Taxes and Incentives for Renewable Energy

Taxes and incentives for renewable energy

KPMG INTERNATIONAL

kpmg.com/energytax This report describes the 2013 taxes and incentives provided by 31 countries around the world to promote renewable energy from wind, solar, biomass, geothermal and hydropower. These policies also support other areas such as increased energy efficiency, smart-grid management, biofuels, carbon capture systems and storage technologies. Content includes an introduction about global trends in renewables, a summary of investments in renewable energy, and a brief outline of renewable energy promotion policies in all 31 countries.

André Boekhoudt Lars Behrendt Head of Global Energy Tax Partner, and Natural Resources KPMG in Germany Tax Practice

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Contents Introduction 2 2014 Industry trends 3 Global investment in renewable energy production 5 Renewable energy promotion policies by country 8 Argentina 10 Australia 11 Austria 13 Brazil 14 Belgium 16 Canada 18 China 21 Costa Rica 24 France 26 Germany 28 Greece 32 India 36 Ireland 38 Italy 40 Japan 43 Mexico 44 The Netherlands 46 New Zealand 48 Norway 49 Peru 51 Philippines 52 Poland 54 Romania 56 South Africa 58 South Korea 61 Spain 62 Sweden 64 Turkey 65 United Kingdom 66 United States 70 Uruguay 72 Top Five Countries 2013 74 Appendix A: REN21 2014 Renewables Global Status Report 75

Over the past decade, renewable energy growth. Renewable energy has of support mechanisms are specific has demonstrated remarkable growth as featured strongly in economic recovery to electricity produced by renewables, a significant source of global energy. Since packages put in place in response to capacity installed in a particular year, 2004, the industry has seen a – the global economic downturn. An and have a fixed duration. Subsidies for estimated 6.5 million people worldwide biofuels predominately take the form of • 53-fold increase in solar PV capacity now work directly or indirectly in the blending mandates.9 • 15-fold increase in biodiesel renewables sector.7 Since 2004, the number of countries production Energy access and affordability – promoting renewable energy with direct • 10-fold increase in concentrating solar providing electricity access and modern policy support has tripled, from 45 to thermal power (CSP) capacity energy services to the 1.3 billion people 144, and an ever-increasing number of currently without access to electricity and developing and emerging countries is • 10-fold increase in wind capacity.1 the 2.6 billion that still rely on traditional setting renewable energy targets and In fact, the International Energy Agency, biomass energy sources. Mini-grid and enacting support policies.10 The EU is the World Bank, Greenpeace, and others off-grid solutions are often less costly maintaining its target of 20 percent by all projected levels of renewable energy than grid extension to rural areas. 2020. According to recent reports, three for the year 2020 that were met and EU Member States (Bulgaria, Estonia, The rapid increase in renewables is even exceeded by 2010.2 As of last year, and Sweden) already reached their 2020 driven by a number of factors, including renewables were providing: targets in 2012.11 Discussions about falling technology costs, the continued setting 2030 EU climate and energy • 43.6 percent of the new power high price of crude and carbon pricing. targets are now in progress. capacity added in all technologies3 However, growth is driven mainly by government incentives, which totaled Mention should also be made of the • 22.1 percent of global electricity, USD101 billion globally in 2012, up continued growth of policies at the local with hydropower providing about 11 percent over the previous year.8 level. Hundreds of community, city, 16.4 percent4 district, state and island governments This report describes current incentives • 8.5 percent of global energy worldwide have set renewable energy provided by 31 countries around the generation.5 targets and enacted fiscal incentives or world to promote renewable energy other policies to foster the deployment of Today, renewable energy is recognized from wind, solar, biomass, geothermal renewables. In 2013, Sydney, Australia, as delivering a number of key benefits6 and hydropower. These incentives announced the goal of achieving 100 for countries, regions, markets, also support related areas such as percent renewable energy for power, industries and the global population: increased energy efficiency, smart-grid heating, and cooling by 2030, and management, biofuels, carbon capture Energy security and diversity – Yamanashi, Japan, targeted local systems and storage technologies. contributing to energy security by generation of 100 percent renewable providing more diversity in the energy Renewable energy incentives take a electricity by 2050. Over 40 other cities supply and reducing the need for fossil variety of forms, including blending have already achieved their goal of 100 fuels, which for many countries can mandates, quotas, portfolio obligations, percent renewable energy in at least one reduce fuel import bills. tax credits and feed-in tariffs, all of which sector or aim to do so over the next few offer a higher return than market prices, decades.12 Environmental protection – helping to to offset higher costs. With schemes reduce local air pollution and emissions For additional information about these like feed-in tariffs, blending mandates or of CO as well as other pollutants such policies, see appendix A page 76. 2 quota obligations, this remuneration is as sulfur dioxide and nitrogen oxides. paid by the end-users. However, some Economic growth – supporting schemes, such as tax credits are funded widespread and sustainable economic from government budgets. Many forms

1. REN 21 Renewables 2014 Global Status Report 7. Op. cit., REN 21 Renewables 2014 Global Status Report 2. Ibid. 8. Ibid. 3. Adapted from Global Trends in Renewable Energy Investments 2014, 9. Ibid. Bloomberg New Energy Finance 10. Ibid. 4. Op. cit., REN 21 Renewables 2014 Global Status Report 11. Ibid. 5. Ibid. 12. Ibid. 6. World Energy Outlook 2013

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Over the long term, the energy industry gale” of natural gas made available Biomass and Biofuels: Demand in general and renewables in particular with hydraulic fracturing (fracking) and continued to grow steadily in the heat, will see steady growth. Between horizontal drilling. European countries power, and transport sectors. Total now and 2035, research and analysis are also questioning their incentive primary energy consumption of biomass suggests that:1 policies or allowing incentive programs reached approximately 57 exajoules (EJ) to lapse, driven by the ongoing in 2013, of which almost 60 percent was • Global electricity demand will economic crisis in some member traditional biomass, and the remainder increase by over 70 percent. states, by related electricity over- was modern bioenergy (solid, gaseous, • Overall energy demand will rise by capacity, and by rising competition with and liquid fuels). Ethanol production over 30 percent. fossil fuels. was up 6 percent after two years of decline, biodiesel rose 11 percent, and • Generation from renewables will In view of these changes and other hydrotreated vegetable oil (HVO) rose by increase to almost three times its factors involving global economic 16 percent to 3 million liters. New plants 2010 level. growth trends, it is not surprising that for making advanced biofuels, produced major renewable energy companies • The share of renewables in the from non-food biomass feedstocks, continue to shift their focus away generation mix will increase to were commissioned in Europe and from developed economies and into 31 percent. North America. Africa, Asia, and Latin America, where However, trends for renewables in strong new markets are emerging in Hydropower: Global hydropower 2014 suggest a maturing industry all sectors, both on and off the grid. generation during the year was an affected by changing attitudes among In developing countries, rural energy estimated 3,750 TWh. About 40 GW investors, a reassessment of incentives, markets offer significant business of new hydropower capacity was the growing importance of emerging opportunities, and products are being commissioned in 2013, increasing total economies, and new challenges for tailored specifically to meet the needs global capacity by around 4 percent. The key energy subsectors. As explained of these markets. Wind power moved most capacity was installed in China more fully in the next section, global more firmly into Africa and Latin (29 GW), with significant capacity also investments in renewables declined America. While CSP shifted its focus added in Turkey, Brazil, Vietnam, India, 13 percent from 2012 to 2013.2 Some of further to South Africa and the Middle and Russia. Growth in the industry has this decline can be attributed to lower East and North Africa region. been relatively steady in recent years, production costs or, as with biofuels, fuelled primarily by China’s expansion. Responding to these global changes, slowing growth rates. However, the companies involved in renewable Solar PV: The solar PV market had a decrease in investment has also been energy have increased their flexibility record year in 2013, adding more than 39 the result of changing views about and developed cross-regional strategies GW for a total exceeding 139 GW. China policies supporting renewables, and supply chains. Manufacturers saw spectacular growth, accounting for especially in developed countries. have diversified products to increase nearly one-third of global capacity added, For example, Australia – one of the first product value, and many have advanced followed by Japan and the US. Interest major countries outside Europe to adopt further into project development continued to grow in corporate- and a carbon price – repealed its national and ownership. Many renewable community-owned systems, while the carbon tax in July of 2014. In the US, the industries saw a rapid increase in number and size of utility-scale systems federal 30 percent solar investment tax worldwide demand for construction continued to increase. Although it was credit for residential and commercial and engineering, consulting, equipment a challenging year for many companies, properties is scheduled to expire at the maintenance, and operations services. predominantly in Europe, the industry end of 2016, and policies supporting began to recover during 2013. Module The following major subsectors other renewable energy sources such prices stabilized, while production represent a sample of industry trends as ethanol are being reconsidered, costs fell and solar cell efficiencies for 2014: especially in the wake of the “shale increased steadily.

