Renewable Energy Act of 2008

State policy and program framework

The State policy is to accelerate the exploration and development of renewable energy resources (including biomass, solar, wind, hydro, geothermal, and ocean energy, including hybrid systems) to achieve energy self-reliance and reduce dependence on fossil fuels.
The State policy is to minimize exposure to international fossil-fuel price fluctuations that affect the economy.
The State policy is to increase utilization of renewable energy by institutionalizing national and local capabilities and promoting efficient and cost-effective commercial application through fiscal and nonfiscal incentives.
The State policy is to encourage renewable energy as a tool to prevent or reduce harmful emissions and balance economic growth with health and environmental protection.
The State policy is to establish the infrastructure and mechanisms to carry out the mandates of the Act and other existing laws.
The Act establishes the framework for accelerated development of renewable energy resources and provides for a strategic program to increase their utilization.

Key definitions and system concepts

“Department of Energy (DOE)” refers to the government agency created under Republic Act No. 7638, whose functions are expanded under Republic Act No. 9136 and further expanded under this Act.
“Energy Regulatory Commission (ERC)” is the independent quasi-judicial regulatory agency created under Republic Act No. 9136.
“Distribution of Electricity” refers to conveyance of electricity through a distribution system pursuant to Republic Act No. 9136.
“Distribution Utility (DU)” refers to any electric cooperative, private corporation, government-owned utility, or existing local government unit with an exclusive franchise to operate a distribution system in accordance with its franchise and Republic Act No. 9136.
“Grid” refers to the high voltage backbone system of interconnected transmission lines, substations, and related facilities located in Luzon, Visayas, and Mindanao, or as otherwise determined by the ERC under Republic Act No. 9136.
“Distributed generation” refers to a system of small generation entities supplying directly to the distribution grid, with any one entity not exceeding one hundred kilowatts (100 kW) capacity.
“Net-Metering” refers to a system where a distribution grid user has a two-way connection to the grid, is only charged for net electricity consumption, and is credited for overall contribution to the grid.
“Renewable Energy (RE) Resources” are renewable energy resources without an upper limit on total quantity to be used, renewable on a regular basis, and renewable energy includes (among others) biomass, solar, wind, geothermal, ocean energy, and hydropower conforming with internationally accepted norms and standards on dams and other emerging renewable technologies.
“Hybrid Systems” are generation facilities using two (2) or more types of technologies using both conventional and/or renewable fuel sources, including specified integrated examples, with a minimum of ten (10) megawatts or ten percent (10%) of annual energy output provided by the Renewable Energy (RE) component.
“Micro-scale Project” is an RE project with capacity not exceeding one hundred kilowatts (100 kW).
“Off-Grid Systems” are electrical systems not connected to the on-grid wires and related facilities of the Philippines.
“On-Grid System” includes interconnected transmission lines, distribution lines, substations, and related facilities for the purpose of conveyance of bulk power on the grid.
“Registered RE Developer” means an RE Developer duly registered with the DOE.
“Renewable Energy Market (REM)” is the market where trading of RE certificates equivalent to power generated from RE resources is made.
“Renewable Portfolio Standards (RPS)” are market-based policies requiring electricity suppliers to source an agreed portion of energy supply from eligible RE resources.
“Renewable Energy Service (Operating) Contract (REContract)” grants the RE Developer exclusive right to a particular RE area over two stages: pre-development stage (preliminary assessment and feasibility up to financial closing) and development/commercial stage (construction, installation, and up to operation).
“Renewable Energy Policy Framework (REPF)” is the long-term policy developed by the DOE identifying goals and targets for development and utilization of renewable energy.
“Green Energy Option” is the mechanism enabling end-users to choose renewable energy to meet energy requirements.
“Missionary Electrification” means providing basic electricity service in unviable areas to bring operations to viability levels.
“Geothermal energy” is considered renewable and covered by this Act if produced through natural recharge and/or enhanced recharge as defined.
“Geothermal Resources” are mineral resources classified as renewable energy resources, including indigenous steam/hot water/hot brines, artificial fluids introduced into geothermal formations, heat or associated energy found in geothermal formations, and any by-product derived from them.
“Government Share” is the amount due the National Government and local government units from exploitation, development, and utilization of naturally-occurring renewable energy resources such as geothermal, wind, solar, ocean, and hydro excluding biomass.
“Local government share” and “National government share” refer to amounts due to local government units and the national government, respectively, from exploitation, development, and utilization of naturally-occurring renewable energy resources.
“Ocean Energy Systems” convert ocean or tidal current, ocean thermal gradient or wave energy into electrical or mechanical energy.
“Non-power application” covers renewable energy systems/facilities producing mechanical energy or combustible products (e.g., methane gas) or useful thermal energy (e.g., heat or steam) not used for electricity generation (e.g., cooling and cooking/transport fuel).
“Power application” covers renewable energy systems/facilities producing electricity.
“Renewable Energy (systems) Developers” / “RE Developers” are individuals or groups formed under Philippine laws engaged in exploration, development, utilization, and operation of RE systems/facilities.
“Renewable Energy Registrar” refers to the function created under Section 8 for issuing, keeping, and verifying RE Certificates.
“Supplier” refers to a person or entity authorized by the ERC to sell, broker, market or aggregate electricity to end-users.

