In a landmark decision promulgated on 13 August 2024, the Philippine Supreme Court upheld the constitutionality of Republic Act No. 9513, otherwise known as the Renewable Energy Act of 2008 (RE Act), and the issuances of the Energy Regulatory Commission (ERC) relating to the feed-in tariff (FIT) system and the collection of the FIT allowance (FIT-All), a charge on electricity bills that helps fund renewable energy development.
The court also affirmed the delegation of legislative power to the Department of Energy to set installation targets for each renewable energy technology eligible for FIT rates. This decision resolves any question on the legality of the renewable energy mechanisms, particularly the FIT system and the renewable portfolio standards (RPS), which were delegated by congress to the ERC and the energy department. The court ruled that the renewable energy law is complete in its terms, containing the guiding principles to be implemented by the commission and the department, and fixes a sufficient standard that determines the limitations of their authority.
Senior Partner
Metro Manila
DivinaLaw
Signed into law on 16 December 2008, the RE Act aims to accelerate the exploration, development and utilisation of renewable energy resources. Section 7 of the act mandates the adoption of a FIT system for electricity produced from clean energy, offering a fixed payment for 20 years to participants who source electricity from renewable energy.
The system also provides eligible renewable energy plants with:
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- Priority connections to the transmission grid or distribution system; and
- Priority purchase and transmission of, and payment for, such electricity by the National Grid Corporation of the Philippines. The economic policy incentivises investment in renewable energy development.
On 12 July 2010, the regulatory body issued Resolution No. 16, series of 2010 (FIT rules). The rules aim to establish the system and regulate the method of establishing and approving the feed-in tariff and the allowance. Under these rules, the commission, on the recommendation of the National Renewable Energy Board (NREB), shall approve technology-specific FITs in Philippine pesos per kilowatt-hour for the electricity generated from biomass, ocean, run-of-river hydro, solar and wind energy resources.
Under the act, the NREB was tasked to recommend the rates and their degression to the commission and accordingly filed a petition to initiate rule making for the adoption of FIT in 2011. After public hearings, the commission promulgated Resolution No. 10, series of 2012, approving the rates for solar at PHP9.68/kWh; wind at PHP8.53/kWh; biomass at PHP6.63/kWh; and run-of-river at PHP5.90/kWh, payable over the set period. In 2014, the commission approved the first allowance rate at PHP0.04/kWh, collected from consumers based on their kilowatt-hour consumption.
In 2012, AGHAM (Advocates of Science and Technology for the People ) and the Foundation for Economic Freedom challenged the constitutionality of the act, including the FIT and the RPS, before the Supreme Court.
The court upheld the FIT-All collections, stating they aligned with renewable energy policies. It held that the FIT policy aims to accelerate the exploration, development and the use of energy resources by establishing the necessary infrastructures and systems, and that ultimately the policy’s objectives are both economic and environmental, as it:
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- Reduces the jurisdiction’s dependence on fossil fuels and exposure to price fluctuations in international markets; and
- Prevents or reduces harmful emissions to protect public health and environment.
The court also recognised the authority of the commission to determine the rates and the allowance, and the energy department’s power to implement the RE Act. Citing data from the NREB and the Developers of Renewable Energy for AdvanceMent, the court noted that the FIT system, implemented from November 2014 to August 2017, resulted in the net avoided cost of PHP18.69 billion (USD322.2 million) to consumers whose distribution utility service providers purchased at the Wholesale Electricity Spot Market. These savings likely doubled after the surge in coal and oil prices in 2022, supporting increased use of renewable energy.
The energy department is conducting three green energy auctions (GEAs) this year, following the structure as the FIT programme implemented in 2012. It successfully conducted GEA-3 covering non-FIT technology, including pumped storage hydropower, with offered capacities of 7,500 megawatts exceeding the installation target of 4,650MW. Fourteen projects, with delivery periods from 2025 to 2035, were submitted. The department announced GEA-4 for solar, wind and integrated energy storage systems this quarter, and GEA-5 for offshore wind in the third quarter of this year.
The auctions form part of the Marcos government’s strategy to encourage market-driven investment and transition to cleaner energy, aiming for a 50% share in the power mix by 2040.
Jose M Layug Jr is a senior partner at DivinaLaw in Metro Manila
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