1. OECD, International Energy Association (IEA), World Energy Outlook 2012, REN 21 Renewables 2013 Global Futures Report 2. Op. cit., REN 21 Renewables 2014 Global Status Report

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Global New Investment in Renewable Power and Fuels, Developed and Developing Countries, 2004–2013

Billion USD

300 279 World Total World Total 250 250 Developed Countries 214 227 billion USD Developing Countries

200 171 168 187 146 150 153 142 100 122

100 113 107 106 103 92 65 93 74 74 40 63 50 58 49 43 32 25 8 16

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: REN21 Renewables 2014 Global Status Report, 2014.

Asset ﬁnance of renewable energy assets by sector, 2013, $bn

75.4 Wind

44.4 Solar

6.8 Biomass & w-t-e

4.7 Small hydro

1.5 Biofuels

0.5 Geothermal

Total values include estimates for undisclosed deals

Source: Global Trends in Renewable Energy Investments 2014, Bloomberg New Energy Finance, 2014.

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. © 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. In 2013, total investment in renewable energy stocks. The slump bottomed out For additional information, power and fuels (excluding large hydro- in July 2012 and turned into a strong see appendix A page 76 electric projects) fell for the second rally during 2013, gaining 54 percent. year running, reaching USD214 billion The improved share price performance China: worldwide.1 T his figure is 14 percent took place as many companies in the China was once again the dominant lower than in 2012 and 23 percent solar and wind manufacturing chains country in 2013 for investments below the 2011 record. However, the moved back towards profitability after in renewable energy, accounting beginnings of a recovery in renewable the painful period of over-capacity for USD56 billion in renewables energy investment has been detected and corporate distress in 2011-12. investment. In fact, China invested in 2014. The release of 1Q numbers In North America, innovative yield- more in renewable energy in 2013 showed a 4 percent gain compared oriented financing vehicles have than the whole of Europe, this despite to the same period in 2013.2 emerged as investment tools for a 6 percent decline from 2012. Not The decline in investment can be renewables, and crowd funding moved surprisingly, the year also saw China’s explained by several factors, starting further into the mainstream in a number new renewable power capacity surpass with uncertainty about renewables policy of countries. In Europe, institutional new fossil fuel and nuclear capacity for in developed economies. In the US, investors continued to play an increasing the first time. investments have declined 33 percent role, with a record volume of renewable Asset financing in 2013 for China over the past two years, from a peak of energy investments for tools such as increased, but contributions from public USD53.4 billion in 2011 to USD35.8 billion Green Bonds in France and Renewable markets and private equity shrank to in 2013.3 European renewable energy Financing Company Bonds in the low levels. Despite the overall decline, investment was down 44 percent from United Kingdom. Development banks China’s investment in additional 2012. Former champions for renewables were again an important source of renewable power capacity surpassed in Europe such as Italy and Spain saw clean energy investment, with some their fossil fuel capacity additions in significant contractions based on policy banks pledging to curtail funding for 2013 for the first time. The vast majority changes and cuts in tariff supports. fossil fuels, especially coal power. of the country’s investment was for Dramatically lower prices for renewable A major performer among investment solar and wind power projects, and energy have also discouraged investors. types was public market equity raising China was the global leader in spending Solar PV module prices continue to drop by renewable energy companies. This on utility-scale projects, followed by dramatically. In 2013, a record amount jumped 201 percent to $11 billion, the the US and the UK. China also invested of PV capacity (39GW) was constructed highest since 2010, spurred on by the significant sums in hydropower, bringing and for less money than the smaller rally in clean energy share prices and about 29 GW of new capacity into 2012 total of 31GW. Wind power was by institutional investors’ increased operation during the year, based mainly excluded from one of Brazil’s national appetite for funds offering solid yields on large projects greater than 50 MW. auctions because it was pricing all other on portfolios of operating projects. Based on the 2005 Renewable Energy generation sources out of the market. Solar power was the leading sector Law, the government’s support for Overcapacity in the manufacturing by far in terms of money committed renewables in China includes reduced supply chain in North America and during 2013, receiving 53 percent (USD corporate income taxes, significant Europe has also discouraged investors. 113.7 billion) of total new investment reductions in value added taxes, That being said, renewables continue in renewable power and fuels (with other tax incentives, feed-in tariffs, to be recognized as a growth industry 90 percent going to solar PV). Wind R&D incentives, and subsidies for by both investors and financial power followed with USD 80.1 billion. energy conservation technologies institutions. During the global downturn, Asset finance of utility-scale projects improvement. the WilderHill New Energy Global declined for the second consecutive More on page 21. Innovation Index (NEX), which tracks year, but it again made up the vast 96 clean energy stocks worldwide, majority of total investment in renewable recorded a 78 percent drop in clean energy, totaling USD 133.4 billion.

1. Bloomberg New Energy Finance, IHS Research, REN 21 Renewables 2014 Global Status Report. Figure excludes large hydroelectric projects using traditional technology 2. Op. cit., REN 21 3. Ibid.

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. United States top country for investments in small- investment level declined again in 2013 scale distributed renewables. At the to USD33.7 billion – less than one-third Although first among developed same time, Japan’s asset finance in of its 2010 peak. The low investment economies, the US again ranked utility-scale projects nearly doubled, to level in 2013 can be attributed in part second in 2013 for renewables USD5.6 billion. to the policy uncertainty faced by investments, with a total of USD35.8 investors ahead of the general election More on page 43. billion. This figure represents a decline in September 2013. However, other in investment of nearly 10 percent United Kingdom factors contributed to the dampened compared to 2012, attributed largely activity levels, including reduced prices to the impact of low natural gas prices In the UK, investments rose by of solar PV and a shortage of good caused by the shale gas boom, and 14 percent, with the largest component quality, unexploited wind sites on land. to uncertainty over the continuation coming from asset financing of utility- of policy support for renewables. US scale projects. This was followed by However, Germany’s commitment venture capital and private equity public markets, where a new breed of to renewables has not faltered. In 1Q investment in renewables fell to just funds that owns and operates wind and 2014, clean-energy sources such as USD1 billion, the lowest since 2005, solar power assets raised significant solar and wind met a record 27 percent indicating a loss of confidence among money during the year. of demand in Germany because of early-stage capital providers. However, additional installations and favorable In April of 2014, the government 18 this decline was offset by a big jump weather. Renewable generators announced eight major renewable in US public markets investment, from produced 40.2 billion kilowatt-hours of electricity projects are unveiled as USD 949 million in 2012 to USD 5.3 electricity, up from 35.7 billion kilowatt- part of national electricity reforms. billion in 2013. These investments were hours in the same period last year. By 2020, the projects will provide mainly for solar power and biofuels. Germany, Europe’s biggest clean-energy up to GBP12 billion of private sector market, seeks to increase the share of More on page 70. investment, supporting 8,500 jobs. renewables to at least 80 percent by Involving offshore wind and biomass Japan: 2050 to replace nuclear reactors closed conversion technology, the projects will by 2022. Following the events at Fukushima in add 4.5GW of low-carbon electricity 2011, Japan began a national initiative to Britain’s energy mix (or around 4 As a part of its Energiewende or energy to support renewables. In 2013, the percent of capacity), generating enough transformation program, feed-in tariffs country saw a record increase in clean electricity to power over three are available in Germany for wind, renewable energy investment, up 80 million homes. Once built, the projects solar, geothermal, methane gas and percent from 2012 to USD28.6 billion. will contribute approximately 15TWh hydro generation. The government- or 14 percent of renewable electricity owned bank KfW also provides various The largest part of that commitment generation expected by 2020. subsidies and support programs for was for small-scale solar PV projects, renewables. as investors sought to capitalize on More on page 66. More on page 28. the generous feed-in tariff that was Germany: introduced in 2012. Investment in this area increased 76 percent in 2013 for a Although still ranking among the top total of USD 3 billion, making Japan the five investors in renewables, Germany’s

4. Renewables Meet Record 27 Percent of German Electricity Demand, Bloomberg News, May 9, 2014

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The following chart is a summary of the support schemes available in the 31 countries that are highlighted in this publication. Additional details regarding the investment and operating support schemes for each country can be found in the following pages.