Lead implementation roles

The DOE is the lead agency mandated to implement the provisions of the Act.
The Act establishes the role of the National Renewable Energy Board (NREB) created under Section 27 as the board that supports RPS setting, approvals, and monitoring functions.
The ERC formulates and promulgates feed-in tariff rules and establishes net-metering interconnection standards and pricing methodology.
TRANSCO (or successors-in-interest) and distribution utilities must incorporate RE connection facilities into transmission and distribution development plans subject to DOE approval.
PEMC is directed to implement changes to WESM Rules to incorporate the REM and to implement the REM under DOE supervision.
The Renewable Energy Management Bureau (REMB) under the DOE is created to implement and manage key operational functions, including development of data systems and technical supervision.

RPS, feed-in tariff, and REC mechanisms

The Act requires all stakeholders in the electric power industry to contribute to the growth of the renewable energy industry.
Within one (1) year from the Act’s effectivity, the NREB sets the minimum percentage of generation from eligible RE resources and determines which sector RPS shall be imposed on a per grid basis.
The Act mandates a feed-in tariff system for electricity produced from wind, solar, ocean, run-of-river hydropower, and biomass to accelerate development of emerging renewable energy resources.
Within one (1) year from the Act’s effectivity, the ERC (in consultation with the NREB) formulates and promulgates feed-in tariff system rules.
Feed-in tariff rules must provide for:
- priority connections to the grid for electricity from eligible emerging renewable energy resources within the Philippines;
- priority purchase, transmission, and payment of such electricity by grid system operators;
- fixed tariffs for each type of emerging renewable energy and a mandated application period of not less than twelve (12) years; and
- that the feed-in tariff shall be applied to emerging renewable energy to comply with the RPS under this Act and in accordance with DOE-established RPS rules.
The DOE establishes the Renewable Energy Market (REM) to facilitate compliance with the RPS rules and directs PEMC to incorporate REM rules into the WESM Rules.
Within one (1) year from the Act’s effectivity, PEMC must establish a Renewable Energy Registrar.
The Renewable Energy Registrar issues, keeps, and verifies RE Certificates corresponding to energy generated from eligible RE facilities for RPS compliance.
PEMC may impose a transaction fee equal to half of what PEMC currently charges regular WESM players.
RE Certificates used for compliance are issued corresponding to eligible RE facilities and are tied to REM operations under WESM rules.

