International Alternative 

Energy Corp.

Electric tax
http://www.doe.gov.ph/issuances/republic-act/627-ra-9513

Philippines

Investments and other subsidies

Republic Act 9513 or the Renewable Energy Act of 2008.

In 2009, Republic Act (RA) 9513, otherwise known as the Renewable Energy Act, was passed. The law is intended to accelerate the development and commercialization of renewable energy resources in the Philippines. Among other items, the Act includes the setting up of the Renewable Portfolio Standard which sets a minimum percentage of generation from renewable energy resources by power generators, distribution utilities and suppliers; the creation of a Renewable Energy Market and the adoption of the Feed-In Tariff (FIT) System.

RA 9513 also provides for fiscal incentives to renewable energy (RE) developers of renewable energy facilities, including hybrid systems, in proportion to and to the extent of the RE component, for both power and non power-applications. Incentives include the following:

a. IncomeTax Holiday (ITH)

Duly registered RE developers are exempt from income taxes for the first 7 years of commercial operations. Additional investments are entitled to additional income tax exemptions during an entitlement period not exceeding 3 times the period of the initial availment of the ITH.

b. 10 percent CorporateTax Rate

A corporate tax rate of 10 percent (reduced from the regular 30 percent) on net taxable income shall be imposed on all RE developers after 7 years of
the ITH.

c. 10-year Duty-free Importation of RE Machinery, Equipment and Materials 


Department of Energy (DOE) is obtained before importation. The machinery, equipment, and material must be directly and actually needed and used exclusively in the RE facilities.

d. Net Operation Loss Carry-Over (NOLCO) of 7 years

The RE developer’s NOLCO during the first 3 years starting commercial operation may be carried over as a deduction from the gross income for the next 7 consecutive taxable years immediately following the year of loss, provided it has not been previously offset and it does not result from the availment of the incentives under RA 9513.

e. Zero percentValue-AddedTax Rate

The sale of fuel or power from RE sources shall be subject to 0 percent value-added tax (VAT) rate. All RE developers are entitled to zero-rated VAT on purchases of local supply of goods, properties and services needed for plant facilities. This may be claimed throughout the whole process of exploring and developing RE sources up to its conversion to power, including those performed by subcontractors and contractors.

f. Special RealtyTax Rates on Equipment and Machinery

Realty and other taxes on equipment, machinery and other improvements actually and exclusively used for RE facilities shall not exceed 1.5 percent of their original cost less accumulated normal depreciation or net book value. In an integrated resource development and generation facility, only the power plant shall be imposed real property tax.

g. Accelerated Depreciation

If an RE project fails to receive an ITH before its full operation, it may apply for an accelerated depreciation in its tax books and be taxed accordingly, although the project or its expansions shall no longer be eligible for an ITH.

h. Cash Incentive of Renewable Energy Developers for Missionary Electrification

RE developers shall be entitled to a cash incentive per kilowatt-hour of power generated, that is equal to 50 percent of the universal charge for power needed to service missionary areas where it operates. This incentives is chargeable against the universal charge for missionary electrification.

i. Tax Exemption of Carbon Credits

All proceeds from sale of carbon emission credits are exempt from all taxes.

j. Tax Credition Domestic Capital Equipment and Services

RE operating contractor holders purchasing RE machinery, equipment, materials and parts from a domestic manufacturer shall be entitled to a tax credit equivalent to 100 percent of the value of the VAT and customs duties that would have been paid on the equipment, materials and parts had they been imported.

k. Exemption from the Universal Charge

Power and electricity generated through the RE system for the generator’s own consumption or for free distribution to off-grid areas shall be exempt from the universal charge.

l. Payment ofTransmission Charges

Power and electricity produced from an intermittent RE resource may opt to pay the transmission and wheeling charges, on a per kilowatt-hour basis at a cost equivalent to the average kilowatt-hour rate of all other electricity transmitted through the grid.

m. Hybrid and Cogeneration Systems

Incentives and tax exemptions under RA 9513 may be claimed by registered RE developers of hybrid and cogeneration systems using both RE sources and conventional energy, but only for the equipment and machinery using RE resources. 

Introduction

Over the past decade, renewable energy has demonstrated remarkable growth as a significant source of global energy. Since 2004, the industry has seen a –

53-fold increase in solar PV capacity

15-fold increase in biodiesel production

10-fold increase in concentrating solar thermal power (CSP) capacity

10-fold increase in wind capacity.1

In fact, the International Energy Agency, the World Bank, Greenpeace, and others all projected levels of renewable energy for the year 2020 that were met and even exceeded by 2010.2 As of last year, renewables were providing:

43.6 percent of the new power capacity added in all technologies3

22.1 percent of global electricity, with hydropower providing about 16.4 percent4

8.5 percent of global energy generation.5

Today, renewable energy is recognized as delivering a number of key benefits6 for countries, regions, markets, industries and the global population:

Energy security and diversity – contributing to energy security by providing more diversity in the energy supply and reducing the need for fossil fuels, which for many countries can reduce fuel import bills.

Environmental protection – helping to reduce local air pollution and emissions growth. Renewable energy has featured strongly in economic recovery packages put in place in response to the global economic downturn. An estimated 6.5 million people worldwide now work directly or indirectly in the renewables sector.7

Energy access and affordability – providing electricity access and modern energy services to the 1.3 billion people currently without access to electricity and the 2.6 billion that still rely on traditional biomass energy sources. Mini-grid and off-grid solutions are often less costly than grid extension to rural areas.