FISCAL INCENTIVES COUNTRY REGULATORY POLICIES AND PUBLIC FINANCING

, VAT, 2 Electric utility quota obligation/RPS Net metering Tradable REC Tendering Heat obligation/ mandate Biofuels obligation/ mandate Capital subsidy or rebate Investment or production tax credits Reductions in sales, energy, CO Renewable energy targets or other taxes Energy production payment Public investment, loans, or grants Feed-in tariff/ premium payment

Argentina    R      Australia  R*      Austria        Brazil   R  R  R R Belgium       *   Canada  R*         China RR          Costa Rica  R      France R  R  R   Germany  R       Greece  R       India R   *  R  RR  R  Ireland       Italy  R    R       Japan         Mexico       Netherlands  R R        New Zealand   Norway         Peru      Philippines      R      Poland    R    Romania      South Africa    R     South Korea          Spain1        Sweden         Turkey  R    United Kingdom RR     R    United States R* R* R* R*  R  R  5   R Uruguay R   R        – existing national,  – existing sub-national,  – new, R – revised, – removed/expired, * – sub-national

1. Spain removed FIT support for new projects in 2012. Incentives for projects that had previously qualiﬁed for FIT support continue to be revised.

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Market Issues KPMG’s ENR Tax Services & Due to the impact of these incentives and taxes on your investment decisions, To help clients address key challenges Solutions – Engaging the Green Agenda KPMG firms can factor them into in today’s rapidly evolving renewable tailored due diligence and tax modeling energy sector, KPMG member firms KPMG firms can help you to review services. These services apply not only provide services backed by a global your regulatory and sustainability to production or sale/purchase of green network of resources, information and business strategies and your energy goods but also to green investments experience. The KPMG Energy & Natural and emissions trading objectives. and financing arrangements. Resources practice has specialists in We can provide tax characteristics KPMG’s Global ENR Tax network the field of renewable energy, based of carbon credits, resolve Clean includes professionals who specialize in in key business locations around the Development Mechanism issues, and these tax practice areas: world, acting as a single network. In define implications of Certified Emission each location, KPMG professionals Reduction forward contracts from both • Financial Services Tax can offer practical, in-depth, renewable trading and transfer pricing standpoints. energy experience. They can also draw • Global Indirect Tax on the KPMG global network of Energy We can also help you navigate the • Global Transfer Pricing Services & Natural Resources practitioners to wide array of available global and local provide clients with immediate access Government and municipal grant • International Tax to the latest industry knowledge, skills, programs or tax incentives related to • Mergers & Acquisitions. resources and technical developments. the production and sale and purchase of alternative energy and green Investing in the sector With regular calls and effective products. These include feed-in tariffs, communications tools, we can share tax holidays, accelerated depreciation, KPMG member firms invest significant observations and insights, debate carbon tax/pricing, trading schemes, time and resources in deepening our new emerging issues and discuss energy taxes, excise taxes or VAT understanding and knowledge of the issues that are critical to clients’ in relation to wind, solar, biomass, sector. This enables us to provide clients management agendas. This global biofuels, geothermal and hydropower with strategic and insightful services network also produces regular surveys sources, as well as increased energy that are tailored to their specific needs and commentary on key issues affecting efficiencies, smart-grid technologies, and based on an understanding of their the sector, business trends, changes in and carbon capture and storage challenges. regulations and the commercial, risk and technologies. financial challenges of doing business.

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Support schemes The type of benefit depends on the Additional information geographic area in which the renewable Investments and other subsidies energy plant operates, so the plant’s The following authorizations are Support is available for renewable specific location must be supplied for a required for the construction of energy sources including biofuels, solar, proper tax classification. renewable energy plants: wind, hydro and geothermal, among • authorization to use the land others. Operating subsidies • environmental impact study At the local tax level: Subsidies at the national level: • Wind: 0.015 Argentine peso (ARS)/ • approval by the Energy Secretariat • Anticipated value added tax (VAT) kWh refunds for the new depreciable • bidding offer submitted through property (except for automobiles) • Solar: 0.9 ARS/kWh the Program of Electric Generation included in the project. through Renewable Energies • Hydro for less than 30 MW installed (Programa Generación Renovable or • Accelerated income tax depreciation. capacity: 0.015 ARS/kWh GENREN). (filing two claims for the same project • Other: 0.015 ARS/kWh. Several are not allowed). Bill: provinces have different incentive The property used for the project will feed-in tariffs according to the kind of In March 2014, a bill to make the not be part of the minimum presumed energy they want to promote. application of Law 26190 more flexible income tax taxable base. In addition, and to achieve an 8 percent share in biofuel producers will not be subject to Quota obligation the satisfaction of the national demand the hydric infrastructure tax, the tax on The aim is to reach a contribution of of electric energy within a ten-year liquid fuels and the gas oil tax for the sources of renewable energy equal term (expiring in 2016) has been amount of fuel that is marketed in the to eight percent of the total national brought before the Argentine Senate. national territory. consumption of electric energy within In addition, such bill sets a new goal for 2025, which consists in increasing the At the provincial level: a term of 10 years, starting in 2006, the effective date of the regime. aforementioned share to 20 percent. • real estate tax exemption Quota obligations also include the Apart from the benefits provided for in • stamp tax exemption use of fossil fuel mixed with at least prior regulations, the current bill offers a novelty by including the collection • turnover tax exemption/deferral five percent of biofuels, including biodiesel and bioethanol. of a tax bonus to be allocated to the • tax stability. payment of national taxes.

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Support schemes initiatives specifically related to renewable Australian Renewable Energy Agency energy that are described below. Act 2011 is repealed. Investments and other subsidies Australia’s clean energy sector is Australian Renewable Energy Emerging Renewables Program (ERP) currently experiencing ongoing Agency (ARENA) The ERP is focused on supporting transformation following the change ENA is the Australian Renewable renewable energy technology at the in Federal Government in September Energy Agency, an independent development, demonstration and 2013 and the recent Federal Budget agency established by the Australian supported commercial stages of the announcement in May 2014. Of Government on 1 July 2012, with innovation chain. Ultimately the aim is particular importance to the renewable two key objectives: to improve the to lower the cost of energy produced sector are potential changes to the competitiveness of renewable energy by renewable energy technologies to Renewable Energy Target (RET) scheme technologies, and to increase the a point where they are better able to which is currently under review by an supply of renewable energy in Australia. compete with traditional fossil-fuel independent expert panel that is due In the recent 2014 Federal Budget it technologies. Funding is available under to report back to Government in mid was announced that ARENA will be two categories: abolished. This will however be require 2014. In addition to the current review • Projects – Offers funding for the Australian Renewable Energy of Australia’s RET, presently set at renewable energy and enabling Agency Act 2011 to be repealed, which 20 percent by 2020, the Government has technologies and products as they is subject to a majority vote in Australian reaffirmed its commitment to reviewing move through the technology Parliament. Until such time as this Act its international emissions targets in innovation chain. The application has been repealed, ARENA continues 2015. This review will focus on the extent process is undertaken in two phases, to manage its existing projects and to which other nations, including the with funding allocations expected to to assess and progress proposals major economies and Australia’s major fall within the range of AUD2 million received. The changes to ARENA’s trading partners, are taking real and to 30 million. comparable actions to reduce emissions. funding will not affect projects that already have a funding agreement in • Measures – Offers funding for In addition to potential RET changes, the place with ARENA. initiatives that involve a renewable Government is preparing legislation to energy industry capacity building By way of background, ARENA is repeal the Carbon Pricing Mechanism activity, skills development activity or currently tasked with managing including its associated programs and a preparatory activity for an ARENA AUD3.2 billion of financial assistance replace it with a Direct Action Plan Project. The application process for renewable energy projects and (DAP). The main support scheme within is undertaken in one phase and is initiatives promoting the R&D, the DAP is the Emissions Reduction expected to fund up to AUD3 million, demonstration, commercialization Fund (ERF), which is set to operate with a maximum funding pool of and deployment of renewable energy alongside existing programs that work AUD10 million. to offset Australia’s emissions. If the projects. ARENA incorporates and DAP is passed into legislation, the has responsibility for overseeing In addition to these two phases Government will commit $2.55 billion renewable energy initiatives previously ARENA also has a Supporting High Australian dollars (AUD) of funding to administered separately through a value Australian Renewable Energy the ERF. The focus of this program is range of bodies including the Australian Knowledge (SHARE) initiative that the reduction of emissions through Centre for Renewable Energy (ACRE), seeks to build on the store of publicly- driving productivity, innovation and Solar Flagships Program, Australian available knowledge about renewable investment into projects utilising clean Solar Institute (ASI), Low Emissions energy technologies and approaches technologies. Details of this initiative Technology Demonstration Fund, that are best suited to Australia. The are contained in a White Paper that Renewable Energy Demonstration SHARE iniative can support the direct was released in April 2014 with funding Program, Renewable Energy Venture commissioning research, studies intended to be offered via a reverse Capital Fund, Australian Biofuels or knowledge products that meet auction process that will begin in Research Institute, Geothermal Drilling knowledge gaps within the industry or the second half of 2014 (subject to Program and the Second Generation help overcome barriers to its growth in successful legislative passage through Biofuels Research and Development priority areas including understanding the Federal Parliament). Program. ARENA also has accountability renewable energy potential, for administering unallocated funding. grid integration and international There are also a number of policies, engagement. programs and incentives, with key Listed below are ARENA’s current initiatives which will close if the

