THlRTEENTH CONORESS OF THE REPUBLIC) 
OF THEPHILIPPINES 
) 
First Regular Session 
1 
. .. ,. 
Introduced by Sen. Juan M. Flavier 
I 
EXPLANATORY NOTE 
As of June 2004, the National Power Corporation ("C) 
started charging every 
household in the major island grids in the Philippines a generation charge of 
PhF'2.2802kWb for Luzon, PhP2.5238 for the Visayas, and PhP1.5101 for Mindanao. 
The fhel cost components of these generation charges amount to PhP0.6718hh for 
Luzon, PhP1.1705 for the Visayas, and PhP0.2963 for Mindanao. On top of the above 
generation charges, the NPC was authorized to recover in full the remaining Net Fuel and 
Power Cost Adjustment (FPCA) for the Visayas within two months from June 2004 in an 
amount equivalent to PWO.O989/kWh. The fuel cost components of the generation 
charges represent NpC's recovery of fuel costs. Shown in the table blow is a co%parison 
of NPC's fuel oil costs for the five-month period before the June 2004-approved 
generation charge with similar five-month periods for the immediately preceding five- 
year period. 
April 
2001 7 
I 
I 
I 
I 
The above figures show an increase in fuel cost by about 60% for %el oil and 50% for 
diesel. 


On the other hand, for a similar five-year period the average costs of imported coal 
for the NPC-owned as well as the IPP-owned coal-fred power plants are shown below. 
2003 
FOB 
Freight 
1 
2000 
200 1 
2002 
2004 
FOB 
Freight 
coal 
at 
US$/MT 
27.34 
6.00 
24.00 
50.80 18.8 
Freight 
FOB 
Freight 
FOB 
Freight 
7.26 
25.21 
6.50 
26.10 3.99 
5.27 
26.00 
5.50 
26.54 4.10 
5.90 
24.00 
5.80 
27.24 3.60 
26.00 
3.70 
38.00 15.00 
26.56 
6.35 
48.18 17.80 
The current costs of imported coal for NPC-owned and IPP coal-fired power plants 
represent an increase of about 52% FOB and 35% freight per metric ton. And the trend 
of the FOB cost of imported coal for the rest of 2004 indicates a price of US$65 per 
metric ton. 
At the very least, the increases in the prices of imported &el oil and coal mean (a) 
utilization of foreign exchange and @) burden to the general public by way of additional 
costs of electricity and other services. And more significantly, fossil-fired power plants 
contribute to the climatic changes that have caused so much destruction worldwide. 
Recognizing a duty to help maintain a balance in the environment, the Senate ratified the 
Kyoto Protocol in October 2003. As a proactive measure to implementing the Kyoto 
Protocol is the need to re-calibrate the power development program of the country. 
Cognizant of the importance of maintaining a sustainable balance between economic 
development and progress on the one hand, and electric power energy requirements of the 
economy on the other hand, it has become imperative to focus the quest for security for 
its energy and electricity requirements to the development of the country’s indigenous 
and environment-friendly energy sources. The Philippine Energy Plan 2004 - 2013 has 
amply demonstrated the vast renewable energy sources of the country - hydropower, 
geothermal, wind, solar and biomass, among others. Their development will translate 
into displacement of imported fossil-hel, and over time a security in electric energy 
of the economy. 
important in the development of the country’s renewable energy sources is 
an investment climate that will enable the Philippines to be at least 
foreign investments. Defined, firmed and transparent process 


legislative proposal seeks to make the Philippines achieve security in the 
requirements of the economy, contribute to the accomplishment of the 
Kyoto Protocol, and most importantly maintain a balanced ecology in 
time for addressing the effects of abrupt climatic changes is now. 
In view of the foregoing, the early passage of this bill is earnestly urged 


I 
I 
, y '  , ( '  
'I 
<i 
THIRTEENTH CONGRESS OF THE REPUl3LIC 
First Regular Session 
OF THJ3PHaIPPwES 
. 
.-.. . 
. -~ 
.> . 
Introduced by Sen. Juan M. Flavier 
AN ACT 
PROMOTING TFJE DEVELOPMENT, UTJLIZATION AND 
COMMERCIALIZATION OF RF;NEWABLE ENERGY SOURCES 
AND FOR OTHER PURPOSES" 
Be it enacted by the Senate and House of Representatives of fhe Philippines in Congress 
assembled: 
CHAPTER I 
TITLE AND DECLARATION OF POLICY 
Section 1. Short Title. - This Act shall be known as the "Renewable Energy Act 
of 2004". 
Section 2. Declaration of Policies. - It is hereby declared the policy of the State 
I 
'to: 
I 
chieve self-reliance in the country's energy requirements primarily through the 
a' i. 
exploration, development and utilization of renewable energy resources including 
but not limited to biomass, solar, wind, hydro, geothermal, and ocean energy 
sources or hybrid systems; 
b. Promote greater private sector investment and participation in the implementation 
of renewable energy activities and projects; 
c. Prioritize the development and utilization of renewable energy resources and 
technologies, in view of their environmental benefits, to improve energFsecurity 