The rapid increase in renewables is driven by a number of factors, including falling technology costs, the continued high price of crude and carbon pricing. However, growth is driven mainly by government incentives, which totaled USD101 billion globally in 2012, up
11 percent over the previous year.8

This report describes current incentives provided by 31 countries around the world to promote renewable energy from wind, solar, biomass, geothermal and hydropower. These incentives also support related areas such as increased energy efficiency, smart-grid management, biofuels, carbon capture systems and storage technologies.

Renewable energy incentives take a variety of forms, including blending mandates, quotas, portfolio obligations, tax credits and feed-in tariffs, all of which offer a higher return than market prices, to offset higher costs. With schemes like feed-in tariffs, blending mandates or quota obligations, this remuneration is paid by the end-users. However, some schemes, such as tax credits are funded from government budgets. Many forms of support mechanisms are specific to electricity produced by renewables, capacity installed in a particular year, and have a fixed duration. Subsidies for biofuels predominately take the form of blending mandates.

Since 2004, the number of countries promoting renewable energy with direct policy support has tripled, from 45 to 144, and an ever-increasing number of developing and emerging countries is setting renewable energy targets and enacting support policies.10 The EU is maintaining its target of 20 percent by 2020. According to recent reports, three EU Member States (Bulgaria, Estonia, and Sweden) already reached their 2020 targets in 2012.11 Discussions about setting 2030 EU climate and energy targets are now in progress.

Mention should also be made of the continued growth of policies at the local level. Hundreds of community, city, district, state and island governments worldwide have set renewable energy targets and enacted fiscal incentives or other policies to foster the deployment of renewables. In 2013, Sydney, Australia, announced the goal of achieving 100 percent renewable energy for power, heating, and cooling by 2030, and Yamanashi, Japan, targeted local generation of 100 percent renewable electricity by 2050. Over 40 other cities have already achieved their goal of 100 percent renewable energy in at least one sector or aim to do so over the next few decades.


Electric incentives

The Philippines: Incentives pave way for renewables growth 

Philippines Energy

A new incentives programme to be rolled out across the Philippines next year is expected to help the government boost the renewables sector, while also meeting rising domestic demand for power.

The programme will make additional payments available to energy companies for electricity generated by non-conventional means through the introduction of feed-in tariffs (FIT). However, the slow pace at which the scheme is being introduced and changes to its format are already frustrating private developers.

The need for investment in the Philippines’ power sector is growing and could soon become critical. According to a report issued at the end of March by the Energy Development Corporation (EDC), the country’s largest producer of geothermal energy, demand for energy in the main regions of the Philippines is expected to increase between 4.3% and 5.2% annually over the next five years.

The government’s National Renewable Energy Programme, which came into effect in 2011, calls for a near trebling of renewable energy capacity from its current level of 5438 megawatts (MW) to 15,304 MW by 2030. Achieving this target would give renewables around half of the domestic power generation market, while putting the Philippines at the forefront of alternative energy production.

The government hopes that FITs, which guarantee companies producing renewable energy a higher payment than the set rate given for conventional power sources, will help steer the Philippines towards its goal. The FIT scheme was first floated in 2008 in legislation tabled by the government of the time to make the segment more attractive to developers.

In July last year, the Energy Regulatory Commission approved proposed FIT rates for key renewable energy sources. Run-of-river hydroelectric power sources was given a P5.78 ($0.14) kilowatt-hour tariff, biomass P6.60 ($0.16), wind P8.26 ($0.20) and solar P9.50 ($0.23).

The rates were below the levels sought by the Renewable Energy Board, with the tariff awarded for solar power just over half the figure requested. However, the commission stood by the rates set, saying it believed they were high enough to attract investment, but would also soften the impact of incentives on electricity rates.

In an interview given to Agence France Presse at the end of March, Mario Marasigan, head of the Department of Energy’s Renewable Energy Management Bureau, said the first projects eligible for FIT should be up and running next year. Marasigan added that he expected solar power plants of between three and five megawatts to top the list of new ventures.

Although the launch of the FIT scheme was broadly welcomed by the industry, concerns were raised that its deployment was taking too long, with critics suggesting that delays risked discouraging investors.

A decision to amend the programme was also questioned. The government recently set out a clarification that FIT guarantees would be given to firms only once a project was operational rather than at an earlier developmental stage. Energy Secretary Carlos Jericho Petilla said the alteration in the terms was aimed at ensuring that only firms committed to seeing through renewable energy projects would embark on the programme.

However, critics have voiced concerns that the amendment could make it more difficult for some energy producers to obtain financing, especially smaller outfits. They argued the change favoured larger firms which were often better capitalised and found it easier to access funding.

In early April, Jesse Ang, the resident representative of the International Finance Corporation of the World Bank group, suggested that the amended terms for granting FIT certifications could affect the development of renewable energy projects, while also impacting investors’ choice of energy sources.

“Clearly, without assurance of FIT, you also have to find another way to have an assurance, so the cheaper technologies like hydro will have an advantage over the wind and solar sectors which really need FIT rates because they are very expensive,” Ang said in an interview with the Manila Bulletin on April 5.

Marasigan said the setting up of a new energy financing scheme was an involved process. “A FIT mechanism is relatively new to us,” he said. “It took us a while to learn and really decipher what is the best means for us.”

There is little to suggest that changes to the FIT guidelines are causing projects to be cancelled. Figures indicate that investment in the renewable segment is already on the rise, with the potential for above-tariff earnings expected to bring further expansion to the industry.