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. © 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Regional Australia’s Renewables demonstration projects that address two tiers of incentive based on the (RAR) barriers to higher penetration of turnover of the company in question: renewables in distribution networks, at The RAR program aims to demonstrate • A 45 percent refundable tax both residential and commercial scale. the viability of renewable energy in offset (equivalent to a 150 percent regional and remote locations. The Clean Energy Finance Corporation deduction) for eligible entities with a initiative has two parts: (CEFC) grouped turnover of less than AUD20 • RAR Industry Program (I-RAR) – The CEFC is a commercially oriented million per annum. I-RAR supports a portfolio of fund which is expected to make a • A non-refundable 40 percent tax renewable energy solutions in positive return on its investment. The offset (equivalent to 133 percent regional and remote Australia, future of the CEFC remains uncertain deduction) for all other eligible focusing on hybrid and integrated as a second bill to abolish the CEFC entities. Unused non-refundable systems in off-grid and fringe-of-grid was introduced into parliament in offset amounts may be able communities. March 2014. The CEFC has to date to be carried forward to future been responsible for investing in firms • Community and Regional income years. and projects that utilize renewable Renewable Energy Program energy and clean energy enabling However, following the recent Federal (CARRE) – The RAR CARRE technologies as well as manufacturing Budget announcement, the rate of offers support for renewable businesses that focus on producing the incentive is due to be decreased energy systems in grids for small the inputs required. To date, the CEFC to 43.5 percent and 38.5 percent communities and islands, grow has to date offered just under $600 respectively. This decrease will be supporting technologies, show million of complementary financing subject to new legislation being passed commercial viability and contribute to alongside private sector financing for by parliament. knowledge sharing. renewable energy and clean energy Operating subsidies Accelerated Step Change enabling technologies. Initiative (ASCI) Feed-in tariff Renewable Energy Venture ASCI supports exceptional, Capital Fund There are no national based feed-in breakthrough projects that are not tariffs. However, a number of state- The Southern Cross Renewable otherwise eligible under existing based initiatives exist for small-scale Energy Fund is a 13-year, AUD200 ARENA programs. Expressions generation. The Australian Capital million venture capital fund, operated of interest from Australian and Territory (ACT) has a Large Scale Feed- by Southern Cross Venture Partners. international companies and research in Tariff Scheme (the Scheme) which The fund was established under the institutions will be accepted until 2018. provides the ACT government with Australian government’s AUD100 million Eligible projects must require an ARENA power to grant feed-in tariff entitlements Renewable Energy Venture Capital Fund contribution of $5 million or more, with up to 210 MW of generation capacity. (REVC). The government’s contribution the overall project cost expected to be has been matched by an additional more than $20 million. Quota obligation AUD100 million contributed by Softbank Projects that are at the research China Venture Capital. 20 percent reduction by 2020, subject and development (R&D) phase of a to review. R&D Tax Incentive renewable energy technology or include Additional information a technology that has yet to be proven at The major mechanism and program the pilot scale are not eligible. Projects for fostering innovation is a tax-based In addition to the funding initiatives can, however, include R&D components scheme rewarding expenditure on described above, the government where they assist in the demonstration, R&D activities. The R&D Tax Incentive also has a number of policy levers and commercialisation or deployment of a scheme is a broad-based program numerous other programs. renewable energy technology. accessible to all industry sectors. In many instances, activities conducted as Integrating Renewables in the Grid a part of renewable energy development ARENA is investigating the introduction may be eligible for the R&D tax of a new initiative that focuses on incentive. Currently the program offers

12 | Taxes and incentives for renewable energy

Support schemes Geothermal: Investments and other subsidies • ct7.36/kWh Small solar plants Sewage gas Less than 5 kWp investment subsidies • ct5.88/kWh are granted for the plants, sufficient for Landfill gas them to achieve a 6 percent capital yield. • ct4.90/kWh Waste liquor plants Compact biomass (such as forest Maximum 30 percent of the investment woodchips or straw) (not including real estate costs) • ct8.81/kWh to ct13.86/kWh, • up to 100 MW: 300 Euros (EUR)/kW depending on the production capacity • 100 MW to 400 MW: EUR180/kW (declining tariff) • more than 400 MW: EUR120/kW Waste with high biogenic contingent Small hydro plants • Same as for compact biomass, minus 25 percent • maximum 30 percent of the investment for 500 kW capacity: up to Liquid biomass EUR1500/kW • ct5.68/kWh; surplus of ct2/kWh for • maximum 20 percent of the production in an efficient power-heat investment for 2 MW capacity: up to cogeneration EUR1000/kW Biogas from agrarian production • maximum 10 percent of the • ct 12.80/kWh to ct19.31/kWh, investment for 10 MW capacity: up to depending on the production capacity EUR400/kW (declining tariff) • in between these set percentages, Additional information the maximum is calculated via linear interpolation. Legal The feed-in tariffs are regulated by the Medium hydro plants (<10 MW) law for the promotion of electricity • maximum 10 percent of the production from renewable energy investment resources (Ökostromgesetz 2012). The concrete feed-in tariffs have to be • maximum EUR400/kW and maximum determined each year by a decree from EUR6 million per plant the Ministry of Economics. Operating subsidies Duration of the feed-in-tariffs Feed-in tariff1 15 years for liquid and concrete Wind energy: biomass or biogas; 13 years for all other • cents (ct)9.36/kWh renewable technologies. Solar: Administrative procedures On buildings: Applications have to be filed with the Renewable Energy handling Center • 5 kWp to 350 kWp: ct12,50/kWh (Ökostromabwickklungstelle, http:// www.oem-ag.at/). In open space: • 5 kWp to 350 kWp: ct10,00/kWh

