Philippine to Promote Hydrogen Energy 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” 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.

Guiding principles:-

• 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.

Scope and 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 involves facilities and activities in the fields of production, transportation, distribution and storage, utilization, import and export of hydrogen in the energy sector.

Production:- Hydrogen production shall be classified according to its energy resource such as but not limited to, RE, nuclear energy, fossil fuels, and electricity from the grid, chemical reactions, among others.In recognition of its role in the energy transition, production of hydrogen and its derivatives from RE shall be preferred and shall be considered as RE projects.Production of Hydrogen and its derivatives using nuclear energy may be recognized as an efficiency project, accordance with the EEE act, provided that the project shall be qualified under the strategic investment priorities plan of the BOI.

• Transportation, Distribution and Storage:- From the point of production of hydrogen can be transported, distributed, and stored in compressed form or by conversion to hydrogen derivatives, such as ammonia, liquid organic hydrogen carriers, solid carriers, among others. storage systems refer to specialized storage tanks and underground storage systems, among others. Transportation and Distribution of hydrogen and its derivatives can be done through dedicated pipelines, chemical carriers, rail or maritime distribution systems, and fueling stations.
• Utilization:- Prospective uses of hydrogen in the energy sector shall be divided into power generation and electricity storage applications and non-power applications. Power generation and electricity storage shall include use of electricity produced from hydrogen energy supplied to the grid or as backup and off grid power supply, industrial scale energy storage, Co-firing with hydrogen derivatives in existing fossil fuel power plants, and hydrogen and its derivatives multigenerational systems.
• 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 Systems in the Electric Power Industry.” In addition, HESS already registered under other laws and regulations must notify the Energy Utilization Management Bureau (EUMB) in writing of such registration.
• Import and Export:- Contributing to the global strategy towards decarbonization and exploration of energy solutions, importation and exportation of hydrogen and its derivatives shall be considered in the value chain acknowledging its significance in supplementing domestic demand and utilizing surplus RE.

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:- Financial and non-financial incentives are available for eligible hydrogen energy projects. The Renewable Energy Act of 2008 and its IRR, for instance, provides incentives for hydrogen energy projects whose main objective is to produce, import, or export green hydrogen or green hydrogen derivatives for power generation or other uses. These projects are also 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.

Hydrogen colors:-

Penalties:- Upon determination that a reasonable ground exists that a violation of any of the prohibited acts under section 23 of circular has been committed, when warranted, a fine ranging from a minimum of One hundred thousand pesos(PHP 100,000.00) to a maximum of five hundred thousand pesos specified in Annex L shall be imposed upon the hydrogen energy project and may include revocation of endorsement issued if applicable. When warranted, the revocation of endorsement shall be communicated to the BOI and to the hydrogen energy industry participant.The imposition of fines is without prejudice to the applicable penalties provided under existing laws, rules and regulations prescribed by the other concerned agencies.