Green energy option and net-metering

The DOE must establish a Green Energy Option program giving end-users the option to choose renewable energy as sources of energy.
In consultation with the NREB, the DOE promulgates the implementing rules and regulations to achieve the program’s objectives.
When DOE determines technical viability and consistent with program requirements, end-users may directly contract from RE facilities their energy requirements distributed through their respective distribution utilities.
TRANSCO (or successors-in-interest), DUs, PEMC, and all relevant parties must provide mechanisms for physical connection and commercial arrangements necessary to ensure success of the Green Energy Option.
Enrolling end-users must be informed through their monthly electric bill about how much of monthly energy consumption and generation charge is provided by RE facilities.
Distribution utilities must, upon request by qualified end-users installing RE systems, enter into net-metering agreements subject to technical consideration and without discrimination.
Within one (1) year from the Act’s effectivity, the ERC (in consultation with the NREB and electric power industry participants) establishes net-metering interconnection standards and pricing methodology and other commercial arrangements needed for the net-metering program.
The distribution utility is entitled to any Renewable Energy Certificate resulting from the net-metering arrangement with the qualified end-user, and the utility can use the certificate to comply with RPS obligations.
DOE, ERC, TRANSCO (or successors-in-interest), DUs, PEMC, and relevant parties must provide mechanisms for physical connection and commercial arrangements for net-metering consistent with applicable grid and distribution codes.
The Act requires priority and non-discriminatory treatment through net-metering arrangements and requires ERC-established rules for interoperability and commercialization.

Grid integration, dispatch rules, and limitations

TRANSCO (or successors-in-interest) and buyer/concessionaire, and all DUs, must include required connection facilities for RE-based power facilities in transmission and distribution development plans.
Connection facilities must be approved by the DOE.
Connection facilities of RE power plants, including lines, are subject only to ancillary service covering such connections.
TRANSCO (or successors-in-interest) in consultation with stakeholders determines the maximum penetration limit of intermittent RE-based power plants to the Grid using technical and economic analysis.
Qualified and registered RE generating units with intermittent RE resources are considered “must dispatch” based on available energy and must enjoy priority dispatch.
WESM Rules, Distribution and Grid Codes provisions that do not allow “must dispatch” status for intermittent RE resources are deemed amended or modified.
PEMC and TRANSCO (or successors-in-interest) implement technical mitigation and system improvements to ensure safety and reliability.
Intermittent RE resources are RE generating units (or groups connected to a common connection point) where the RE resource is location-specific, naturally difficult to precisely predict, making output variable, unpredictable, irregular, and the resource inherently uncontrollable; these include plants using wind, solar, run-of-river hydro, or ocean energy.

Off-grid development and missionary electrification

Within one (1) year from the Act’s effectivity, NPC-SPUG (or successors-in-interest) and/or qualified third parties in off-grid areas must source a minimum percentage of their total annual generation upon NREB recommendation of available RE resources in the area, as determined by the DOE.
In off-grid and missionary areas, eligible RE generation is eligible for RE Certificates under Section 8.
Where there are no viable RE resources in off-grid and missionary areas, the relevant electricity supplier remains obligated under the RPS provisions under Section 6.

Government share and royalty-related relief

Government share on existing and new RE development projects is one percent (1%) of gross income of RE resource developers resulting from sale of renewable energy produced and other incidental income arising from renewable energy generation, transmission, and sale—except indigenous geothermal energy.
Indigenous geothermal energy carries one and a half percent (1.5%) of gross income as government share.
The government waives its share from proceeds of micro-scale projects for communal purposes and non-commercial operations not greater than one hundred kilowatts (100 kW).

Environmental compliance requirement

All RE explorations, development, utilization, and RE systems operations must be conducted in accordance with existing environmental regulations as prescribed by the DENR and/or any other concerned government agency.
For purposes of environmental compliance under local government requirements, securing an Environmental Compliance Certificate (ECC) from the corresponding regional office of the DENR is sufficient, notwithstanding Section 17 (b)()(iii) of Republic Act No. 7160.

