Philippines Philippine to Promote Hydrogen Energy under New Guideline

Philippines Energy Other Law/Regulations
26 February 2024  HIROSE Nao  HIROSE Nao (EnviX, Ltd.)
Philippine to Promote Hydrogen Energy under New Guideline

On January 29, 2024, “Department Circular No. DC2024-01-0001 Providing a National Policy and General Framework, Roadmap, and Guidelines for Hydrogen in the Energy Sector” (hereinafter, the “Circular”) was promulgated in the Philippines. The Circular, abbreviated as “Hydrogen Energy Guidelines,” is intended to address the following four objectives. Specifically, the guidelines specify requirements and incentives for the implementation of hydrogen-related projects.

  • Energy Security
    Reduce the country’s dependence on imported oil and mitigate its vulnerability to energy supply disruptions and global energy market volatility with diversifying energy sources and expanding the use of domestic energy resources through the production of hydrogen and its derivatives
  • Environmental Sustainability
    Promote hydrogen as a renewable energy, alternative fuel and energy saving technology to reduce GHGs and achieve the Philippines’ NDC (nationally determined contribution) under the Paris Agreement.
  • Research and Technological Development
    Promote technological innovation in the field of hydrogen through collaboration among various scientific and technological organizations.
  • Financing and Investment
    Establish financial and non-financial incentives and government financial support mechanisms for hydrogen-related projects.

 

This circular shall enter into force 15 days after its promulgation by two general newspapers.

 

The original text of the Circular can be downloaded from
https://www.doe.gov.ph/sites/default/files/pdf/issuances/DC2024-01-0001.pdf

 

Scope of Coverage

The circular covers all activities related to the establishment, construction, operation, maintenance, decommissioning, and disposal of hydrogen projects or facilities involving the research, development, production, storage, transportation, distribution, and use of hydrogen energy. But all activities related to the exploration, development, and production of naturally occurring hydrogen and hydrogen derivatives shall be covered by “Department Circular No. DC2023-11-0031 Providing Guidelines on the Awarding of Service Contracts for the Exploration, Development, and Production of Native Hydrogen” and “Presidential Decree No. 87, which short title is THE OIL EXPLORATION AND DEVELOPMENT ACT OF 1972” (PD 87).

 

Various requirements in the hydrogen value chain

The hydrogen value chain is illustrated in Annex A of the Circular. First, the “production” of hydrogen is classified according to the original energy resource: renewable energy, nuclear power, fossil fuels, electricity from the grid, and chemical reactions. From the perspective of hydrogen’s role in the energy transition, the Circular stipulates that the production of hydrogen and its derivatives (green hydrogen and green hydrogen derivatives) based on renewable energy sources is given priority and is considered a renewable energy project. On the other hand, the production of hydrogen and its derivatives based on nuclear energy is recognized as an energy efficiency project in accordance with the “Energy Efficiency and Conservation Act” (EEC Act or RA 11285). However, it must be certified as a Strategic Investment Priority Plan (SIPP) by the Board of Investment (BOI).

In the “utilization” of hydrogen, when hydrogen is stored for use in power generation, it must be managed as a “Hydrogen Energy Storage System” (HESS). In this case, the management as a “Hydrogen Energy Storage System” (HESS) is required as stipulated in “Department Circular No. DC2023-04-0008 Prescribing the Policy for Energy Storage System in the Electric Power Industry.” In addition, HESS already registered under other laws and regulations must be notify the Energy Utilization Management Bureau (EUMB) in writing of such registration.

 

Requirements for the Implementation of Hydrogen Energy Projects

Notification to the EUMB is required prior to the implementation of any project related to hydrogen energy. The following documents must be attached to the notification. The EUMB will check the submitted documents and if there are no problems, an approval will be issued within 7 days of submission.

  • Letter of Intent for hydrogen energy projects addressed to the Director General of the EUMB (Annex E)
  • Letter of commitment to comply with the terms and conditions as a participant in a hydrogen energy project (Annex F)
  • Overview of the Hydrogen Energy Project (Annex G)
  • Copies of business registration certificate (DTI/SEC), financial statements for the last two years, partnership agreement/joint venture agreement, BIR registration, or LGU permits and approvals, if applicable.

 

During project implementation, periodic reports according to Annex K must also be submitted. The reports are required to be submitted semi-annually during the development and construction phases of the project, and monthly during the commercial phase.

 

In addition, all hydrogen energy project participants are required to comply with the environmental and occupational health and safety requirements under the ” Department Circular No. DC2012-11-0009 Renewable Energy Safety, Health and Environment rules and regulations statement of authority” until other regulations are set by the Department of Energy.

 

The Circular also stipulates that the unit of measurement for hydrogen energy shall be unified as “kJ/kgH2“, the calorific value per kg of hydrogen.

 

Incentives for Hydrogen Energy Development

Eligible hydrogen energy projects may take advantage of financial and non-financial incentives. For example, hydrogen energy projects whose primary purpose is to produce, import, or export green hydrogen or green hydrogen derivatives for power generation or other uses are eligible for incentives under the Renewable Energy Act of 2008 (RA 9513 AN ACT PROMOTING THE DEVELOPMENT,. UTILIZATION AND COMMERCIALIZATION OF RENEWABLE ENERGY RESOURCES AND FOR OTHER PURPOSES) and its IRR, and are eligible for the following incentives

  • Income tax holiday (ITH)
  • Exemption from duties on renewable energy machinery, equipment and materials
  • Special realty estate tax rates on equipment and machinery
  • Net operating loss carry-over (NOLCO)
  • Corporate tax rate
  • Accelerated depreciation
  • Zero percent value-added tax (VAT) rate
  • Tax exemption of carbon credits
  • Tax credits for domestic capital equipment and services related to the installation of equipment and machinery

 

In addition, the circular also provides for incentives for the use of hydrogen energy in the transportation sector, the production of hydrogen from nuclear power, and research and development related to hydrogen energy.

 

 

Related Legislations

Author / Responsibility

HIROSE Nao

Researcher, Research & Consulting Dept. EnviX Ltd.

Business Performance

In charge of Southeast Asia for managing information on the environmental regulations.

Background

BA, Human Life and Environmental Sciences, Ochanomizu University

HIROSE Nao