and catalyze economic development in the countryside through the energization 
- -  
of off-grid communities; 
-2 
d. Establish the institutional infrastructure and provide key government inputs to 
develop national and local capabilities in the use of renewable energy systems, 
encourage their widespread commercial applications and promote their efficient 
utilization; 
e. Promote and prioritize the utilization of electrical energy from power generation 
facilities utilizing renewable energy resources, including but not limited to wind, 
solar, ocean, hydro, geothermal, and biomass energy, whose facilities are capable 
of supplying electricity through the Main Grid or Transmission Systems under 
R.A. 9136, to reduce dependence on imported sources of fuel and to assure the 
development of facilities which utilize environment-tiiendly sources of energy; 
Promote and prioritize the utilization of renewable energy resources for non- 
power application; and 
g. Promote people empowerment by providing opportunities for all stakeholders to 
participate in the development, planning, and implementation of renewable 
energy projects and activities. 
f 
Section 3. Scope. - This Act shall provide the framework for the exploration, 
develo ment and utilization of the country’s renewable energy resources, encourage their 
widesp 4 ead commercial applications, and promote their efficient utilization, including the 
development of local capabilities in all aspects of Renewable Energy Systems. 
Section 4. Definition of Term. - As used in this Act, the following terms shall 
mean as follows: 
a. “Affiliated Renewable Energy Centers’’ or “ARECs” refer to the institutions 
established by the Department of Energy (DOE) to pzvide extension and 
technical services at the national and local levels in the promotion and 
dissemination of renewable energy technologies. An AREC refers to any 
university, college, non-government 
organization or private volunteer 
organization certified by the DOE upon its compliance with the technical and 
legal requirements that shall be imposed by the DOE; 
- -  


b. “Alternative Pnels/Alternative Fuel Systems” refer to the use of materials, 
machinery, and/or equipment to generate power using non-petroleum fuels. The 
machinery and/or equipment may be modified from its original condition or an 
original equipment manufacturer (OEM) that allow the usage of alternative fuel or 
that fkther produce, handle, store, and/or utilize alternative fiiels; 
c. “Biomass Energy Systems” refer to energy systems which use biomass 
resources to produce heat, steam, mechanical power or electricity throngh either 
thermochemical, biochemical or physiochemical processes; 
d. “Biomass Resources” refer to plants and plant materials, trees, crop residues, 
wood and bark residues, and animal manure or any organic matter that can be 
used in bioconversion process; 
e. “Board of Investments” or “BOI” refers to an attached agency of the 
Department of Trade and Industry created under Republic Act No. 5186, as 
amended; 
f 
‘Department of Budget and Management” or “DBM” refers to the 
overnment agency created pursuant to Executive Order No 25, as amended; 
‘Department of Energy” or “DOE” refers to the government agency created 
1 
ursuant to Republic Act No. 7638 whose functions are expanded in R. A. 9136 
and hrther expanded herein; 
h. “Department of Finance” or “DOF” refers to the government agency created 
pursuant to Executive Order No. 127, as amended; 
“Department of Science and Technology” or “DOST” refers to the government 
agency created pursuant to Executive Order No. 128; 
“Department of Trade and Industry’’ or ‘-‘DTI” refers=to the gavernment 
agency created pursuant to Executive Order No. 133; 
k. “Department of Tourism” or “DOT” refers to the government agency created 
pursuant to Executive Order No. 120; 
1. “Distribution of Electricity” refers to the conveyance of electricity fiom 
transmission facilities or embedded generators to end-users by a Distribution 
Utility through its distribution system pursuant to the provision of Republic Act 
NO. 9136 and its implementing rules and regulations; 
g. 
i. 
j. 
m. “Distribution Utility” refers to an electric cooperative, private corporation, 
government-owned utility or existing local government unit which has an 


n. 
0. 
P. 
S .  
t. 
U. 
V. 
W 
exclusive franchise to operate a distribution system in accordance with its 
franchise and Republic Act No. 9136; 
“Energy Regulatory Commission” or “ERC” refers to the regulatory agency 
created pursuant to Republic Act No. 9136; 
“Generation Facility” refers to a facility for the production of electricity; 
“Geothermal Energy” refers to all geothermal fluids whether existing naturally 
or formed by the artificial introduction of fluids into naturally hot formation, heat 
energy in the earth, and any by-product derived from them; 
“Geothermal Energy Systems” refer to machines or other equipment that 
converts geothermal energy into useful power; 
‘Geothermal Resources” mean (a) all products of geothermal processes, 
mbracing indigenous s t e m  hot water and hot brines; (b) steam and other gases, 
ot water and hot brines resulting &om water, gas, or other fluids artificially 
ntroduced into geothermal formations; (c) heat or associated energy found in 
geothermal formations; and (d) any by-product derived from them. 
“Government Share” refers to the amount due the National Government and 
Local Government Units from the value of renewable energy resources; 
“Green Energy Rating Program” refers to a program that identifies and 
recognizes project developers, investors, operators andlor end-users that have 
participated in the implementation of most successful RE projects and activities; 
“Green Pricing” refers to pricing scheme wherein electricity consumers agree to 
pay a premium price for electricity generated using RE sources and technologies; 
“Main Grid” refers to the high voltage backbone system of interconnected 
transmission lines, substations and related facilities, located in each of Luzon, 
Visayas, and Mindanao, or as may otherwise be determined by the ERC in 
accordance with the implementing rules and regulations of Republic Act No. 
9136; 
1 
~- 
-~ 
. “Hybrid Systems” refer to any power or energy generation facility which makes 
use of two or more types of technologies utilizing both conventional and/or 
renewable fuel sources, such as but not limited to integrated wind/diesel systems, 
integrated solar/wind systems, biomass/fossil fuel systems, hydro/fossil fuel 
systems, integrated solarhiomass systems, integrated wind/fossil fuel systems, 


z. 
I 
ts auxiliary facilities, such as diversion stmcture, headrace, penstock, substation, 
.transmission, and machine shop, among others; 
“Hydroelectric Power Resources” or “Hydropower Resources” refer to water 