Fiscal incentives and tax benefits

RE Developers of renewable energy facilities, including hybrid systems, are entitled to incentives for the RE component proportionate to and to the extent of the RE component, as duly certified by the DOE in consultation with the BOI.
Income Tax Holiday (ITH):
- For the first seven (7) years of commercial operations, a duly registered RE developer is exempt from income taxes levied by the National Government.
- Additional investments in the project qualify for additional income tax exemption on income attributable to the investment.
- Discovery and development of new RE resources are treated as new investments for a fresh package of incentives.
- The entitlement period for additional investments cannot exceed three (3) times the period of the initial ITH availment.
Duty-free importation of RE machinery, equipment, and materials:
- Within the first ten (10) years upon issuance of DOE certification, imported machinery and equipment and materials and parts (including control and communication equipment) are exempt from tariff duties.
- Exempt items must be directly and actually needed and used exclusively in RE facilities for transformation into energy and delivery of energy to the point of use and covered by shipping documents in the name of the duly registered operator.
- DOE endorsement must be obtained before importation.
- DOE endorsement must also be secured before any sale, transfer, or disposition of imported capital equipment, machinery, or spare parts.
- If sold/transferred/disposed within the ten (10)-year period, at least one condition must apply:
  - sale to another RE developer enjoying tax and duty exemption on imported capital equipment; or
  - sale to a non-RE developer upon payment of taxes and duties due on net book value of the capital equipment; or
  - exportation of used capital equipment/machinery/spare parts or source documents required for RE development; or
  - reasons of proven technical obsolescence.
- If the sale/transfer/disposition is made after ten (10) years from importation, it is no longer subject to payment of taxes and duties.
Special realty tax rates:
- Registered RE developers’ realty and other taxes on civil works, equipment, machinery, and improvements actually and exclusively used for RE facilities must not exceed one and a half percent (1.5%) of original cost less accumulated normal depreciation or net book value.
- For integrated resource development and generation facilities under Republic Act No. 9136, real property tax is imposed only on the power plant.
Net Operating Loss Carry-Over (NOLCO):
- An RE developer’s NOLCO during the first three (3) years from start of commercial operation that was not previously offset is carried over as a deduction from gross income for the next seven (7) consecutive taxable years.
- Operating loss resulting from availment of incentives provided under this Act is not eligible for NOLCO.
Corporate tax rate after ITH:
- After seven (7) years of ITH, RE developers pay a corporate tax of ten percent (10%) on net taxable income as defined in the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 9337.
- The RE developer must pass on savings to end-users in the form of lower power rates.
Accelerated depreciation:
- If an RE project fails to receive an ITH before full operation, it may apply for accelerated depreciation in its tax books and be taxed based on that option.
- If it applies for accelerated depreciation, the project or its expansions no longer qualify for an ITH.
- Accelerated depreciation of reasonably needed and actually used plant, machinery, and equipment may use a rate not exceeding twice the rate that would have been used under annual allowance computation.
- The accelerated depreciation may use declining balance method or sum-of-the-years digit method.
Zero percent VAT:
- Sale of fuel or power generated from renewable sources of energy (including specified examples such as biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging sources using fuel cells and hydrogen fuels) is subject to zero percent (0%) VAT pursuant to the NIRC of 1997 as amended by Republic Act No. 9337.
- RE developers are entitled to zero-rated VAT on purchases of local supply of goods, properties, and services needed for plant development, construction, and installation.
- The zero-VAT also applies to the entire process of exploring and developing renewable energy sources up to conversion into power, including services performed by subcontractors and/or contractors.
Cash incentive for missionary electrification:
- A RE developer is entitled to a cash generation-based incentive per kilowatt-hour rate generated equal to fifty percent (50%) of the universal charge for power needed to service missionary areas where it operates.
- The incentive is chargeable against the universal charge for missionary electrification.
Carbon credits:
- Proceeds from the sale of carbon emission credits are exempt from any and all taxes.
Tax credit on domestic capital equipment and services:
- An RE operating contract holder receives a tax credit equal to one hundred percent (100%) of the value-added tax and custom duties that would have been paid if RE machinery, equipment, materials, and parts had been imported.
- The tax credit applies when the operating contract holder purchases from a domestic manufacturer for purposes under the Act.
- The domestic manufacturer must obtain prior DOE approval.
- The acquisition must be within the validity of the RE operating contract.
Hybrid and cogeneration:
- Tax exemptions and/or incentives in this Act apply to hybrid and cogeneration systems utilizing both RE sources and conventional energy.
- Incentives apply only to equipment/machinery/devices utilizing RE resources.
Intermittent RE resources—must dispatch:
- Intermittent RE generating units that are qualified and registered are treated as “must dispatch” and must receive priority dispatch, supported by system mitigation requirements described above.
Incentives for RE commercialization (locally produced equipment):
- Manufacturers, fabricators, and suppliers of locally-produced RE equipment and components recognized and accredited by the DOE (in consultation with DOST, DOF, and DTI) may register with the BOI to receive privileges under the section on commercialization incentives.
- BOI registration is facilitated through an agreement and administrative arrangement between BOI and DOE to facilitate registration of qualified RE facilities based on DOE accreditation.
- BOI must positively act on applications based on the accreditation issued by DOE.
- The renewable energy sector is declared a priority investment sector and forms part of the Investment Priority Plan unless declared otherwise by law; all DOE-accredited entities are entitled to incentives provided in the Act.
Tax/duty-free importation of components (for local manufacturers):
- Shipments necessary for manufacture/fabrication of RE equipment and components are exempt from importation and duties and VAT if:
  - not manufactured domestically in reasonable quantity at competitive prices; and
  - directly needed and used exclusively in the manufacture/fabrication; and
  - covered by shipping documents in the name of the duly registered manufacturer/fabricator delivered by customs authorities.
- Prior DOE approval is required before importation.
Tax credit for domestic components (for accredited suppliers/manufacturers):
- A tax credit equal to one hundred percent (100%) of VAT and custom duties that would have been paid on components/parts if imported is granted to RE equipment manufacturer/fabricator/supplier duly recognized and accredited by DOE who purchases from domestic manufacturers, subject to:
  - exclusivity and direct need for use in manufacture/fabrication/sale; and
  - prior DOE approval by the local manufacturer.
Income Tax Holiday and exemption for RE equipment manufacturers/fabricators/suppliers:
- For seven (7) years from date of recognition/accreditation, an RE manufacturer/fabricator/supplier is fully exempt from National Government income taxes on net income derived only from sale of RE equipment, machinery, parts and services.
Zero-rated VAT transactions for local manufacturers:
- Locally produced RE equipment manufacturers/fabricators/suppliers are subject to zero-rated VAT on transactions with local suppliers of goods, properties and services.