Taxes and incentives for renewable energy | 13

Support schemes • There is a special tax regime for Federal and state VAT (IPI and ICMS) producers, importers and distributors Investments and other subsidies • Biodiesel and ethanol sales are not of ethanol. The producers and subject to the Industrialized Products Taxes over revenue and imports (PIS importers may opt for: tax (Imposto Sobre Produtos and COFINS) – a 1.5 percent PIS rate and a Industrializados or IPI). • A special tax regime is applicable in 6.9 percent COFINS rate levied on • Equipment used in the renewable Brazil for producers and importers gross revenue of ethanol sales; energy generation process is of biodiesel,1 which includes two generally exempted from the IPI. programs: the Social Integration – a fixed value of PIS and COFINS Program (Programa de Integração by cubic meter of commercialized • The State Value-Added Tax on Sales Social or PIS) and the Contribution to ethanol – BRL8.57 and BRL39.43, and Services (Imposto Sobre a the Social Security Fund (Contribuição respectively, up to 31 August 2013. Circulação de Mercadorias e Serviços para o Financiamento da Seguridade Recently, the Brazilian government or ICMS) can possibly be exempted Social or COFINS). The PIS and edited Decree 7.997/13, which sets for some products used for biodiesel COFINS taxes due are definitive, forth that, from 1 September 2013 until or ethanol production. In addition, meaning that the resale of biodiesel December 31st 2016, the fixed value the ICMS calculation basis may be by wholesalers, distributors and of PIS and COFINS by cubic meter reduced for interstate operations retailers is not subject to PIS and of commercialized ethanol shall be related to ethanol and biodiesel COFINS. Under this tax regime, the increased to BRL21.43 and BRL98.57, production and distribution. This producers and importers can opt for: respectively. reduction depends on individual state law. – a 6.15 percent PIS rate and a Despite this, the Brazilian government 28.32 percent COFINS rate levied approved Federal Law n. 12.859/2013 • In the same way, operations involving on gross revenues derived from that grants to the producers and equipment used in the generation biodiesel sales; or importers a presumed credit in the of wind and solar energy can possibly be ICMS taxexempt until – a fixed value of PIS and COFINS same values, which leads to a practical 31 December 2015. by cubic meter of commercialized effect of zero rate of PIS and COFINS. biodiesel 26.41 Brazilian real (BRL) Also, the taxpayers may opt for this new Contribution for Intervention in the and BRL121.59, respectively. fixed value and the presumed credit in Economic Domain (CIDE) advance (from 8 May 2013). Producers opting for the fixed value can • Ethanol sales are not subject to obtain certain reductions and exemptions When it comes to distributors of Contribution for Intervention in the of the amounts due, depending on the ethanol, the options are (depending on Economic Domain (Contribuição de supplier of raw material or input applicable the option of the producer or importer). Intervenção no Domínio Econômico or CIDE). to the production (for example, acquisition – a 3.75 percent PIS rate and a from castor bean producers or from 17.25 percent COFINS rate levied on Operating subsidies family farmers). Moreover, producers of gross revenue of ethanol sales; biodiesel under a non-cumulative regime Feed-in tariff – a zero rate for the fixed PIS and of PIS and COFINS are able to offset Wind: N/A 4.625 percent of presumed credit on COFINS. Biomass: N/A acquisition of inputs from individuals or • Ethanol sales carried out by retailers legal entities that supply agribusinesses and sales negotiated through the Hydro: N/A or agribusiness cooperatives. Future & Commodities Exchange Brazil currently has no feed-in tariff (Bolsa de Mercadorias e Futuros or • The sugarcane sales for ethanol policy. production are exempt from PIS and BM&F) are not subject to PIS and COFINS, provided that the tax payer COFINS, as long as the commodities’ Additional information is under the non-cumulative regime. contracts do not estipulate physical Brazil is considered the world’s sixth delivery (i.e. applies to contracts that largest investor in renewable energy.2 are financially settled).

1. Producers and importers are legal entities that are beneficiaries of concessions or authorizations from the National Petroleum Agency (ANP). They are registered as producers or importers of biodiesel in the Special Register held by the Brazilian Internal Revenue Service. 2. Global Trends in Renewable Energy Investment 2012 – UNEP 14 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Nationwide, 44.1 percent of the Internal wind energy at a price of BRL148.39/ • Creation of a line of credit of BRL Energy Supply (Oferta Interna de MWh. Encouraged by the success of 6 billion for the production and Energia or OIE) is renewable,3 whereas this auction, the government continues storage of sugarcane and ethanol the world’s average is 20.3 percent.4 to hold auctions on an annual basis. with reduced interests. Furthermore, the National Bank for Additional benefits not yet in • Increasing of the percentage of Economic and Social Development force ethanol to be mixed with gasoline (Banco Nacional do Desenvolvimento from 20 percent to 25 percent. Econômico Social or BNDES) provides Several other incentives being • Reduction of chemical input costs, a variety of financial programs discussed in the Brazilian scenario are by diminishing the chemical industry to stimulate the production of also worth mentioning: costs with the increasing of its PIS renewable energy. The development The Brazilian Commission of and COFINS credits. of the renewable energies in Brazil Infrastructure Services (CI) approved is increasing, and almost half of the PLS 311/09, a federal project law that Finally, other general benefits that energy consumed in Brazil is now establishes the Special Regime of are not specific to renewables may generated by renewable sources. Taxation to encourage the development apply, such as the Special Incentives Program for Infrastructure Development The actual scenario is very and generation of electric power from (Regime Especial de Incentivos para o advantageous for renewable energy. alternative sources (Regime Especial Desenvolvimento da Infra-Estrutura or The government expectations are that de Tributação para o Incentivo ao REIDI), SUDAM/SUDENE incentives, and renewable energy may be responsible Desenvolvimento e à Produção de technology innovation. Each one has its for 18 GW out of a total increase of 63 Fontes Alternativas de Energia or requirements for application and, in some GW in the total installed capacity of the REINFA). This project foresees several cases, depends on government approval. segment over the next 10 years.5 tax benefits such as exemptions of PIS and COFINS, import taxes and IPI According to the Ministry of Mines for companies operating under the and Energy, Brazil is especially well regime. It is important to emphasize situated for becoming a major producer that this is not a law in force, yet. At the of biodiesel. The country contains a vast present time, it is still awaiting internal amount of arable land, much of which procedures in the Federal Senate. has the right soil and climate for growing a variety of oilseeds. After COP-15, Brazil formalized its commitment to reduce carbon The growth of biodiesel as an alternative emissions and increased its goal by energy source in Brazil is supported 2.8 percent. Under the National Policy by Federal Law 11.097/05, which on Climate Change (law 12.187/09), mandates a minimum of five percent of Brazil has pledged to reduce carbon biodiesel to be mixed with diesel and emissions 38.9 percent by 2020. the monitoring of this mixture in the According to this law, Brazil could grant marketplace. This law also supports the several tax benefits to encourage the funding of R&D for biodiesel and other use of renewable energy. At this point in energy sources, as well as all phases of time, these benefits have not yet been production, including the acquisition of implemented. equipment and technology. In 2013, the government created a In a related matter, Brazil is one of the program of incentives to the ethanol most promising countries for wind sector. This program involves several 6 energy. The first wind energy auction benefits to this market that will be was held at the end of 2009, in which implemented soon: the government bought 1805 MW of

3. Energetic National Balance (Balanço Energético Nacional) 2012 4. United Nations Environment Programme – 2012 5. Brazilian government website, 2013 6. GLOBAL Wind Energy Outlook of 2012 Taxes and incentives for renewable energy | 15

Support schemes plants, biomass and waste handling, savings achieved. The certificate should processing installations or heat recovery be granted on a monthly basis, taking Investment and other subsidies devices. into account several factors. Corporate income tax incentives A certificate issued by the competent Electricity suppliers in Belgium have An increased investment deduction is Regional Authority confirming that the to make sure that a minimum share available for investments made by a assets are enlisted should be requested of the electricity they provide to the Belgian company into newly acquired within three months following the last end consumers can be considered or built tangible or intangible fixed day of the taxable period in which the as green or renewable energy assets. This deduction is provided if the assets are acquired or established. (“the minimum renewable energy investment is made in “energy saving In order to verify the authenticity of requirements”). To verify this minimum assets,” which are fixed assets used the investment, it is necessary that amount of renewable energy, the for a more rational approach to energy the application is accompanied with electricity suppliers need to be granted consumption, for the improvement of supporting documents and other a sufficient number of certificates. industrial processes from energetic items for determining the accuracy These certificates should be submitted considerations, and especially for the of the amount and the value of the to the Regional Authority, showing recovery of energy in industry. investments. that the minimum renewable energy requirements are met. Suppliers that Applicable rules and rates Regional Support Schemes do not produce electricity (and are not A percentage of the acquisition or In Belgium, renewable energy is a investment value of certain assets granted certificates) or suppliers that do regional matter; only offshore wind not provide enough renewable energy that have been acquired or established power and hydro power are governed by during the taxable period and that relate are able to buy the certificates on the national regulations. Depending on the market. to energy savings is tax deductible. competent Regional Authority, specific This is in addition to the accounting support schemes could be applied for. A producer of renewable energy that depreciations that are also tax is granted certificates can sell the deductible. Financial support which encourages certificates to a supplier that meets companies to invest in state-of-the-art, the minimum renewable energy The increased investment deduction ecological technologies can be obtained should therefore be applied as a requirements. Moreover, to ensure via an open online system and is granted the sale of a minimum volume of one-off deduction and equals 13.5 by the competent Regional Authorities. percent (indexed yearly – percentage certificates at a certain minimum These state-of-the-art technologies purchase price, the distribution network investments 2014) of the acquisition are described in limitative lists of eco- value or investment value. operator, as part of its duty as a public friendly or energy-saving technologies service, should purchase at a minimum Tax deduction and are granted financial support of guaranteed value, upon request of The investment deduction can be between 5 and 50 percent. the energy producer, the certificates deducted from the profits of the The regionally granted subsidies are granted to the energy producer by the taxable period in which the assets are under certain conditions tax-free for Regional Authority. acquired or established (that is, become corporate income tax purposes. As a result, a producer of renewable depreciable). When the deduction energy can use the certificates that cannot be fully set off against the profits Federal System of Certificates were granted to his energy plant by the of the taxable period, the proportion In Belgium, electricity from renewable Regional Authority to: of the investment deduction that has sources is promoted mainly through not been used can be carried forward a quota system based on the trade • meet the minimum renewable energy without any time limit and can be set off of certificates (in other words, green requirements (if it is a producer and against the profits of the subsequent energy certificates and / or combined supplier of electricity) taxable periods. heat and power (CHP) certificates). • sell the certificates on the market at Formalities The certificate is a transferable market price intangible asset demonstrating that the The Royal Decree implementing the • transfer the certificates to the Belgian Income Tax Code contains energy plant mentioned therein realized a significant amount of energy savings. distribution network operator at a a list of eligible investments. Some certain minimum guaranteed value. examples are wind turbines, solar The competent Regional Authorities panels, combined heat and power grants the certificate to the owner of the energy plant as a reward for the energy

