BIOMASS pt. 2 ( Familiarization to Laws Relevant to biomass)

Question 1

Omnibus Investment Code of 1987 (amended by RA
7918)

The Code provides investment incentives to
enterprises registered with the Board of Investments
(BOI) NRE projects can be registered with BOI for its
“pioneer” status to avail of the following incentives:

(i) Income tax holiday for 6 years
(ii) Exemption from value-added tax
(iii) Simplified customs procedure
(iv) Unrestricted use of consigned equipment
(v) Employment of foreign nationals
(vi) Deduction on taxable income of expenditures on
necessary infrastructure related to project
development
(vii) Additional deduction on taxable income of 50% of
wages corresponding to the increment in direct
labor hired within the first five years of
registration
(viii) Deduction on taxable income of expansion
expenses if additional deductions for labor
expenses were not claimed

Question 2

Mini-Hydro Power Incentives Act (RA 7156)

Mini-hydro proponents can avail of the following
incentives:

(i) Special privilege tax rates of 2% of gross receipts
from sale of electric power and from
transactions incident to the generation,
transmission and sale of electric power
(ii) Tax and duty-free importation of capital equipment,
materials and parts
(iii) Tax credit on domestic capital equipment
(iv) Realty tax cap not exceeding 2.5% based on
original costs of equipment and machinery
(v) VAT exemption on gross receipts from electricity
sales
(vi) Income tax holiday for 7 years

Question 3

Law on OSW (EO 462, amended by EO 232)

For generation projects exceeding 1 MW, the
private sector is allowed to participate in the
exploitation, development, utilization and
commercialization of ocean, solar and wind (OSW)
energy resources, through a production sharing contract
with the national or local government. The Department
of Energy can extend assistance to OSW developers in
obtaining all applicable fiscal and non-fiscal incentives,
including registration as pioneer industry with the
Board of Investments. In addition, OSW developers can
charge the cost of assessment, field verification and
feasibility studies on other sites to their current
commercial projects. They can also secure access to
lands and/or offshore areas where OSW energy
resources can be harnessed

Question 4

Agriculture and Fisheries Modernization Act of 1997
(RA 8435)

Apart from providing trade and fiscal incentives on
the agricultural and fisheries sectors, the Act provides
for duty-free importation of machinery and equipment,
including renewable energy systems such as solar
panels, provided that such equipment shall be for the
exclusive use of the importing enterprise.

Question 5

Clean Air Act (RA 8749)

The Act sets emission standards on stationary and
mobile sources for greenhouse gases, including power
plants. NRE projects are favored to the extent that some
of its technologies, such as photovoltaics, have zero
emissions. But the Act imposes an outright ban on
incineration facilities which may have adverse impact
on biomass combustion facilities. Combustion should
be set at very high temperature levels for it to be
complete and free of emissions.

Question 6

National Integrated Protected Areas System (NIPAS)
Act of 1992 (RA 7586)

Some areas in the Philippines have been declared
protected, thus construction of NRE projects in these
sites would require special permits. The Department of
Environment and Natural Resources (DENR) issues the
Environment Compliance Certificate to projects
complying with the environmental standards. For NRE
projects that are located in areas considered ancestral
domains, the proponent must secure permits from the
concerned indigenous communities and the National
Commission on Indigenous Peoples.

Question 7

RA 6957 BOT Law as Amended by RA 7718

Power plants may be constructed under a
build-operate-transfer (BOT) scheme whereby the
private sector project proponent can recoup its
investments through the charging of toll fees and rentals
during the contract periods. Section 10 of RA 7718 provides that BOT projects in excess of P1 billion shall
be entitled to incentives as provided by the Omnibus
Investment Code.

Question 8

DOE Circular No. 2000-03-004

This Circular amends the law that seeks to elicit
private sector participation in power generation.

Relevant to NRE development are the following
proviso:

(1) Companies do not have to show a five-year
track record to receive accreditation for NRE
generation facilities, provided that the technology being
proposed has already achieved commercial status and
can be demonstrated to be adaptable to local conditions;
or if the project is for self-generation purpose, or the
proponent is technically and financially capable.
(2) The provision for spinning reserve imposed on
Private Sector Generation Facility shall not apply to
RRPPF/NREF projects if (a) the project is not
connected to either the national backbone grid, or
regional or island mini-grids; or (b) the project is
connected to a regional or island mini-grid powered by
conventional generation reasonably capable of load
following, e.g., peaking or intermediate diesel
generation plants. If the RRPF/NREF project is
proposed for connection to the national backbone grid,
the provision on spinning reserve shall be subject to
negotiation with the transmission system operator or
from any future regulatory body overseeing the
operations of the transmission grid system
(i) Thermal efficiency requirement for cogeneration
facilities using NRE, including hybrid systems has
been removed.
(ii) Renewable resource power production facilities are
exempt from ( submitting 10-year power supply
agreements and are only required to demonstrate
potential net foreign exchange savings by virtue of
utilizing renewable energy sources.
(iii) For projects that supply electricity to a designated
utility or user, ( or for internal use, the power
development plan review and approval
requirements of the Department of Energy shall
not be required.

Question 9

DOE Circular No. 2000-10-011

This Circular mandates the acceleration of Rural
Electrification Program by instituting summary
procedures in the approval and subsequent release of
the electrification fund to the franchised distribution
utility or project implementer. Section 2f of the Circular
provides that the electrification of target areas should be accomplished in the least-cost possible manner which
means either adopting the conventional line design or
utilizing indigenous and renewable energy sources.

Question 10

DOE Circular No. 2000-03-003

This Circular amends the 1994 DOE regulation that
prescribes the provision of direct benefits to local
government units (LGU) hosting energy resource
development projects and/or energy-generating
facilities. The amendments streamlined provisions
concerning allocation of funds and generation of
livelihood projects. Section 7 provides that in cases
where the grid type is deemed unavailable for
energizing a particular LGU, the electrification fund
may be redirected by the DOE in favor of utilizing the
NRE system to speed up the electrification of the
concerned area.
Biomass is starting to emerge as a viable option as
shifts in the energy markets and perspectives on natural resources make a strong case for renewable and
sustainable energy. As the biomass energy sector grows,
engineers, financiers, financing institutions, workers,
regulators, and other stakeholders must consider a
number of business and legal challenges.
Over time, there have been significant structural
changes to the Philippine energy sector. Important
contemporary innovations, such as policies and
initiatives, are now cooperatively synergized to assist
the government, stakeholders, and consumers in making
educated energy decisions.