na>onal
government
should
also
develop
a
transparent
system
of
accoun>ng
for
and
alloca>on
of
sharing
of
revenues
and
taxes
with
LGUs.

19. Legal
and
Regulatory
Issues
• Rules
of
Procedure
for
Environmental
Cases
–
In
a
decision
of
the
Philippine
Supreme
Court
promulgated
on
03
February
2015,
the
SC
removed
the
legal
impediment
for
the
construc>on
and
opera>on
of
the
600-­‐megawaP
coal-­‐fired
power
plant
and
upheld
the
validity
of
an
environmental
compliance
cer>ficate
issued
in
2008.
The
SC
reversed
a
Court
of
Appeals
decision
that
granted
the
pe>>on
for
a
Writ
of
Kalikasan,
that
is
a
legal
remedy
granted
to
pe>>oners
if
they
show
that
the
environmental
damage
arising
from
an
ac>vity
is
of
such
magnitude
that
it
prejudices
the
life,
health,
or
property
of
inhabitants
in
two
or
more
ci>es
or
provinces.

20. Legal
and
Regulatory
Issues
• Amendment
of
EPIRA
-­‐
Recommenda>ons
made
by
business
groups
include
reviewing
or
modifying
the
WESM
Rules
and
strengthening
the
capability
of
the
market
regulators
like
the
DOE
and
ERC.
The
slow
process
for
approval
of
power
projects
under
the
single
buyer
Power
Purchase
Agreement-­‐based
regime
can
be
addressed
by
shortening
the
procedures
and
requirements
for
permidng.
-­‐
Na>onal
Grid
Corpora>on
of
the
Philippines
takes
at
least
18
months
to
finish
a
Grid
Impact
Study
-­‐
DENR
takes
at
least
2-­‐3
years
to
issue
an
ECC
-­‐
ERC
takes
around
12
months
to
process
the
review
of
the
Power
Supply
Agreement

21. RECOMMENDED
POLICY
CONSIDERATIONS
FOR
PHILIPPINE
REGULATORS

22. Recommended
Policy
Considerations
for
Philippine
Regulators
• Poli>cal
will
–
Congress
must
promulgate
a
new
law
in
extreme
urgency
that
will
set
the
parameters
for
“energy
project
of
na>onal
significance”.
Government
should
also
give
assurance
that
expropria>on
measures
are
available
as
may
be
necessary,
over
private
lands
relevant
to
the
project
for
steam
transporta>on
and
electricity
transmission.
Government
needs
to
address
the
perceived
veto
powers
on
energy
and
power
projects
of
indigenous
peoples
and
local
government
units.

23. Recommended
Policy
Considerations
for
Philippine
Regulators
• Valuing
environmental
and
social
benefits
-­‐
fossil
fuel
plants
have
a
shorter
lead
>me
making
them
more
aPrac>ve
but
with
no
allowance
for
environmental
externali>es.
This
places
renewable
energy
at
a
commercial
disadvantage
but
this
can
be
resolved
by
regula>ng
and
internalising
the
associated
cost
of
greenhouse
gas
emissions,
noise
and
air
pollu>on.
Emissions
trading
will
assist
in
crea>ng
a
value
and
cost
associated
with
such
factors.
Another
barrier
is
the
non-­‐recogni>on
of
environmental
benefits,
which
may
flow
from
RE
e.g.
amenity
value
and
poverty
allevia>on.

24. Recommended
Policy
Considerations
for
Philippine
Regulators
• Emerging
technologies
-­‐
With
the
advent
of
new
technology,
government
regulators
should
form
policies
covering
hybrid
energy
rela>onships
to
increase
geothermal
power
plants'
efficiency
and
capacity.
The
government
must
formulate
laws
and
guidelines
that
will
facilitate
geothermal
developers
to
commercially
access
by-­‐products,
which
is
technically
covered
by
a
separate
mining
legisla>on.
Government
regulators
should
introduce
differen>ated
economic
incen>ve
schemes
for
new
and
emerging
technologies.

25. Conclusion
• The
government
may
have
been
overly
op>mis>c
in
its
projec>ons
of
addi>onal
geothermal
poten>al
capacity
of
under
the
new
RE
Law
contractual
regime.
This
may
be
due
to
the
over-­‐es>ma>on
of
the
resources
or
failure
to
take
into
considera>on
the
regulatory
delays
and
the
permidng
process
involved
in
pudng
the
projects
on-­‐
stream.
• Government
must
be
unequivocal
in
easing
ownership
restric>ons
to
foreign
capital
and
exert
more
poli>cal
will
in
its
efforts
to
mi>gate
social
and
environmental
concerns.
• Regulatory
policy
should
be
open
to
fast-­‐paced
development
of
technology
in
providing
the
legal
cover
and
addi>onal
incen>ves
to
private
investors.

26. Renewable
Energy
Act
of
2008:
Hits
and
Misses
for
the
Philippine
Geothermal
Industry
Atty.
Fernando
S.
Penarroyo
World
Geothermal
Congress
Melbourne,
Australia
20
April
2015
Puno
&
Peñarroyo
Law
OfNices

27. About
the
Lecturer
• Master
of
Laws
(Univ.
of
Melbourne),
Bachelor
of
Laws,
BS
Geo
(UP),
• Managing
Partner,
Puno
and
Penarroyo
Law
(www.punopenalaw.com)
• Chief
Opera3ng
Officer,
Clean
Rock
Renewable
Energy
Resources
Corpora>on
• Director,
Interna>onal
Geothermal
Associa>on
• Trustee,
Na>onal
Geothermal
Associa>on
of
the
Philippines
• Professorial
Lecturer,
De
La
Salle-­‐FEU
MBA-­‐JD
Program,
UP
Na>onal
Ins>tute
of
Geological
Sciences
• hPp://www.philippine-­‐resources.com/

28. Acknowledgment
• Philippine
Department
of
Energy
for
the
facts
and
figures
in
this
presenta>on