DOE leads EE&C fiscal incentive discussion in ECCP RE & EE meeting; PE2 supports first fuel and ESCO positions
MAKATI CITY, 11 August 2020 – Director Patrick T. Aquino of the Energy Utilization Management Bureau (EUMB) of the Department of Energy (DOE) led discussions relating to the emerging guidelines on the DOE endorsement of energy efficiency and conservation (EE&C) projects to the Board of Investments (BOI) for fiscal incentives under the EE&C Act during a virtual meeting earlier today of the Renewable Energy (RE) and Energy Efficiency (EE) Committee of the European Chamber of Commerce of the Philippines (ECCP). ECCP RE & EE Committee Chair and Philippine Energy Efficiency Alliance (PE2) Vice President for Internal Affairs Ruth Yu-Owen chaired the meeting.
Director Aquino announced that he was scheduled to meet the BOI Executive Committee later that day and sought stakeholder feedback on PE2’s classification of energy efficiency as first fuel to qualify for pioneer incentives under the incentive framework of Executive Order No. 226, or the Omnibus Investments Code of 1987, as well as the DOE preference to endorse EE&C projects only channeled through certified and registered energy service companies (ESCOs).
PE2 president Alexander Ablaza responded to both requests for industry feedback. The PE2 head explained that the original position of classifying energy efficiency as the economy’s first fuel has been bolstered by the growing recognition across global markets that energy efficiency can indeed displace at least 65% of energy resource requirements, as confirmed by a study of the International Energy Agency (IEA) on the displacement of total fuel consumption of 11 IEA-member countries through over 2 decades. PE2 emphasized that the concept of first fuel has evolved into a real resource which should be given the same investment treatment as other mainstreamed infrastructure asset classes. He said that E.O. 226 currently qualifies fuel displacement as one of the non-technology-dependent eligibility criteria for the BOI granting of pioneer status across all EE&C project registrations in the next ten years. PE2 believes that the extension of income tax holiday from the modernization benchmark of 4 years to the targeted pioneer incentive of 6 years is crucial in ensuring that ESCO and third-party investments in EE&C equipment assets installed in non-owned and non-leased premises draw commercial-grade returns.
Ablaza also welcomed DOE’s preference to prioritize BOI registrations for EE&C projects implemented by ESCOs, over the “self-financed” modality allowed in the EE guidelines approved by the BOI in February 2018. He explained that fiscal incentive availment through ESCOs provides an energy-savings-based discipline, which effectively allows the government to remove technology restrictions and remain focused on the delivery of energy savings rather than the mere replacement or modernization of equipment assets. The PE2 head said that while PE2 has no strong convictions ruling out self-financed EE&C projects, the Alliance is worried about BOI applications from non-Top-500 corporations, who may not have the same in-house engineering and energy management capabilities to measure and verify energy savings arising from the upgrading of equipment. Ablaza said, “The situation can be likened to the purchase of prescription medication without a signed prescription from a licensed physician.” PE2 does not want the market to abuse the objectives of granting fiscal incentives under Republic Act 11285 by qualifying equipment retrofits which fail to deliver the intended savings, and the ESCO sector stands ready to help the government prevent such leakage.
Other PE2 representatives in the committee meeting included Job Mayo and Jerico Medel of ABB Inc., and PE2 member services and communications manager Luigi Eusebio.