K “Minimum Renewable Electricity Generation” refers to the minimum 
percentage of the total annual electricity generated, transmitted and distributed to 
electricity customers in a specific jurisdiction and period that will be required to 
e sourced from RE-based power projects and technologies; 
Electrification” refers to the provision of electricity service in 
nviable areas with the aim of bringing the operations in these areas to viability 
hh. “National Power Corporation” of “NPC” refers to the government corporation 
created under Republic Act No. 6395, as amended; 
ii. “National Transmission Corporation” or “TRANSCO” refers to the 
corporation created pursuant to Republic Act No. 9136 responsible for the 
planning, consimction, and centralized operation and maintenance of high voltage 
transmission facilities, including grid interconnection and-awiilary serviees; 
jj. “Ocean Energy Systems” refer to energy systems which convert ocean or tidal 
current, ocean thermal gradient or wave energy into electrical or mechanical 
energy; 
kk. (‘Off-Grid Systems” refer to electrical systems not connected to the wires and 
related facilities of any Mini-Grid System or the On-Grid Systems of the 
Philippines; 
11. “On-Grid System” refer to electrical systems composed of interconnected 
transmission lines, substations and related facilities for the purpose of conveyance 
of bulk power on the Main Grid of the Philippines; 
mm. 
“Power Development Program” or “PDP” refers to the indicative plan 
for managing electricity demand through energy-eficient programs and for the 
upgrading, expansion, rehabilitation, repair and maintenance of power generation 
and transmission facilities, formulated and updated yearly by the DOE in 
coordination with the generation, transmission and distribution utility companies; 
nn. “Renewable Energy Developers” or “RE Developers” refer to Filipino 
individualh or a group of individuals formed in accordance with existing 
Philippine Laws engaged in the exploration, .development and utilization of 
renewable energy resources and actual operation of renewable energy 
systems/facilities; 


00 Renewable Energy Resources” or “RE Resources” refer to energy resources 
hat do not have an upper limit on the total quantity to be used. Such resources are 
I 
enewable on a regular basis, and whose renewal rate is relatively rapid to 
consider availability over an indefinite period of time. These include, among 
others, biomass, solar, wind, hydropower, geothermal, and ocean energy, and 
other emerging energy sources using technologies such as he1 cells, hydrogen 
fuels, among others; 
pp. “Renewable Energy Systems” or ‘‘RES” refer to energy systems which convert 
renewable energy resources into useful energy forms, like electrical, mechanical, 
-- 
etc.; 
c 
qq. “Republic Act No. 9136” or “Electric Power Industry Reform Act of 2001” 
refers to the law mandating the restructuring of the electric power sector and the 
privatization of the NPC; 
rr. “Rural Electrification” refers to the delivery of basic electricity services, 
consisting of power generation, subtransmission, and/or extension of associated 
power delivery system that would bring about important social and economic 
benefits to the countryside; 
ss. “Operating Contract” refers to a contract or agreement entered into by and 
between the Government and a Filipino individual, group of individuals or a 
corporation organized under existing Philippine Laws, involving the exploration, 
development and utilization of renewable energy resources; The details of the 
implementation shall be contained in the Implementing Rules and Regulations of 
this Act; 
tt. “Operator” refers to a renewable energy developer, whether alone or in 
consortium with others, involved in the exploration, development and utilization 
bf renewable energy resources under an operating contract agreement with the 
vernment; 
uu. ‘Solar Energy” refers to the energy derived from solar radiation that can be 
r 
onverted into useful thermal or electrical energy; 
w. “Solar Energy Systems” refer to energy systems which convert solar energy into 
thermal or electrical energy; 


ww. 
6LSmall Power Utilities Group” or “SPUG” refers to the functional unit 
of the National Power Corporation mandated under Republic Act No. 9136 to 
pursue missionary electrification function; 
xx. “Transmission of Electricity” refers to the conveyance of electricity through the 
yy. “Unviable Area” refers to a geographical area within theTranchise-zea of a 
Distribution Utility where immediate extension of distribution line is deemed not 
feasible; 
high voltage backbone system; 
zz. “Wind Energy” refers to the energy that can be derived from wind that is 
converted into useful electrical or mechanical energy; 
am. 
“Wind Energy Systems” refer to the machines or other related 
equipment that convert wind energy into usehl electrical or mechanical energy; 
bbb. 
“Waste-to-Energy Technologies” refer to systems which convert 
biodegradable materials such as animal manure, agricultural waste, etc. into 
useful energy through chemical processes such as anaerobic djgestion, 
fermentation and gasification, among others; 
ccc. 
“Wholesale Electricity Spot Market” or “WESM” refers to the 
wholesale electricity spot market created pursuant to Republic Act No. 9136; 
CfLAPTER I1 
ORGANIZATION 
Section 5. Iqplementing Agency and Its Powers and Fgmtiions. - In addition io 
its existing mandate, the DOE shall have the following powers and functions under this 
Act: 
a. Formulate, implement and regularly update a comprehensive Renewable Energy 
Policy Framework (REPF) which shall be aimed at accelerating the exploration, 
development and utilization of renewable energy sources to attain the goals of 
energy self-sufficiency, energy affordabilit), rural eli%trificationi-poverty 


