The Philippines is a top world producer of geothermal power, second only to the United States.
The country’s Department of Energy (DOE) estimates that there is still about 4.41 GW of untapped potential for geothermal energy. Currently, the Philippines has more than 2 GW of installed capacity, comprising nearly 18% of the country’s total energy output.
The impending shortage of electricity supply in the country has pushed the Government to harness its geothermal energy further by approving more energy contracts, especially in relation to renewable energy resources.
The DOE anticipates electricity demand to double in the next 20 years due to growth in its industrial and transportation sectors, and population. In response, the Philippines in its 2009-2030 Energy Plan has targeted to increase its operating geothermal capacity up to 3,447 MW by 2030.
Government may ease project award restriction for foreigners
The Philippines’ conservative approach against awarding renewable energy service contracts to foreigners is gradually evolving as the Philippine President considers a DOE recommendation to allow a fully-foreign owned corporation to execute financial or technical assistance agreements (FTAA) with the State for a proposed geothermal project.
Evolution of geothermal regulations
The Philippines’ Renewable Energy (RE) Act of 2008 does not restrict the nationality of entities who may be awarded renewable energy service contracts in the country.
The DOE, however, took the position in its implementing rules of the RE Act (IRR) that only Philippine nationals (i.e. Filipino citizens or corporations at least 60% of which capital is owned by Filipinos) may harness RE resources. The IRR mandates that renewable energy development may only be conducted through an RE service/operating contract with the Philippine Government, subject to the provisions of the Philippine Constitution.
Another circular was released by the DOE in 2009, exempting foreign corporations from the 60% nationality restriction and allowing them to do large-scale exploration, development or utilization of geothermal energy resources.
This exemption appears to be founded on a provision of the Philippine Constitution that empowers the Philippine President to enter into FTAAs with foreign corporations for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils, based on real contributions to the country’s economic growth and general welfare.
A more liberal approach
A later administrative order issued by the Philippines’ Department of Environment and Natural Resources (DENR) classified geothermal energy as “minerals.” The DOE, as a result, decreed that FTAAs may be executed in relation to large-scale exploration, development or utilization of geothermal energy resources.
Based on these regulations, the DOE recommended to the Philippine President that a 100% foreign corporation (in this case, a current steam field operator of two of the Philippines’ largest geothermal plants) be allowed to execute an FTAA with the State for its proposed geothermal project in the Philippines.
The above recommendation by the DOE is seen as an encouraging step for foreign investors. It affords foreign investors the flexibility to invest more equity into geothermal projects without the need of a Filipino partner.
On the other hand, unofficial reports indicate that the Office of the President has asked the DOE to re-evaluate its recommendation since it remains unclear whether or not geothermal energy is properly classified as a mineral resource and thus capable of being the subject of an FTAA. The DOE has yet to make official pronouncements on this matter.
Despite its latent potential, the current challenge in the Philippine geothermal industry is for the Philippine Government to resolve and affirm official policy and position on this matter.