16 | Taxes and incentives for renewable energy

Support schemes – equipment generating electricity negotiation, regulatory, site approval from geothermal energy costs, site prep and testing, etc. CRCE Federal investments and other can also include test wind turbines that – equipment generating electricity subsidies are part of a wind farm, on projects from eligible waste fuel. The Government of Canada has where 50 percent or more tangible committed that Canada’s total – thermal energy costs are reasonably expected to be greenhouse gas (GHG) emissions be included in Class 43.1 or 43.2 ACCA. – active solar equipment reduced by 17 percent from 2005 levels CRCE is fully deductible in any year, can by 2020 and that 90 percent of Canada’s – district energy equipment that be carried-forward indefinitely or can electricity be generated from sources distributes thermal energy from be transferred to investors through the that do not produce GHG pollution by cogeneration flow-through share rules. 2020. Here is a summary of incentives and grants that the federal government – heat recovery equipment used Scientific Research & Experimental has invested in support of these goals. in electricity generation and Development (SR&ED) Program industrial processes The SR&ED Program is a federal tax Income tax incentives – ground source heat pump incentive program administered by Accelerated Capital Cost Allowance equipment the Canada Revenue Agency that (ACCA) encourages Canadian businesses of all – equipment generating heat sizes, and in all sectors, to conduct R&D Advantageous ACCA rates are available for industrial processes or in Canada. Companies, including those for certain types of assets used for greenhouses, using an eligible carrying on business in clean energy clean energy generation and energy waste fuel. conservation: generation, may be entitled to claim an – fuels from waste Investment Tax Credit (ITC) if they incur • Class 43.1 (30 percent declining eligible R&D expenditure. The tax credit – equipment that recovers landfill balance basis) for certain clean energy is based on money already committed gas or digester gas generation and energy conservation and spent by the company. The program equipment. – equipment used to produce is the single largest source of federal government support for industrial R&D, • Class 43.2 (50 percent declining biogas through anaerobic returning as much as a 35 percent balance basis) for certain equipment digestion federal cash refund. described in Class 43.1 that is – equipment used to convert acquired on or after 23 February biomass into bio-oil. Sustainable Development Technology 2005 and before 2020 that is used for Canada (SDTC) clean energy generation and energy – Equipment used to remove non- SDTC plays a significant role in conservation and meeting higher combustibles and containments bridging the gap between research efficiency standards. from gas and commercialization of clean • The 2014 budget proposes to broaden • Recent federal budgets continue to technologies. It does this by the eligible equipment in Class 43.2 expand the list of equipment that fasttracking clean technologies to include qualifies for an ACCA. The current through their development and eligible equipment includes: – Water-current energy equipment. demonstration phases, in preparation for commercialization. SDTC is an – electricity – A broader range of equipment arm’slength foundation that was created used to gasify eligible waste. – high-efficiency cogeneration by the Federal government to invest equipment Canadian Renewable and 1.09 billion Canadian dollars (CAD) in innovative technologies and projects – small hydroelectric facilities Conservation Expense (CRCE) that deliver economic, environmental, To promote development and – wind turbines and health benefits to Canadians. conservation of sources of renewable – fuel cells energy, many start-up expenditures on Backed by CAD598 million in funds, SDTC supports projects that address – wave and tidal power equipment renewable projects can be grouped in a CRCE pool. CRCE can include intangible climate change, air quality, clean water – photovoltaic (PV) equipment expenses such as feasibility studies, and clean soil. The CAD500 million

18 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. NextGen Biofuels Fund supports the was established to provide production commercial technical solutions to the establishment of first-of-kind, large subsidies for a variety of bioenergy gas-over-bitumen issue to allow the demonstration-scale facilities for products, including renewable fuels, efficient and orderly production of both the production of next-generation electricity, and heat using waste resources. Over time, program costs renewable fuels. such as manure and wood chips. In will be recovered through additional the 2013 budget, the Government of recoverable reserves and increased SDTC acts as the primary catalyst in Alberta cancelled future rounds of the royalties. Successful applicants in the building a sustainable development Bioenergy Producer Credit Program. program are provided with royalty technology infrastructure in Canada. The However, the government will still be adjustments up to a maximum of SDTC portfolio is currently comprised honouring payments to existing grant 30 percent of approved project costs. of 246 clean technology projects, for a agreements. The program is valid for The industry must provide the remaining total value of CAD2.2billion, of which bioenergy production from 1 April 2011 70 percent or more of total project over CAD1.6 billion is leveraged primarily to 31 March 2016. costs. The total industry/government from the private-sector. In February commitment to important new 2014, SDTC announced its 23rd call Carbon Capture and Storage (CCS) Fund – technologies, assuming full subscription for applications, which was open until Alberta of the program, will be CAD1.15 billion. 16 April 2014. The Alberta government has committed Innovative Clean Energy Fund (ICE) – British ecoENERGY CAD2 billion to advance CCS Columbia technology. Approved projects can The ecoENERGY program targets receive a maximum of 75 percent of The Innovative Clean Energy Fund several areas including biofuels, energy the total incremental cost to capture, encourages the development efficiency and renewable energy. transport and store CO2. A maximum of new sources of clean energy • ecoENERGY for biofuels: The of up to 40 percent of the approved and technologies and supports ecoENERGY for Biofuels initiative funding will be distributed during precommercial energy technology or has a budget of CAD1.5 billion over the design and construction stage commercial technologies not currently 9 years to boost Canada’s production based on achieved milestones and used in British Columbia. Since 2008, of biofuels. The program runs from up to an additional 20 percent of the there are 62 projects with a total 1 April 2008 to 31 March 2017, and approved funding will be granted upon amount of CAD77 million that have been recipients will be entitled to receive commercial operation. The remaining approved throughout British Columbia. incentives for up to 7 consecutive 40 percent of the funding will be SR&ED tax credit – All provinces years. provided as CO2 is captured and stored over a maximum period of 10 years. Various provinces provide refundable • ecoENERGY for Renewable Power: and/or non-refundable investment The ecoENERGY for Renewable The government of Alberta has awarded tax credits (ITC) worth between Power initiative has a budget of funding for two projects from its CAD2 10 percent and 15 percent of annual approximately CAD1.4 billion billion CCS fund. eligible expenditures (depending on the over 14 years to encourage using • Alberta Carbon Trunk Line (CAD495 particular province) for all corporations renewable energy sources to create million) that do business through a permanent electricity. The program runs from establishment situated in that province. 1 April 2007 to 31 March 2021. There • Shell Quest (CAD745 million) Eligible expenditures are generally those are no new agreements signed Innovative Energy Technologies Programs that qualify for federal ITC purposes after 31 March 2011; however, many (IETP) – Alberta and are generally capped at a maximum projects with existing contribution annual credit. agreements will still receive The Innovative Energy Technologies payments up until 31 March 2021. Program (IETP) supports the Provincial Operating subsidies Energy Strategy (PES), which identifies Provincial investments and other There are no feed-in tariffs and quota the need for innovation, research and subsidies obligations at the federal level but they technology development. Announced are implemented in some provinces. Bioenergy Producer Credit Program – in 2004, the IETP supports innovative Alberta technology development in the To expand Alberta’s bioenergy sector, production of Alberta’s oil, oil sands, and the Bioenergy Producer Credit Program gas resources. It also supports finding