, 
, 
g. 
administration of RE resources; 
Encourage the development of a program to quantify and certify Greenhouse Gas 
(GHG) Allowances from RE projects; 


Resources Board (hWRB), Department of Environment and Natural Resources- 
Environmental 
Management Bureau @Em-EMB), Energy Regulatory Commission (ERC), 
Department of Finance @OF), Department of Trade and Industry @TI), among 
others, such rules and regulations as may be necessary to implement the 
objectives and provisions of this Act; 
1. 
Generally exercise all powers necessary or incidental to attain the purpose of this 
Act and other laws vesting additional powers on the DOE. 
Section 6. Institutionalization of AfJiriated 
Renewable Energy Centers 
{AREcs). - There shall be established ARECs to serve as a support to the extension and 
technical services of the DOE in the field implementation of renewable energy projects 
,pursu t to the objectives of this Act. An AREC can be a recipient of donationdgrants 
from D E and other donor agencies so as to develop and strengthen their capabilities to 
effecti ely perform their responsibilities under the Renewable Energy Policy Framework. 
The 1 
iliated Non-conventional Energy Centers (ANECs) shall be known as ARECs 
upon evaluation and accreditation of the DOE. 
Section I .  Roles of Other Agencies and Institutions. - This Act mandates the 
following agencies and institutions to perform or carry out specific functions and 
responsibilities: 
.- 
a. Cooperating Research Institutions (CRIs), duly accredited by the DOE, in 
collaboration with DOST shall implement research and development projects and 
activities consistent with the priorities in the REPF. Such activities include the 
conduct of research activities, pilot studies and demonstration projects as well as 
technical support and consultancy services; 
b. The National Transmission Corporation (TRANSCO) shall ensure the 
interconnection and access of RE generating facilities to the grid; 


c. ERC is mandated to set the rules in the computation of rates that allow fair 
economic returns for RE systems developerdoperators serving remote, off-grid 
and unviable areas; 
d. NPC-SPUG, in the performance of its missionary electrification functions, shall 
give priority to renewable energy sources and technologies for the energization of 
remote and rural areas; 
e. The BOI, in consultation with DOE and other stakeholders, shall include 
renewable energy projects and activities in its annual Investment Priorities Plan to 
attract both domestic and foreign investors; and 
f. The DOF and the DBM shall provide sufficient fund allocation for the full 
implementation of this Act. 
I 
CHAPTER III 
ON-GRZD RENEWABLE DEVELOPMENT 
Section 8. On-Grid Renewable Energy Generation. - The DOE shall develop 
and implement a Renewables Portfolio Standard (RPS) that mandates all grid-users, 
particularly the distribution utilities and electricity suppliers, a percentage utilization of 
electricity fiom eligible RES and targets fifty per cent (50%) REs_capacity-sf-the total 
generation on the Grid. The timetable and scheme of implementation for this target shall 
be stipulated in the REPF and the Philippine Energy Plan. 
Section 9. Minimum Renewable Electricity Generation Policy. - To create an 
initial market for RES facilities and promote greater environmental sustainability within 
the electric power industry, DOE and other industry participants shall develop a 
mechanism to implement a minimum electricity generation policy from renewable energy 
in the Wholesale Electricity Spot Market (WJ3SM). The DOE shall determine the 
optimum value of said percentage share of renewable energy in the WESM based on the 
implementation of the Renewables Portfolio Standard. The DOE in consultation with 
other industry participants shall set the proper timing for the implementation of the same. 
'' 


c 
Y 
Section 10. Intermiftent Renewable Energu Generation. - Specific for power 
generating facilities using intermittent RE souces such as wind and solar among others, 
the DOE, in coordination with TRANSCO and other industry participants, shall facilitate 
the interconnection of these facilities to the Main Grid and shall formulate production 
predictability incentive schemes (capacity forecast premium). 
11. Green Pricing Advocacy. - The DOE shall provide the necessary 
Green Pricing Advocacy that promotes the choices and preferences of 
for environment-friendly renewable energy sources and technologies 
of a Green Pricing Program. 
CHAPTER N 
OFF-GRID RENEWABLE ENERGY MARKET 
Section 12. Off-grid Renewable Energy Development Bogzam. - Thentilization 
of renewahle energy resources in power generation in energizing off-grid barangays and 
households shall be prioritized; Provided, However, that the same will promote social 
economic returns in said concerned areas. Consistent with the provisions of Section 70 of 
the Republic Act No. 9136 and the Rules and Regulations promulgated therefor, the 
DOE, NPC-SPUG and National Electrification Administration, through the Rural Electric 
Cooperatives established in accordance to Law, shall prioritize the type of renewable 
energy technologies and systems on a least-cost basis. The DOE shall endeavor to devise 
schemes for the standardization of renewable energy equipment for efficient utilization. 
Section 13. Off-Grid Renewable Energy Zones. - Consistent with the Policy 
herein provided, the President of the Republic of the Philippines is hereby empowered to 
establish off-grid renewable energy zones / sites / areas, where abundant renewable 
energy sources have been determined to exist, upon the recommendation of the DOE. 
Section 14. Promotion of Hybrid Systems. - The use of hybrid systems and 
applic tions for off-grid areas shall be pursued because of its potential effectiveness in 
e 