Additional fiscal incentives and rate-based relief

Farmers engaged in plantation of biomass resources:
- For ten (10) years after Act effectivity, individuals and entities planting crops/trees used as biomass resources (e.g., jatropha, coconut, sugarcane) certified by DOE are entitled to duty-free importation and VAT exemption on agricultural inputs, equipment, machinery, and specified examples including fertilizer, insecticide, pesticide, tractor, trailers, trucks, farm implements and machinery, harvesters, threshers, hybrid seeds, genetic materials, sprayers, packaging machinery and materials, bulkhandling facilities (including conveyors and mini-loaders), weighing scales, harvesting equipment, and spare parts.
Tax rebate for purchase of RE components:
- The DOF provides rebates for all or part of tax paid on purchase of RE equipment for residential, industrial, or community use.
- The DOF prescribes the period for granting the tax rebates (after required consultations).
Universal charge exemption:
- Power and electricity generated through the RE system for generator’s own consumption and/or free distribution in off-grid areas is exempt from universal charge under Section 34 of Republic Act No. 9136.
Transmission charges for intermittent resources:
- A registered RE developer producing power from an intermittent RE resource may opt to pay TRANSCO (or successors-in-interest) transmission and wheeling charges on a per kilowatt-hour basis at a cost equivalent to the average per kilowatt-hour rate of all other electricity transmitted through the grid.
Period of grant of fiscal incentives:
- Fiscal incentives under Section 15 apply to all RE capacities upon effectivity.
- NREB and DOE submit a yearly report every January to the Philippine Congress through the Joint Congressional Power Commission for each year following the period in review, including progress and benefits/impact for energy security and climate change imperatives to serve as basis for congressional review of incentives.

