Perks seen needed for energy efficiency equipment

A proposed law encouraging energy efficiency and conservation may turn out to be less attractive for the commercial and industrial sectors if the fiscal incentives attached to it are taken out, industry stakeholders said.

“Right now, the government is pushing very hard for tax reform. It calls for rationalizing of all fiscal incentives as well as boosting [tax] collection. This [bill] will run contrary to that,” said Senator Sherwin T. Gatchalian, chairman of the Senate committee on energy, during a hearing on Wednesday.

The legislation in question is Senate Bill No. 30: “An Act Institutionalizing Energy Efficiency and Conservation, Enhancing the Efficient Use of Energy, Granting Incentives to Energy Efficiency and Conservation Projects, and for other Purposes.”

Mr. Gatchalian said that as far as he knows, the bill calls for duty-free importation of energy equipment.

“Can we still implement this bill even without these fiscal incentives?” he said.

Representatives of the Department of Energy (DoE), which will be the main agency implementing the proposed law, which was introduced by Sen. Loren B. Legarda, said taking out the fiscal incentives might be a challenge.

“That’s something we’ve seen in other jurisdictions. The approach has always been carrot and then stick. Of course, we can implement this without the carrot and we’ll just use the stick,” said Patrick T. Aquino, a director at the DoE’s energy utilization management bureau. 

Mario C. Marasigan, who leads the DoE’s renewable energy management bureau, said the incentives are needed because the department wants the scope of energy efficiency and conservation to cover not just ordinary consumers using home appliances, but also industrial and commercial establishments.

“It will be difficult and challenging but definitely there are ways and means,” he said.

He cited hotels, which simply pass on their costs, including electricity bills, to consumers, and have no incentive to adjust their temperatures to a standard 25 degrees.

Mandatory standards will push them to use equipment that meet the DoE’s minimum energy performance (MEP) system, which may require importing new technology.

“For that technology to come in, it may need 10,000 consumers,” Mr. Marasigan said, thus the need for the tax incentives to bring down the cost that comes with big volume purchases.

“Yes, we can do it without incentives, but the immediate impact will be faster if you have incentives,” he said. 

“But is it really that important? Maybe not,” he said, adding that similar incentives are being offered by the Board of Investments yet only a few are availing of them.

Alexander Ablaza, who heads the Philippine Energy Efficiency Alliance, Inc. (PE2), said without the fiscal incentives investments in energy efficient projects “will be stuck with the business as usual.”

“And what is the business as usual? We will be stuck with only self-financed and a little debt-financed energy efficiency projects. We will never be able to achieve scale and meet our long-term road map targets without the incentives,” he said.

Mr. Ablaza also called for the creation of a public-private council similar to the National Competitiveness Council that will craft a strategy after the bill’s passage into law.

“It’s to steer the direction of the energy efficiency market. We have to keep in mind that every piece of legislation, there will be no single silver bullet that will solve everything. But Senate Bill 30, most of it, will help us make that big leap in accelerating the transformation of the energy efficiency market as far as practices, financing, business models, technologies are concerned,” he said.

“What lies ahead over the long term, the bill will not be able to solve everything,” he added. 

PE2 is non-stock, non-profit organization of energy efficiency market stakeholders. -- Victor V. Saulon