in Secdons 
CHAPTERV 
20,21 and 23 oftbis Act to firms and entities duly certified by DOE 
OTHER RENEWABLE ENERGY MARKETS 
GOVERNMENT SHARK 
Section 17. Uniform Government Sharing Scheme. The Production Bonus, 
Section 15. Promotion of Non-Power Renewable Energy Systems. - The DOE 
shall develop specific support programs for business entities, marketers and distributors 
of, among others, solar water heaters, windpumps, biomass-fired-thermal sysrems and 
other non-power renewable energy equipment such as engines, machines and/or 
equipment capable of using alternative fuels or fossil/altemative fuel blends as energy 
source. DOE shall ensure that these entities can also avail of the incentives provided for 
renewable energy markets and activities as specified under Section 24 of this Act. 
Section 16. Renewable Energy and Ecotourisnz. - The DOT, in collaboration 
with the DOE, shall develop technical and financing support programs for ecotourism 
projects using renewable energy systems and establish accreditation system for the use of 
environment-friendly renewable energy resources in facilities located or to be constructed 
in tourist spots, such as beaches, spas, resort areas, cultural centers, etc. The DOT and 
DOE shall prepare a priority list of ecotourism projects with renewable. energy 
component to promote viable investments in remote and rural areas. The BO1 shall 
incorporate the same in the annual preparation of its Investment Priorities Plan. 
CHAPTERVI 


t 
Order 32 and Section 10 (1) of Republic Act No. 7156; respectiveIy, and other royalties 
on RE development projects, shall be equal to at least one and one half per centum 
(1.5%) I of the gross proceeds. Accordingly, provisions of said Laws inconsistent herewith 
are hereby amended. 
The distribution and allocation of Government Share / Special Privilege Tax / 
Royalty shall be in accordance with the Sections 290, 292 and 294 of Republic Act No. 
7160, otherwise known as the “Local Government Code of 1991”; Provided, That, for the 
period of not exceeding five (5) years, the National Government 
. Share, eq&alent to 
sixty per cent (60%) of the production bonus, special privilege tax and royalty shall be 
waived for the country’s first 300-megawatt cumulative RE capacity additions starting 
from the date of approval of this Act. 
The government share, as provided in Presidential Decree No. 1442 and its 
Implementing Rules and Regulations, payable by the service contractor shall be equal to 
at least two per centum (2%) o f  the gross revenues of the contractor from the sale of 
geothermal steam. Such government share shall be made payable to the National 
Government and the Local Government Units on or before the 20* day of the month 
following the end of each calendar or fiscal quarter and shall be hlly tax deductible. In 
case of integrated steamfield and power plant operation by a contractor, the government 
share of at least two per centum (2%) shall he based on the gross sales of geothermal 
steam used for generating power at a transfer price to be set by DOE based on a generally 
acceptable criteria to be prescribed by DOE. The share of the Local Government Units 
from this government share shall be made by the service contractor in accordance with 
Republic Act No. 7 160. 
CHAPTER VZI 
I 
ENVIRONMENTAL COMPLIANCE 
Section 18. Compliunce with Environmental Regulutians. - All renewable 
energy explorations, development, utilization, and RES operations shall be conducted in 


accordance with existing environmental regulations as prescribed by the DOE and/or any 
other government agency. 
Section 19. Mandatory Restoration Work. - In all cases where the proposed 
hydroelectric power development entails the closure or stoppage of existing water outlets, 
passageways, connections, conduits, apertures or the like from &e%ater source, it shall 
be mandatory for the hydropower operating contract holder to restore or reengineer such 
water outlets, passageways, connections, conduits, apertures or the like on its account or 
expense, and in such manner that existing users or appropriators shall not be permanently 
deprived of their use or appropriation; 
. -- 
In all other cases where the proposed RE development projects shall affect the 
environment in any manner, the RE operating contract holder shall be mandated to 
implement appropriate restoration works in the affected areas to its original conditions. 
A RE operating contract holder in an area shall open a “Trust Account” jointly in 
the name of the contractor, the DOE and the concerned municipality/ies or cityhes 
wherein an amount equivalent to at least one centavo (Pbp 0.01) per kilowatt-hour or 
electricity sold shall be deposited in a commercial bank on a quarterly basis to cover the 
cost of environmental assurance, restoration, re-engineering and rehabilitation works. 
This amount shall be determined by the Secretary of the DOE, in consultation with the 
ed host comunityfies and local government ~
t
k
 
based on environmental 
requirement of each project. 
I 
CHAPTERM 
GENERAL INCENTIVES 
Section 20. Incentives for Renewable Energy Bojects and Activities. - All RE 
developers and operators of renewable energy facilities, as duly certified by the DOE and 
in consultation with the DOF and DTI, shall be entitled to the following privileggs: 
. -~ 
- 


