Legal Opinion On Foreign Ownership May Encourage Investments In Renewables

The country has the opportunity to open up to foreign investors its renewables market after a legal opinion issued by the Department of Justice, which found that the industry is not subject to foreign investment limits, Denmark’s ambassador to the Philippines said.

Photo Insert: Franz-Michael S. Mellbin, Denmark's ambassador to the Philippines

Ambassador Franz-Michael S. Mellbin told reporters that Denmark, a major exporter of wind turbines and rated the world’s most sustainable country by the 2022 Environmental Performance Index, stands ready to assist the Philippines in its transition to renewable energy (RE).

He added, “When I look at the Philippines (I see) you have better opportunities than Denmark to build such a system, but it doesn’t happen (overnight). You need a long-term energy plan. It takes time and it needs investment,” he said.

Mellbin said the infrastructure needed by the Philippines in its RE transition will include smart grids. "We have Danish companies who are willing to make very large investments in renewable energy here, which can help bring down energy costs,” he added.

He called the legal opinion, which paves the way for 100% foreign investment in RE, “a great step for the Philippines.” He added that the administration should follow up immediately on this potential market opening because “the truth is, the Philippines has an amazing opportunity in renewable energy.”

The legal opinion states that “exploration, development, and utilization of inexhaustible RE sources are not subject to the 60:40 foreign equity limitation, as mandated by Section 2, Article 12 of the 1987 Constitution.”

President Ferdinand R. Marcos, Jr. has committed to developing RE in pursuit of energy security and volatile fuel prices. He also said the government is revising the implementing rules and regulations of the Renewable Energy Act of 2008, which expressly limits foreign investment in the sector to 40%, with the objective of allowing more foreign investment.

“It is necessary that we make these changes because the technology for renewable energy has moved forward so quickly that we have to catch up with our regulations,” Marcos added.

The Philippines can generate a lot of energy simply by combining its wealth of options, the ambassador said, noting possibilities in juggling solar, biomass, hydro, geothermal, on-shore wind, and off-shore wind.

However, he noted the introduction of challenges into the system amid this transition. “In the night the sun doesn’t shine, and some days the wind doesn’t blow as much, … sometimes the hydropower dams are not quite full, so there are some variables, but what you do then is you build a smart grid which is better able to manage the total electricity load,” he said.

“This is where Denmark has super expertise,” he added, “and we have helped big countries like China and India manage their net load, this is Danish specialty.”

Denmark had gone through China’s entire power system. Copenhagen did not introduce new technologies to Beijing, instead, it calculated how and when the energy flow in power plants should be increased or decreased to ensure efficiency, as well as save more carbon dioxide.

"You need to invest not just in renewable power plants, but also into net loading. If you mix various sources, you get a much better utilization of your grid,” the envo said, “but financially, it’s very important that you have this mix because otherwise, you pay a lot.”

He added: “If you do that right, you can have abundant energy, and we’re not just talking about a lot of energy, we’re talking about a better, healthier economy, we’re talking about hundreds and thousands of jobs.”

The ambassador also expected that many of the renewable power plants will be placed in less concentrated areas, which could boost the local economy and help the Philippines achieve strategic independence.

"It’s not long ago that the capital reserves, actually as we speak, they are under pressure, and this is also because you spend a lot of money importing energy,” he said. “You’re buying coal and that costs money. Instead, you could be producing on your own.”

The goal, he added, is affordable, high-quality energy for all. “You can have a much better energy future,” Mellbin said. “You can do it in about 10 years if you get the policies right,” noting the need for an accompanying legislation and framework.

Denmark seeks to have improved bilateral relations with the Philippines in six priority areas — agriculture, energy, maritime, digitization, security, and sustainability. “Those are the six areas where I see a very good match between the Philippines and Denmark,” the ambassador said.

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