1. POLICIES AND PROGRAMS ON RENEWABLE ENERGY Prospects for Small Scale Clean Development Mechanism Department of Energy

2. OUTLINE 1.RE Goals, Policies and Strategies 2.RE Situationer 3.Policies on Small RE Systems 4.RE Incentives 5.RE Potential Projects

3. Energy Sector Objectives 1.Ensure sufficient, stable, secure, accessible and reasonably-priced energy supply 2.Pursue cleaner and efficient energy utilization and clean technologies adoption 3.Cultivate strong partnership and collaboration with key partners and stakeholders 4.Empower and protect welfare of various energy publics

4. Renewable Energy Goals B e the number one geothermal energy producer in the world  Increase RE-based capacity by 100% within the next 10 years (2003-2012) B e the number one wind energy producer in Southeast Asia D ouble hydro capacity by 2012 E xpand contribution of biomass, solar and ocean energy by 100 MW  I ncrease non-power contribution of RE to the energy mix by 10 MMBFOE in the next ten years

5. TARGETS RESOURCE INSTALLED CAPACITY AS OF 2002 TARGET INSTALLED CAPACITY TOTAL INSTALLED CAPACITY GeothermalHydroWind Biomass, Solar & others & others1,9312,518001,2002,7232551013,1315,241255101 Total4,4494,2798,728

6. ASSUMPTIONS  Enhancement of existing policies and programs  Realization of higher production targets  Establishment of market-driven RE industry  Availability of new international financing schemes (e.g. Clean Development Mechanism (CDM) and Prototype Carbon Fund)

7. RE Policies and Strategies D iversify energy mix in favor of indigenous RE resources P romote wide-scale use of RE as alternative fuels and technologies T ransform Negros Island as a model of RE development and utilization M ake the Philippines a manufacturing hub for PV cells to facilitate development of local manufacturing industry for RE equipment and components E ncourage greater private sector investments and participation in RE development through market-based incentives E stablish responsive market mechanisms for RE-generated power F ormulate an effective management program for fuelwood utilization with the view of reducing environmental impact

8. RE SITUATIONER 20022001PercentShare Relative to Total Energy Change20022001 RENEWABLE108.8107.41.343.443.2 17.718.0-1.97.07.2 Hydro12.112.24.84.9 Biomass78.877.02.431.431.0 Wood/Woodwaste44.743.72.317.817.6 Bagasse11.211.02.24.54.4 Charcoal5.55.41.32.2 Agriwaste17.516.93.17.06.8 0.2 28.30.1 Geothermal Others Primary Energy Consumption, 2002 vs. 2001 (in MMBFOE)

9. RE SITUATIONER Renewable Energy Share in Total Primary Energy Consumption

10. Primary Energy Mix of Selected Countries, Share of Renewables vs. Conventional RE SITUATIONER

11. Existing Policies on Small RE Systems H Y D R O 1.Small hydro - 10 MW and below - Mini-hydro - 101 kW to 10 MW 2.Large hydro - more than 10 MW - Micro-hydro - 100 kW and below

12. RE INCENTIVES RA 7156 – Mini Hydro Law Special privilege tax rates – Tax payable by developers/grantees to develop potential sites for hydroelectric power and to generate, transmit and sell electric power shall be 2 percent of their gross receipts Income tax holiday for seven (7) years from start of commercial operations Tax and duty free importation of machinery, equipment and materials- Exemption from payment of tariff duties and value-added tax (VAT) on importation of machinery and equipment (within seven (7) years from date of awarding of contract)

13. RE INCENTIVES Tax credit on domestic capital equipment - For developers who buy machinery, equipment, materials and parts from a local manufacturers, tax credit is given equivalent to 100 percent of value of VAT and custom duties that would have been paid to import said machinery, equipment, etc. Special realty tax rates on equipment and machinery – Realty and other taxes on civil works, equipment, machinery and other improvements of a registered mini-hydroelectric power developer shall not exceed 2.5 percent of their original cost VAT Exemption - Exemption from payment of 10 percent VAT on gross receipts derived from sale of electric power whether wheeled via the NPC grid or electric utility lines RA 7156 – Mini Hydro Law

14. RE INCENTIVES EO 462 (1997) as amended by EO 232 (2000)- OSW The government shall waive the signature bonus on the first project to reduce pre-operating cost burden on the OSW production-sharing contractor. Payment of production bonus shall be applied only after the project has fully recovered its pre-operating expenses. OSW developers shall be allowed to charge the cost of assessment, field verification and feasibility studies of other sites to its current commercial projects. The government shall facilitate developers in obtaining all applicable fiscal and non-fiscal incentives, including registration as pioneer industry under the Board of Investments (BOI) and securing of access to lands and offshore areas where OSW resources shall be harnessed.

15. RE INCENTIVES PD 1442 : An Act to Promote the Exploration & Development Of Geothermal Resources Recovery of operating expenses not exceeding 90% of the gross value in any year with carry-forward of unrecovered cost Service fee of up to 40% of the net proceeds Exemption from all taxes except income tax Exemption from payment of tariff duties and compensating tax on the importation of machinery, equipment, spare parts and all materials for geothermal operations Depreciation of capital equipment over a ten (10) year period Easy repatriation of capital investments and remittance of earnings

16. RE INCENTIVES Proposed RE Bill Existing fiscal incentives strengthened/additional incentives Non-fiscal incentives – priority dispatch, ancillary services and interconnection & wheeling charges Incentives

17. RE P R O J E C T S List of Potential Hydropower Resources for Power Generation

18. RE POTENTIAL PROJECTS List of Identified Wind Resources for Power Generation

19. R E POTENTIAL PROJECTS List of Potential Biomass, Solar and Ocean Resources for Power Generation

20. R E POTENTIAL PROJECTS List of Potential Geothermal Resources for Power Generation

21. R E POTENTIAL PROJECTS Geothermal for Non-Power Applications Enhancement of the self-reliant multi-crop dryer project in Manito, Albay Multi-crop dryer in geothermal sites in Leyte In close coordination with the Department of Tourism, promote hot spring areas for possible spa resort development