a. Tax rmd Duty-free Importation @Machinery, Equipment and Materials. - Within 
the duration of a RE operating conttact, importation of machinery and equipment, 
and materials and parts thereof, whether or not shipped with such machinery and 
equipment, including control and communication equipment, shall not be subject 
to tariff duties and value-added tax: Provided, however, that the said machinery, 
equipment, materials and parts are: 
. --. 
1. not manufactured domestically in reasonable quantity and quality; 
2. directly and actually needed and shall he used exclusively in the RE facilities for 
transformation into energy, and transmission of electric energy to the point of use; 
and 
3. covered by shipping documents in the name of the duly registered Operator to 
whom the shipment wifI be directly delivered by customs authorities: 
ProvidedfirtheT, that prior approval of the DOE is obtained before the importation of 
such machinery, equipment, materials and parts are made; 
h. T m  Credit on Domestic Ccipital Equipment. - A tax credit equivalent to one 
hundred percent (100%) of the value of the value-added tax and custom duties 
that would have been paid on the machinew, equipment, materials and parts had 
these items been imported shall be given to a RE operating contract holder who 
purchases machinery, equipment, materials and parts from a domestic 
manufacturer for purposes set forth under sub-paragraph 2 of the immediately 
preceding paragraph (a). Providedfwther, that prior approval by the DOE was 
obtained by the local manufacturer. Provided$mZ&, that the acquisition of such 
machinery, equipment, materials, and parts shall be made within the validity of 
the RE operating contract; 
c. Real Estate Tax Exemption. - Any provision of existing Laws to the contrary 
notwithstanding, all lands, including easements, civil; works, equipment, 
machinery, and other improvements of a registered RE developer actually and 
exclusively used for RES facilities shall be exempted from the payment of any 
real estate tax; Provided, That the activities they engage in exhibit high social 
economic returns and necessary to assist reasonable recovery of large 
investments. 
. - 


c 
. -- 
. 
d. Value-added TQK Exemption. - The sale of electricity generated from RE facilities 
shall be exempt from the ten percent (10%) value-added tax based on the gross 
receipts; 
e. Income T m  Holiday and Exemption. - Within seven I twelve (7) / (12) years 
following the actual commercial operation of a RE facility, the RE operating 
contract holder shall be klly exempt from income taxes levied by the National 
Government. 
f, RE Production Predictability/Forecast PremiumBoms. - RE contract holder 
shall be entitled to a share of RE Production PremiumA3onus proportionate to the 
actual power generation from its RE facility as determined by the DOE. For this 
purpose, there is hereby established a Production Premiudonus Fund and for 
which one centavo @hp 0.01) for every kilowatt-hour sold shall be collected from 
every generating facilities by the TRANSCO and/or system market operator. 
21. Hybrid and Cogeneration Systems. The tax exemptions and/or 
for in Section 20 shall be availed of by RE operating contract holders 
systems, utilizing both RE sources and conventional energy; 
Provided, however, that tax exemptions and incentives shall apply only to the equipment, 
machinery and/or devices utilizing renewable energy sources. 
Section 22. Non-Fiscal Zncentives for RE Developers. Within ten (10) years 
following the effectivity of this Act, all RE operating contract holders shall have the 
following additional incentives, subject to the DOE’S review every 
. three (3) yeas. 
a. Priority Dispatch - RES utilizing biomass, wind, solar, geothermal, hydro, and 
ocean energy shall have the first right to supply electrical energy, up to its 
maximum capacity, to any grid whether or not any fossil power generating facility 
is operating therein subject to the Renewables Portfolio Standards provided under 
Section 8 hereof 
b. ExclusionJiom Payment of Aricilillavy Services - Any R E S  may be excluded from 
any obligation to pay “Load Following and Frequency Regulation”, ”Spinning 
Reserve”, “Back-up Reserves”, and “Energy Imbalances”; (or “to exclude RES 
from any requirement to provide ancillary serves”); 


c. Exclusion from Payment of Interconnection and Wheeling Charges - Any RES 
may be excluded from any requirement to pay interconnection and wheeling 
charges as required under existing laws; 
d. Exemption From De Universal Charge. - Power and electricity generated 
through RES for the generator’s own consumption and/or for free distribution in 
the off-grid areas shall be exempted from the payment of the Universal Charge 
provided for under Section 34 of Republic Act No. 9136. 
Section 23. Incentives for RE Commercialization - All manufacturers, 
fabrica ors and suppliers of locally-produced RE equipment and components duly 
recogn ed and accredited by the DOE, in consultation with DOST, DOF and DTI, shall 
be enti led to the following privileges. 
t 
6 
a. Tmc and Duty-free Importation of Components, Parts and Materials - All 
shipments necessary for the manufacture and/or fabrication of RE equipment and 
components shall be exempted to importation tariff and duties and value added 
tax; Provided, however that the said components, parts and materials: (a) are not 
manufactured domestically in reasonable quantity and quality at reasonable 
prices; (b) are directly and actually needed and shall he used exclusively in the 
manufacture/fabrication of RE equipment; and (c) are -eovered by-shipping 
documents in the name of the duly registered manufacturer/fabricator to whom 
the shipment will be directly delivered by customs authorities: Provided further, 
that prior approval of the DOE was obtained before the importation of such 
components, parts and materials were made; 
b. Tax Credit on Domestic Capital Components, Parts and Materials - A tax credit 
equivalent to one hundred percent (100%) of the value of the value-added tax and 
custom duties that would have been paid on the components, parts and materials, 
had these items been imported shall be given to a RE equipment manufacturer, 
fabricator, and supplier duly recognized and accredited by the DOE, who 
purchases RE components, parts and materials from a domestic manufacturer. 
Provided, that such Components, materials and parts are directly needed and shall 
be used exclusively by the RE manufacturer, fabricator and supplier for the 