Taxes and incentives for renewable energy | 19

20 | Taxes and incentives for renewable energy

Support schemes further review. (According to the • 50 percent refund of VAT is paid on Old Measures, all CDM project the sale of self-produced photovoltaic Investments and other subsidies companies applied directly to the power from 1 October 2013 to Corporate Income Tax (CIT) central NDRC for approval.) 31 December 2015. • A reduced CIT rate of 15 percent The New Measure also changes the • 100 percent refund of VAT is paid on is granted to qualified advanced sharing percentage in the proceeds the sale of biodiesel oil generated by and new technology enterprises. from the transfer of emission reductions the utilization of abandoned-animal fat Applicable fields include solar energy, units between the government and and vegetable oil. wind energy, biomaterial energy, and companies involved in N2O and PFC • The portion of VAT paid in excess of geothermal energy. projects. 8 percent shall be refunded on the • The Clean Development Mechanism • Three years CIT exemption is sale of self-produced electricity by (CDM) Fund is exempted from CIT on followed by a 50 percent reduction for hydroelectric power station with the following income: another 3 years of the standard CIT 1 million KW installed capacity from – the portion of Carbon Emissions rate for income derived from qualified 1 January 2013 to 31 December Reductions (CERs) proceeds that environmental protection and energy 2015, while the portion of VAT paid are shared by the government or water conservation projects. This in excess of 12 percent shall be reduction starts from the year in refunded on the sale of self-produced – donations from international which the first revenue is generated. electricity by hydroelectric power financial organizations Applicable fields include biomaterial station with 1 million KW installed – interest income derived from energy, synergistic development capacity from 1 January 2016 to capital deposit or national bonds and utilization of methane, and 31 December 2017. technological innovation in energy • VAT paid on the sale of goods – donations from domestic and conservation and emission. foreign entities or individuals. produced from recycled materials or • Ten percent of the amount invested waste residuals is refundable. • Enterprises operating CDM projects in the qualified equipment is credited • VAT is exempt on the sale of self are allowed to deduct before CIT the against CIT payable for the current produced goods including recycled CER proceeds that are shared by the year, with any unutilized investment water, qualified powdered rubber government. credit eligible to be carried forward made out of obsolete tires, re-trodden for 5 tax years. This applies only if • Three years CIT exemption is tires and certain construction such equipment is qualified as special followed by a 50 percent reduction materials made from 30 percent or equipment related to environmental for another 3 years of the standard more of waste residuals. CIT rate for income derived from protection, energy, or water specified CDM projects. These conservation and production safety. • VAT is exempt for sewage treatment, garbage disposal and sludge projects include hydrofluorocarbons • Only 90 percent of the revenue treatment services. (HFC), perfluorocarbons (PFC), and derived from the transaction is taken nitrous oxide (N2O) projects, starting into account for CIT computation In November 2011, the government from the year in which the revenue purposes. This applies only if such authority expanded the scope of sales from the transfer of greenhouse revenue is derived from the use of of self-produced goods/products by gas (GHG) emission reductions is specific resources associated with using the prescribed recycled materials, first received. According to the new the synergistic utilization of resources waste residuals and agricultural Administrative Measures Governing as raw materials in the production of residuals that are eligible for VAT refund the Operation of CDM Projects in goods. at rates ranging from 50 to 100 percent 2011, any project companies, except of the VAT payable. The rates may vary • A 150 percent deduction is given for for the 41 state-owned enterprises depending on the nature of recycled qualified R&D expenses incurred for listed, shall apply for approval with the materials or residuals utilized. National Development and Reform CIT computation purposes. As of 1 April 2013, the taxpayer is further Commission (NDRC) at the provincial Value Added Tax (VAT) level first. Then the commission required to meet the local/national would submit preliminary review • 50 percent refund of VAT is paid on pollutant emission requirements in opinions to the central NDRC for the sale of wind power. order to receive the VAT incentive for

Taxes and incentives for renewable energy | 21

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. © 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. self-produced goods/ products from which the investment is made. Where will promulgate guidelines on the full recycled materials. there is not sufficient tax payable purchase of electricity generated by to absorb the credit in the year, the new energies. According to the revised Vehicle and Vessel Tax excess credit may be carried forward law, the price of on-grid electricity As of 1 January 2012, qualified energy up to 5 tax years. generated by renewable energies shall efficient vehicles and vessels enjoy be determined by the competent price • A qualified ESCO taking part in an a 50 percent Vehicle and Vessel Tax department of the State Council. The EPC project will be provisionally deduction. Qualified new energy (mainly council will consider the difference in exempt from the Business Tax/ VAT on electric) vehicles and vessels may be areas and the electricity generated by revenues received from the project. exempted from Vehicle and Vessel different types of renewable energy Taxes. • A qualified ESCO taking part in an companies. EPC project will be provisionally Financial subsidies and tax incentives Financial funds/allowance exempt from the VAT on the transfer available to energy performance to the energy user of goods related to Special funds are made available to contracting (EPC) projects the project. facilitate the development of renewable • Financial subsidies are granted by the energy relating to the following • When, at the end of the term of the central and provincial government activities: energy management contract (EMC), agencies respectively. The standard the ESCO transfers to the energy • scientific and technical research, rate of subsidies at the central level user the assets that have materialized standardization processes and model is 240 Chinese yuan (CNY) per ton in the course of executing the engineering projects of standard coal saved. The standard EPC project, the ESCO can do so rate at the provincial level is no less • renewable energy projects in rural as if these assets had been fully than CNY60 per ton of standard and pastoral areas depreciated or amortized for CIT coal saved. The NDRC and Ministry purposes. In the same way, when • construction of stand-alone electricity of Finance jointly announce the the energy user receives the project generation system in remote areas qualified energy service companies assets from the ESCO, the energy and islands (ESCO). These companies can apply user can do so as if these assets had for financial subsidies on energy • renewable energy resource surveys, been so depreciated or amortized. preservation management contracts. evaluation and construction of The list of qualified ESCOs is updated • When the ESCO transfers the project information systems on a regular basis. These financial assets to the energy user at the end • localization of manufacturing facilities subsidies are rolled out under the of the term of the EMC, the ESCO used in the renewable energy sector. jurisdiction of Energy Performance will not have to recognize any revenue Contracting (EPC), and they should be to take into account the contributions The special funds may also be deployed taxable for CIT purposes. the energy user has made to the price as compensation for the higher costs of the assets. charged by renewable energy plants • A qualified ESCO taking part in an and indirectly borne by the grid for EPC project will be eligible for a tax • An energy user in an EPC project can the purchase of electricity from these exemption in the first 3 years and a deduct reasonable expenses actually plants. Applicants may apply for such tax reduction by half (an effective rate incurred in accordance with the EMC funds with the local finance bureaus and of 12.5 percent) over the following as, and when, they are incurred for the government agencies in charge of 3 years, starting from the tax year in CIT purposes. There is no need to renewable energy projects. which the revenue from the project differentiate between service fees first arises. Where an EPC project and asset prices in claiming such a Financial subsidies for energy lasts less than 6 years, the ESCO shall deduction. conservation technologies be entitled to the incentives based on improvement the actual project period. Operating subsidies During the State’s 12th Five-Year Plan period, the central government will • An enterprise that invests in special Feed-in tariff continue to arrange special subsidies equipment for energy conservation With the revised Renewable Energy to support the projects to improve the will obtain a credit against its tax Law that came into effect in April 2010, energy conservation technologies. payable that equals 10 percent of the State Bureau of Energy and other the investment amount in the year in departments of the State Council

22 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. In order to achieve optimum energy conservation goals, the financial subsidies are closely linked to the quantity of energy conserved on a project basis. The project companies shall be granted financial subsidies if they fully complete the expected goals of energy conservation. For projects in the eastern regions of China, companies may be granted a one-time reward subsidy of CNY240 per ton of standard coal based on the annual energy consumption after the completion of the projects. For projects in the central and western regions of China, a one-time reward subsidy of CNY300 per ton of standard coal may be granted. Financial subsidies for the development of “Model County for Green Energy” program To promote the “Model County for Green Energy” program, financial subsidies are granted to the following qualified projects in rural areas: • concentrated provision of methane gas projects • biomass gasification projects • biomass briquette projects • other projects that develop and utilize renewable energies • rural energy service system. The amount of subsidies granted is subject to a comprehensive evaluation with reference to the completed investment by the applicant, the level of green energy productivity and the number of users. Additional information Quota obligation The guidelines for quotas in the renewable energy sector have been included in the work plan of the State Bureau of Energy and are expected to be issued by 2013.

