VZCZCXRO1496
OO RUEHCHI RUEHCN RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHPB
DE RUEHML #1721/01 2250918
ZNR UUUUU ZZH
O 130918Z AUG 09
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4885
INFO RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
RUEHZU/APEC COLLECTIVE IMMEDIATE
RUCPDOC/USDOC WASHDC IMMEDIATE
RHHMUNA/USPACOM HONOLULU HI//FPA//

UNCLAS SECTION 01 OF 02 MANILA 001721 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR OES/, EB/IFD/OIA, EAP/PMBS 
DOE FOR TOM CUTLER 
TRESURY FOR JVELTRI 
STATE PASS EXIM, OPIC, AND USTR 
STATE PASS USAID FOR AA/ANE, AA/EGAT, DAA/ANE 
USDOC FOR 4430 ITA/MAC/ASIA & PAC/KOREA & SE AIS/ASEAN 
TREASURY FOR OASIASENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON ENGR ECON ECIN RP CN XE XD
SUBJECT:  Philippine Renewable Energy Law a Regional Model 
 
REF: 08 Manila 2731 
 
¶1.  (SBU) Summary:  Positioning to be a world leader in renewable 
energy, the Philippine has passed a new renewable energy law that 
improves the policy environment with fiscal and non-fiscal 
incentives to facilitate and expand investments in the sector.  A 
recent USG visitor suggested the Philippine law could be a model for 
the region and a possible centerpiece for a 2010 U.S.-ASEAN dialogue 
on renewable energy.  End Summary. 
 
Plans for U.S.-ASEAN Dialogue on Renewable Energy 
--------------------------------------------- ---- 
 
¶2.  (U) Office of Commercial & Business Affairs Senior Advisor 
Jonathan Thompson met with various Philippine renewable energy 
stakeholders on July 30-31 to discuss a proposed U.S.-ASEAN dialogue 
on renewable energy to be held in an ASEAN country in the first 
quarter of 2010.  The meetings also highlighted how the Philippine 
Renewable Energy Act of 2008, described as among the first such laws 
in Southeast Asia, has created significant opportunity for further 
investment in the sector.  The legislation was signed into law in 
December 2008 and the implementing rules and regulations released in 
early June 2009.  After listening to stakeholders describe how the 
new renewable energy law will create new investment opportunities, 
Senior Advisor Thompson suggested that it might serve as a model for 
the region, and perhaps could be a centerpiece of the U.S.-ASEAN 
Renewable Energy Dialogue. 
 
¶3.  (SBU) Asia Development Bank officials noted to Senior Advisor 
Thompson that there were numerous renewable energy conferences being 
held in the region, almost on a weekly basis.  They suggested that 
the best way to make a U.S.-ASEAN dialogue on renewable energy 
attractive to potential participants would be to highlight some of 
the cutting edge American technology in renewable energy, such as 
projects involving biologically engineered algae. 
 
Significance of the Philippine Law 
---------------------------------- 
 
¶4.  (U) The new Philippine legislation is significant because it 
attempts to accelerate the development and utilization of renewable 
energy to address the issues of energy self-sufficiency and 
sustainability.  The renewable energy law provides fiscal and 
non-fiscal incentives, and creates market conditions that could 
allow the private sector to move renewable energy financing and 
technologies towards the full development of the sector.  It also 
provides policies that create a market for renewable energy and 
ensure a fair rate of return for investors. 
 
¶5.  (U) Under the law, foreign investments are allowed in renewable 
energy projects subject to the conditions provided in the Philippine 
Constitution.  For most projects, this means that foreign ownership 
cannot exceed 40 percent.  However, geothermal projects, which are 
considered a type of mining, can be 100 percent foreign-owned. 
Within a few days of the release of the implementing rules and 
regulations, the Philippine Department of Energy received 117 
letters of intent from companies interested in investing in 
renewable energy projects.  Some of these projects could get 
underway in the fourth quarter of 2009. 
 
The Philippines as a Renewable Energy Leader 
-------------------------------------------- 
 
¶6.  (U) Renewable energy currently accounts for over 42 percent of 
the Philippine energy mix, one of the highest ratios in the world. 
Geothermal alone supplies 23 percent of the Philippine primary 
energy mix and 18 percent of electrical power requirements.  The 
U.S. company Chevron remains a leader in Philippine geothermal power 
production.  U.S.-based SunPower has a solar silicon wafer 
manufacturing facility in the Philippines to serve export markets. 
Although a recognized leader in renewable energy development, the 
Philippine renewable energy capacities have not grown significantly 
during recent years due to technical, financial, and market 
constraints.  The new renewable energy law seeks to loosen these 
strictures and set the stage for fuller development and utilization 
of its vast renewable energy potential, estimated at more than 
200,000 MW. 
 
Challenges Ahead 
 
MANILA 00001721  002 OF 002 
 
 
---------------- 
 
¶7.  (SBU) While the implementing rules and regulations were released 
in early June, some mechanisms necessary for full implementation of 
the law are still under discussion; such as portfolio standards, 
tariffs, market arrangements, and tax incentive guidelines.  The 
renewable energy law complements the Electric Power Industry Reform 
Act of 2001 in power sector reform.  However, potential foreign 
investors still have concerns about the impact of the 
Constitutionally-mandated 40 percent foreign ownership limitation on 
renewable energy projects, and urge the Philippine government to 
remove this restriction to enlist their full support in renewable 
energy development. 
 
Comment 
------- 
 
¶8.  (SBU) Sometimes a single piece of legislation can make a 
significant difference in an investment landscape, such as the 
legislation that allowed foreign investment in telecom value-added 
services and paved the way for the call center industry in the 
Philippines.  Some industry observers are hoping that the new 
Renewable Energy Act will have a similar impact in attracting new 
investment into Philippine renewable energy projects and serve as a 
model for the region. 
 
Kenney