manufacture, fabrication and sale of RE equipment. Provided further, that prior 
approval by the DOE was obtained by the local manufacturer. 
c. Local Tmces - All duly recognized and accredited RE equipment 
manufacturers/fabricators shall be exempted fiom taxes and fees imposed by local 
government units, such as real estate tax on lands, local business tax, building 
permits fees, among others; Provided that the manufacturing/fabricating facilities 
'are in compliance with the established performance standards certified by the 
OE; 
pecial Realty Tnx Rates on Equipment andMachinery - Any provision of the 
ea1 Property Tax Code or any other law to the contrary notwithstanding, realty 
and other taxes on civil works, equipment, machinery, and other improvements of 
a DOE recognized and accredited RE manufacturer, fabricator and supplier of RE 
equipment shall not one percent (1%) of their original cost of such civil works, 
machinery, equipment, devices andor other components; 
e. Value-added Tmc Exemption -Exemption ftom the ten percent (10%) value-added 
d. 1 
tax on (i) the gross receipts derived from the sale of locally-manufactured RE 
equipment and components; (ii) imported and locally purchased machinery, 
equipment and devices described in items (a) and (b) hereog and (iii) other local 
ValueAdded Tax. 
f. Income Tmc Holiday and Exemption - For seven (7) years starting from the date 
of recognitiodaccreditation, a RE manufacturer, fabricator and supplier of RE 
equipment shall be fully exempt fiom income taxes levied by the National 
Government. 
. - 
. 
Section 24. Renewable Eneqy Trust Fulsd - A Renewable Energy Trust Fund is 
hereby created to: 
a 
b 
C 
.
.
 
Finance the research, development, demonstration and promotion of the 
widespread use of renewable energy systems; 
Conduct resource assessment studies for biomass, solar, wind, hydro, tidal 
current, and ocean energy; and 
Conduct such other activities necessary to carry out the objectives of this Act. 
I 


For this purpose, an amount of One Billion Pesos (Phpl,OOO,OOO,OOO.OO) shall be 
allocated as seed money for the trust hnd which shall be sourced from the following: 
A: Fine and penalties 
B: Man atory RES Contributions 
C: Fees exacted pursuant to this Act 
D: Demonstration Earnings 
E. Grants 
F: Donations 
G: RE Production Predictability/Forecast PremiumBonus 
i 
The DOE shall manage and administer the said fund subject to existing 
government accounting and auditing procedures. The- DOE, in co-ultation -&I 
other 
government units and agencies, is hereby authorized to manage and disburse the hnds to 
be used solely for the purposes enumerated herein in the form of grants, loans, equity 
investments, loan guarantees, and insurance or to access other local or international fbnds 
pursuant to the provisions of this Act. 
CHAPTER X 
GENERAL PROVISIONS 
Section 25. Creation of Renewable Energy Bureau. - In accordance with the 
power of the Secretary and with the approval of the President, the Renewable Energy 
Bureau is hereby created for the effective management and administration of the 
renewable energy resources and development. The Renewable Energy Bureau shall have 
the following Divisions: Hydropower Division; Geothermal Division; Solar and Wind 
Division and Ocean and Biomass Division. 
Th Renewable Energy Bureau shall have the following powers and functions: 
a. Assist in the formulation and implementation of policies for the efficient and 
economical transformation, conversion, processing, refining, market packaging 
I 
. 


nd financing, transportation and storage of hydro, geothermal and other 
enewable energy resources such as wind, solar, biomass and ocean; and ensure 
f heir efficient and judicious utilization. 
Monitor sectoral energy consumption and conduct eEcient utilization audit, 
technical training, energy management advisory services, and technology 
application projects on efficient energy utilization 
Develop, promote and commercialize applications of biomass, solar, hydro, 
wind, wood and charcoal and other renewable energy resources including new 
and more efficient and economical transformation, coqyersion, 
- 
precessing, 
refining, marketing, distribution, transportation and storage technologies for 
renewable energy resources. 
Assist in the implementation of an integrated rural electrification program to 
effectively address the energy self-sufficiency in rural communities and 
implement, monitor and regularly review the implementation program for 
eEcient administration. 
b. 
c. 
d. 
. 
e. Provide information on renewable energy technologies and develop short-and 
long-term renewable energy technology development strategies. 
f. Monitor the implementation of renewable energy projects in coordination with the 
Department of Environment and Natural Resources, National Water Resources 
Board, National Commission on Indigenous People and other government 
agencies to ensure compliance with the existing regulations and prescribed 
environmental standards. 
Monitor and supervise renewable energy projects implemented by government 
and private institutions including, affiliated renewable energy centers. 
Section 26.Product Standards and Testing Procedures. - The DOE, in 
consu ation with the Bureau of Product Standards, shall if necessary, establish product 
stand ds and testing procedures for selected renewable energy products, equipment, 
devices and accessories in consonance with existing international renewable energy 
testing and product standards. The DOE and DTI shall jointly identify and designate 
laboratories and research facilities as accredited renewable energy testing laboratories to 
undertake the testing ,and labeling of renewable energy products, systems and devices 
according to the approved standards and procedures. 
g. 
1 


