BOI, DOE and PE2 meet on EE guidelines and transition to CREATE framework

Date Published: 
June 7, 2021
  • BOI, DOE and PE2 meet on EE guidelines and transition to CREATE framework
    Clockwise from upper left: BOI-RBIS Dir. Raquel B. Echague , PE2 president Alexander Ablaza, DOE-EUMB Director Patrick T. Aquino, and BOI Gov. Napoleon E. Concepcion engage in a discussion on EE guidelines in this screenshot during a virtual BOI-DOE-PE2 meeting on 7 June 2021. (Image: PE2)

MAKATI CITY, 7 June 2021 – The Board of Investments (BOI), the Department of Energy (DOE) and the Philippine Energy Efficiency Alliance (PE2) met earlier today to discuss the energy efficiency (EE) guidelines under the approved specific guidelines of the 2020 Investment Priorities Plan (IPP), and how these will transition toward the rapidly evolving guidelines for the Strategic Investment Priorities Plan (SIPP) under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

The large BOI team was led by BOI Governor Napoleon E. Concepcion and Director Raquel B. Echague of the BOI Resource-Based Industries Service (RBIS) and was ably supported by the presentations of Dino John B. Recto of the BOI Investments Policy and Planning Service and Dennis Jesus O. Panga, Supervising Investment Specialist of the BOI-RBIS.

The DOE representation was led by Director Patrick T. Aquino of the Energy Utilization Management Bureau (EUMB) and was joined by Division Chief Artemio P. Habitan of the Energy Efficiency & Conservation Program Management and Technology Promotion Division and other EUMB staff. PE2 was represented by its president Alexander Ablaza and vice president for external affairs Theresa Acedillo-Lapuz, and supported by secretariat staffers Luigi Andrei G. Eusebio and Hazel T. Planco. 

On behalf of PE2, Ablaza pushed for the alignment of BOI’s EE Guidelines with those of the recently approved DOE Department Circular adopting the Guidelines for the Endorsement of Energy Efficiency Projects to the Board of Investments for Fiscal Incentives. Confirmed by DOE-EUMB during the meeting, PE2 emphasized that aside from self-financed and energy service company- (ESCO) financed EE projects, the DOE endorsement guidelines permit Third-Party Project Developers (TPPDs) and Project Special Purpose Vehicles (SPVs) as project proponents that do not have to be DOE-registered or DOE-certified ESCOs themselves, but will be required to engage DOE-registered or DOE-certified ESCOs to perform the requisite energy audits. PE2 made it clear that in such case, the TPPD or Project SPV, while taking the role as main investor of EE capital, is likewise the lead implementing entity of the EE project.

PE2 also sought rewording of one of the clauses of the transitional EE guidelines under the 2020 IPP specific guidelines, which reads: “The income eligible for ITH of an ESCO or TPPD shall be limited to the income of the registered enterprise directly attributable to the energy savings generated by the registered EE&C project corresponding and to the implementation period as indicated in the Service Contract between the ESCO or TPPD and its client, which shall not be more than four (4) years for non-pioneer projects, and six (6) years for pioneer projects.” PE2 said that the faulty sentence construction may give rise to some legal interpretations that ESCO and TPPD contract durations are limited by the income tax holiday (ITH) periods. 

During the meeting, BOI clarified for the record that the 4-6 year duration limits apply solely to the income eligible for ITH of an ESCO or TPPD and does not at all set term limits to service contracts of ESCOs and TPPDs.

Key representatives of BOI and DOE agreed with the PE2 position that the locational preferences under the CREATE framework are largely inconsistent with the EE objective of implementing more EE projects to harvest and recycle more wasted energy in the more energy-intensive localities such as the National Capital Region (NCR) and its surrounding metropolitan areas. Also, Ablaza announced plans of the Department of Science and Technology - Philippine Council for Industry, Energy and Emerging Technology Research and Development (DOST-PCIEERD) to support the deployment of EE technologies in the micro, small and medium-sized enterprises through research and development (R&D) programs. For these reasons, BOI, DOE and PE2 agreed that pursuing optimal fiscal incentives for EE projects, such as the classification of EE as a Tier III economic activity, would be an effective way to ensure that the CREATE SIPP framework could nonetheless support the scale-up of investment decisions for EE projects.

BOI explained that under the CREATE law, Tier III economic activities include R&D resulting in demonstrably significant value-added, higher productivity, improved efficiency, breakthroughs in science and health, and high-paying jobs as well as generation of new knowledge and intellectual property registered and/or licensed in the Philippines, commercialization of patents, industrial designs, copyrights and utility models owned or co-owned by a registered business enterprise and highly technical manufacturing; or critical to the structural transformation of the economy and require substantial catch-up efforts.

Because the adoption of optimal fiscal incentives can happen no sooner than the approval of the new CREATE SIPP guidelines, all meeting participants agreed to defer any early pilot registrations of EE projects through the transitional period.

Ablaza thanked the BOI and DOE for their shared objective of developing and enabling responsive fiscal incentives for energy efficiency with minimal delay. 
 

About PE2

Philippine Energy Efficiency Alliance Inc. (PE2), is a non-stock, non-profit organization of energy efficiency market stakeholders.

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Republic Act 11285

R.A. 11285 - An Act Institutionalizing Energy Efficiency and Conservation, Enhancing the Efficient Use of Energy, and Granting Incentives to Energy Efficiency and Conservation Projects

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