Opening Foreign Investment and Floodgates: A Critical Analysis of Removing Barriers to Full Foreign Investment in the Philippine Renewable Energy Industry

The renewable energy (“RE”) sector’s liberalization in 2022 raises significant legal questions on compliance with constitutional restrictions on foreign ownership of natural resources. This Article examines the legal conflict between the Department of Energy’s (DOE) November 2022 Circular, which lifted the 40% foreign ownership cap for certain RE projects, and the constitutional limitations on foreign equity in the exploitation, development, and use (“EDU”) of natural resources. It critiques the Department of Justice’s (DOJ) 2022 Opinion, which excluded hydro and ocean (“HO”) energy from the constitutional definition of “natural resources,” arguing that inland waters and territorial seas—including HO resources— should remain subject to the foreign equity limitation. The Article explores the implications of this misinterpretation on foreign investment and the development of the RE sector, offering recommendations to address these legal inconsistencies.