Section 21. Manpower Developnzent Program, - The DOE, in coordination with 
other government units and agencies, shall ensure sustained manpower development 
programs to increase the education, expertise, training, skills and awareness of planners, 
implementors, trainors, technicians, and beneficiaries in the national and local levels in 
appropriate aspects of renewable energy development and utilization. 
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All foreign RE technology suppliers shall be required to conduct technology 
transfer activities to their proposed users and beneficiaries of the technology. The DOE 
shall ensure that capacity building sessions are incorporated into the work plan of the 
foreign technology suppliers prior to project implementation. 
Section 28. Information Management. - The DOE shall create, maintain and 
regularly update an information system of renewable energy resources, technologies, 
suppliers, companies and projects for the purposes of, but not limited tb: 
1. Formulation of annual energy and power development plans of the country; 
2. Information dissemination to the public who are interested to invest in renewable 
energy generation projects or in research and development studies, etc.; 
3. Monitoring and evaluation of existing technologies and projects; and 
4. Formulation of appropriate policies. 
such, the information system shall be backed up by a reliable database and 
all relevant information for the development and commercialization of 
systems. The DOE shall be responsible for the development of the 
to ensure sustained maintenance and upgrading of the 
Section 29. Information Dissemination and Educdion Progrum. - The DOE is 
hereby mandated to conduct outreach program that will disseminate information on 
renewable energy development and utilization. The DOE in collaboration with other 
government agencies, particularly the Office of the Press Secretary-Philippine 
Information Agency, shall conduct nationwide promotional campaigns 
. -~ 
to &cate 
and 
raise the national consciousness on the greater advantages and benefits of the widespread 
use of renewable energy towards energy self-sufficiency, environmental protection, etc. 


- - 
Section 30. Financial Assistance Program. - Government-fnancial institutions 
such as the Development Bank of the Philippines (DBP), the Philippine National Bank 
@NB), the Government Service Insurance System (GSIS), the Land Bank of the 
Philippines (LBP) and other private and government institutions that are now engaged or 
may hereafier engage in financing of renewable energy projects shall in accordance with 
and to the extent allowed by the enabling provisions of their respective charters or 
applicable laws, accord high priority to applications for financial assistance by 
individuals, enterprises, and industries participating in RE development, utilization and 
commercialization, duly recommended and endorsed by the DOE. 
Section 3 1, Adoption of Wasteto-Energy Technologies in Livestock Farm and 
Slaughterhouses. - For pollution control purposes, large-scale livestock farms and 
slaughterhouses shall he required to adopt waste-to-energy facilities such as biogas 
systems. The DOE shall facilitate the provision of technical assistance, in coordination 
with existing private companies and suppliers, in the adoption of the technology. The 
DOE shall coordinate with the DENR for the regular monitoring and compliance to this 
Section 32. Demonstration Projecl Earnings. - The DOE shall have the option to 
from the operation of RE demonstration projects to fund solely 
additional pilot and demonstration projects. 
Section 33. Progrum Appropriations. - The amount necessary for the 
implementation of this Act shall be taken from the current fiscal year's appropriation of 
the DOE. Thereafter, such sum as may be necessary for the operation and maintenance of 
the Renewable Energy Policy Framework shall be included in the annual budget of the 
DOE under the General Appropriations Act. Any unutilized hndsitthe end of the fiscal 
year shafl be reallocated back to the program. 
- c 


CaAPTERXI 
J?INAL PROVISIONS 
Section 34. Implementing Rules and Regulations. - The DOE shall promulgate 
the rules and regulations necessary to implement the provisions of this Act within six (6) 
months aRer its effectivity. 
Section 35. Reportorial Requirements. - The CRIs, ARECs, private entities 
engaged in renewable energy business operations and other concerned agencies and 
institutions are hereby required to provide the DOE all information that it 'may deem 
necessary and in accordance with the regulations for the effective monitoring, 
management and development of the overall Renewable Energy Policy Framework. The 
information and technical data shall remain confidential for a period stipulated in the 
regulat ons, which shall not exceed five (5) years. The DOE, therefore, shall formulate 
reporto 'a1 system for the scope and frequency of submission of the said information. 
i 
Section 36. Penalty Clause. - The DOE shall formulate and promulgate 
appropriate penalties to any person who willfully violates violations of rules or 
regulations provided in this Act shall, upon conviction, be punished by a fine of not less 
than One hundred thousand pesos (PlOO,OOO.OO), or by imprisonment of not less than two 
(2) years but not more than five (5) years, or both, at the discretion of the court; Provided, 
That if the violations committed by a jwidical person the penalty provided shall be 
imposed on the oficial or employee thereof responsible for the vio&ion;. Proded, That 
if the violation is committed by a government oficial or employee including those in 
government-owned or controlled corporations he/she shall, in an additional to the 
promulgated penalties provided, be subject to disciplinary administrative proceedings and 
penalties. 
Section 37. Official Development Assistance. - The provision of Executive Order 
No. 230 of 1986, on the power of the NEDA Board, and the rules and regulations 
governing the evaluation and authorization for the availment of Official Development 
Assistance notwithstanding the privatization of renewable energy facilities as provided 


Y 
for in this Act shall be eligible for foreign 1oms and grants without hrther evaluation by 
the NEnA Board, subject to Section 21, Article X I  of the Constitution. 
Section 38. Separability Clause. - If for any reason or reasons, my part or 
provisions of this Act shall be held unconstitutional or invalid, no other part or provision 
hereof shall be affected thereby. 
Section 39. Repealing Clause. - All laws, orders, doctrines, decrees, rules and 
regulations or parts thereof, including EO 462, EO 232, RA 7156, RA 7160, and PD 
1442, among others, inconsistent with any of the provisions of this Act are hereby 
amended or modified accordingly. 
ection 40. Effectivirj Ciause. - This Act shall take effect fifteen (15) days after 
publication in at least two (2) newspapers of general circulation. 
Approved, 
. 
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