Registration and certification duties

RE Developers and local manufacturers, fabricators, and suppliers of locally-produced renewable energy equipment must register with the DOE through the REMB.
Upon registration, DOE issues a certification to each registered RE Developer and local manufacturer/fabricator/supplier as basis for entitlement to incentives under Chapter VII.
DOE issues all certifications required to qualify for incentives through REMB.
DOE must issue such certification fifteen (15) days upon request.
DOE certifications do not prejudice any further requirements by government agencies administering the fiscal incentives.

Board creation, trust fund, and reporting

The National Renewable Energy Board (NREB) is created and composed of:
- Chairman and one representative each from DOE, DTI, DOF, DENR, NPC, TRANSCO or its successors-in-interest, PNOC, and PEMC designated by their respective secretaries on a permanent basis; and
- one representative each from RE Developers, Government Financial Institutions (GFIs), private distribution utilities, electric cooperatives, electricity suppliers, and nongovernmental organizations, endorsed by their industry associations and appointed by the President.
The Chairman must convene the NREB within one (1) month from the Act’s effectivity.
The NREB is assisted by a Technical Secretariat from the DOE Renewable Energy Management Bureau, which reports directly to the DOE Secretary or Undersecretary depending on the case.
The NREB determines the Technical Secretariat staffing complement subject to approval by the DBM and civil service rules.
NREB powers and functions include:
- evaluating and recommending to DOE the mandated RPS and minimum RE generation capacities in off-grid areas;
- recommending actions to facilitate the National Renewable Energy Program (NREP) to ensure no overlapping and redundant functions among national agencies;
- monitoring and reviewing implementation of NREP including RPS compliance and off-grid minimum RE capacities;
- overseeing and monitoring utilization of the Renewable Energy Trust Fund administered by DOE; and
- performing other necessary functions to attain objectives.
A Renewable Energy Trust Fund (RETF) is established, administered by DOE as a special account in any of the GFIs.
The RETF is exclusively used to finance R&D, demonstration, promotion of widespread and productive use of RE systems for power and non-power applications; provide funding for joint public-private R&D institutions; provide scholarship and fellowship for energy studies; support development and operation of new RE resources through competitive and transparent grant mechanisms; conduct nationwide resource and market assessments; propagate RE knowledge through accredited entities, tapping, training, and providing benefits to institutions; and fund other activities necessary or incidental to objectives.
RETF resources can be used through grants, loans, equity investments, loan guarantees, insurance, counterpart fund or other financial arrangements, using competitive and transparent allocation “as far as practicable.”
RETF is funded from proceeds of emission fees consistent with Republic Act No. 8749 (Clean Air Act of 1999), specified percentages of net annual income and dividends from specified government entities, contributions/grants/donations, government share proceeds from indigenous non-renewable energy resources, RETF-generated revenues, and proceeds from fines and penalties imposed under the Act.
Government financial institutions (DBP, LBP, Phil-Exim Bank, and others) provide preferential financial packages for RE projects as recommended and endorsed by DOE, consistent with their charters and applicable laws.

Waste-to-energy, host communities, and implementation organization

The DOE encourages adoption of waste-to-energy facilities (including biogas systems) where practicable and, in coordination with DENR, ensures compliance.
Waste-to-energy technologies convert biodegradable materials such as animal manure or agricultural waste into useful energy through processes such as anaerobic digestion, fermentation and gasification, subject to Republic Act No. 8749 and Republic Act No. 9003 (Ecological Solid Waste Management Act of 2000).
Incentives for RE host communities/LGUs:
- Eighty percent (80%) of the royalty and/or government share from RE host communities/LGUs from