PE2 cites need for economy to mobilize EE capital toward net zero aspiration

PASIG CITY, 5 April 2022 – Philippine Energy Efficiency Alliance (PE2) president Alexander Ablaza stressed the clear imperative to mobilize energy efficiency (EE) capital as the global and local economies move closer toward net zero pathways. This call was made during the first day of the Renewable Energy and Energy Efficiency (REEE) Summit held earlier today. Organized by the Meralco Power Academy, the two-day event centered on the theme “Driving a Culture of Energy Efficiency, Low Carbon Future, and Zero Waste.”

Ablaza echoed International Energy Agency (IEA) executive director Fatih Birol’s statement during the recent Davos agenda meetings of the World Economic Forum that EE is the world’s first fuel and the main route to net zero. The PE2 head also shared the IEA projection that the “Efficient World Scenario” will need USD 24.5 trillion in EE investments through 2040. “Global energy markets should gravitate toward planning energy efficiency as a primary energy resource – an indigenous fuel to be dispatched with priority,” he declared.

Ablaza found it useful to summarize the key PE2 positions on EE fiscal incentives from 2016-2021. While he stressed that several recommendations have been incorporated in the Energy Efficiency and Conservation Act and its emerging guidelines, the pending recommendations point to the overarching objective of mobilizing up to PHP 12.2 trillion in EE investments in the country to shave off 182 million tons of oil equivalent in final energy consumption through 2040. Some of these recommendations were:

• Fiscal incentives need to make third-party investments and energy service company (ESCO) projects investment-grade, able to hurdle 15% after-tax IRR in most emerging markets.
• Tax based incentives for EE are over 500% recoverable through incremental tax collections.
• Restrictions to type of sector for EE host entity should be removed.
• Incentives should flow to various types of EE proponents where more eligible EE proponents should include those taking upfront investment risk.
• EE projects, regardless of ownership by nationality, should have equal access to fiscal incentives.
• To attract long-term capital, EE project portfolios need long-term certainty to availability of fiscal incentives.
• Guidelines should avoid limiting scope of EE technologies, but instead open up to all savings-based EE measures.
• Fiscal incentives should cover all components of EE project cost. ESCOs and third-party investors need to recover more project costs than energy-end users.
• Guidelines under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act should remove location-based distortions to income tax holiday benefits of EE projects.
• EE projects critically need Tier III classification under the CREATE Strategic Investment Priorities Plan framework.

He likewise emphasized that, based on a PE2 study, EE can generate 45% more jobs than infrastructure projects for the same amount of stimulus or capital funding.

As the government is now trying to accelerate timelines for EE implementation in the public sector, Ablaza said that PE2 now estimates that up to PHP 252 billion of EE investments will have to be made in government buildings, public lighting and water pump improvement projects. A significant slice of this can be mobilized using private sector capital through new procurement modalities such as ESCO performance contract procurement under the Government Energy Management Program (GEMP) Guidelines, public-private partnership (PPP) transactions under the B-O-T Law and Joint Venture Agreements under NEDA Guidelines.

During the Q&A session, the PE2 head was asked to share views on the response of the banking sector to the huge EE financing gap, the role of training and capacity building programs in meeting the human resource requirement of the growing EE market, the opportunities arising from digitalization of energy monitoring and management systems, and the contribution of EE toward the country’s Paris climate obligations.

Other topics and speakers during the first day of the summit included EE case studies, success stories and new opportunities by MSERV COO and PE2 Trustee Ronaldo R. Torres, John Emmanuel Martinez, Anthony Agoncillo and Rommel Benig.

The morning sessions of the first day also had PNOC President Jesus Cristino Posadas and Dir. Patrick Aquino of DOE-EUMB presenting the government’s long-term aspirations and roadmap towards an energy-efficient future. Bill Kent and Eugene Araullo took turns in sharing best practices and innovations in developing EE talents and competencies.