Taxes and incentives for renewable energy | 23

Support schemes • DC electronics equipment for use and the imported products are no longer with PV panels, wind and hydro needed, they can be exported without Investment and other subsidies generators incurring any customs tax. The products Law 7447 must remain in the country for no longer • Materials to build equipment for Law 7447 (Regulation of the Rational than 1 year and must then be exported renewable energy use Use of Energy), Article 38, lists a or definitively imported without any number of energy-related products that • Tempered glass with less than transformations. 0.02 percent iron content are exempt from the following taxes: Operating subsidies • Excise tax • Thermal insulation for thermal solar Feed-in tariff collectors such as polysocyanurate • Ad valorem and polyurethane insulation, additives Costa Rica currently has no feed-in tariff • General sales tax for preparing them, or both policy. • Specific customs tax. • Plate-finned tubes and absorbent Additional information plates for water heaters These exempt products include – Renewable energy production is • Specific aluminum profiles to build supported by Costa Rica’s natural • Multipurpose solar water heaters solar water heaters resources and local conditions, including six months of summer (for solar energy • Water storage tanks for solar heating • Thermal insulation for water pipes systems (boiler type) production), open plains (for wind • Any heat insulator useful to improve energy), and abundant supplies of water • Photovoltaic (PV) panels for power the insulation of storage tanks with (for hydropower). As a result, Costa Rica generation, any capacity solar heated water systems produces 99 percent of its electricity from renewable resources. • Control systems for PV panels, wind • Measuring instruments related to and hydro generators working with renewable energies variables, such The Costa Rican government has set a direct current (DC) as: temperature gauges, pressure goal for the country to become carbon • Static DC to AC converters for PV gauges fluids, solar radiation meters, neutral by 2021. Public institutions systems, wind and hydroelectric and anemometers to measure wind have been developing plans to begin generators with direct current speed and direction offsetting all of the country’s carbon dioxide emissions. systems • Pump-fed systems with PV and wind Deep cycle Lead-acid batteries, nickel- systems For 2012, the country’s energy mix was made up of the following resources: cadmium and nickel-iron, with capacities • Refrigerators, solar cookers and greater than 50 amps per hour hydraulic ram pumps. • Hydroelectric – more than 66 percent • Head economizers for hot water Moreover, tax reductions for green • Thermal – 20 percent showers and sinks, with consumption technology have been introduced, such • Geothermal – 7 percent of less than 9.5 liters / minute as a 30 to 10 percent tax reduction for • Efficient fluorescent and halogen hybrid cars. • Wind – 5 percent lighting Temporary import • Biomass – 2 percent. • Wind and hydro-generators for use Law 7557 (General Customs Law), Grupo ICE operates 76 percent of not related to private generation Article 165, states that the products installed capacity with its own plants of electricity (Law 7200 of 28 listed above are exempt from import and 13 percent with plants contracted September 1990) taxes if they are imported with a to independent private generators. temporary purpose related to a • Equipment for controlling voltage Distribution companies operate renewable energy project. After the and frequency for wind and hydro plants that reach 11 percent of the renewable energy project is finished generators installed capacity.

24 | Taxes and incentives for renewable energy

Installed Capacity by Source 2012 Generation 2012 Solar 0% Biomass 2% Thermal 8% Thermal 20% Solar 0% Wind 5% Biomass 1% Geothermal 2 682 MW Wind 5% 10 076 GWh 7% Effective Local Generation Geothermal 13.9%

Hydroelectric Hydroelectric 66% 72%

Figure 2 shows the historical percentage Figure 2: Historical Generation by Source of use of different sources for electric generation in Costa Rica. At the beginning, after the construction of the Arenal complex, there was hardly any use of thermal generation. Subsequently, its use has increased to a maximum of 17.4 percent in the year 1994, due in part to a severe drought. During recent years, thanks to the contribution of geothermal generation, favorable hydrological conditions and wind, it has been possible to reduce to a minimum the use of thermal generation. In 2012 the heat production was 830 GWh, only 8 percent of the national production. Hydrometric Geothermal Wind Biomass Thermal

Current Projects • “El Paramo” Hybrid System (Chirripó • Self-sufficient house at the INBIO The following renewable energy National Park) Park - Compañía Nacional de Fuerza y Luz projects are being implemented in • Miravalles geothermal project Costa Rica. All these projects have • “Los Anonos” PV power plant the inherent benefit of reducing GHG • Cogeneration with biomass at the emissions. “Azucarera el Viejo” • Garabito thermal plant

• PV power at the thermal plant in San • Electricity generation project from • “Peñas Blancas” hydroelectric plant biogas at the SERMIDE farm Antonio Future Projects • Micro-hydropower station on Coco´s • Tejona wind power generation plant • Las Pailas II geothermal project Island • Hybrid system: wind-solar PV at the • Reventazon hydroelectric plant Iztarú National School Field

Taxes and incentives for renewable energy | 25

Support schemes Operating subsidies • building-integrated generating facilities: EUR0.2794/kWh, As of Investments and other subsidies Feed-in tariff 1 July 2011, the above-mentioned The accelerated tax depreciation has Remuneration is available for electricity tariffs have been adjusted quarterly not been renewed as of 1 January 2011. produced from the following sources by the Ministry in charge of energy, However, companies can still apply a according to tariff which are revised on depending on the number of grid declining-balance method to certain indexation formula. connection applications received by equipment used to produce renewable Wind the distribution system operators energy. This method, which is optional, over the previous quarter. consists of multiplying the depreciation • Onshore wind power plants: rate for the straight-line method by a EUR0.082/ kWh for 10 years and A bonus of 5 percent or 10 percent coefficient determined by law, based between EUR0.028/kWh and applicable on the above-mentioned on the asset’s expected useful life. In EUR0.082/kWh for the next 5 years tariffs was granted for the components practice, when a company applies the depending on the location of the wind of the PV system made in Europe. This declining depreciation method at the farms and the hours of electricity bonus has been cancelled effective beginning of the depreciation period, it production. May 2014 since this system has been can obtain tax depreciation higher than considered as non-compliance with EU On December 19, 2013, the CJEU rules on freedom of movement. the accounting depreciation. considered that the mechanism Biofuels relating to the obligation to purchase The above-mentioned tariffs are mainly applicable for installations below Biofuels benefit from a partial wind-generated electricity meets the 100 KW power. For the installations exemption of the internal tax on conditions for being characterized as exceeding this threshold, they are petroleum products and of the State aid. Based on said decision, the subject to invitation to tender. general tax on polluting activities to French Supreme Administrative Court compensate for the additional costs has decided to cancel the Order of Geothermal 17 November 2008 setting the tariff arising from biofuel production. Biofuels • France: EUR0.20/kWh, in addition to in gasoline include bioethanol and ethyl amounts (Decision dated May 28, 2014). an energy efficiency bonus of up to tertiary butyl ether (ETBE). This partial EUR0.08/kWh exemption is applicable for the period • Further to this decision, a new tariff between 2014 and 2015. should be issued soon. • French overseas departments: EUR0.13/kWh, in addition to an Research tax credit • Offshore wind power plants: energy efficiency bonus of up to Companies may be granted a research EUR0.13/kWh for 10 years and EUR0.03/kWh. tax credit on their environmental between EUR0.03 and EUR0.13/kWh Biomaterial (Biogaz) investments if the expenses they for the next 10 years, depending on incur while carrying on such projects the location of the wind farms and the • Between EUR0.0.8121 and correspond to research activities eligible hours of electricity production. EUR0.1337 /kWh, depending on the for this tax credit. The tax credit will power of the plant, in addition to Solar be equal to 30 percent of the eligible an energy efficiency bonus of up to research expenses that do not exceed Due to several recent changes in the EUR0.04/kWh. EUR100 million and to 5 percent for law, different tariffs apply to photovoltaic Hydro the eligible R&D expenses exceeding (PV) power plants, depending on the EUR100 million. kind of projects (tariffs for the first • EUR0.0607/kWh in addition to a quarter 2014): bonus between EUR0.005/kWh The research tax credit will be offset and EUR0.025/kWh for small power • ground-based PV power plants: against the corporate income tax plants, as well as a bonus of up EUR0.717 /kWh due during the year the expenses are to EUR0.0168/kWh for electricity incurred. Any surplus tax credit will • simplified building-integrated produced during the winter constitute a receivable for the company generating facilities: EUR0.1345kWh • EUR0.015/kWh for ocean hydraulic that can be used to pay the corporate or EUR0.1416/kWh income tax for the three following years energy (wave energy, tidal energy and and may be reimbursed afterwards. other hydrokinetic energy sources).

26 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Biomass government launched bidding rounds Offshore wind energy: • EUR0.043/kWh in addition to a to renew before the end of 2015 the France has set a target plan for installing bonus between EUR0.0771/kWh concessions for 10 lots that represent 6,000 MW of offshore wind energy by and EUR0.1253/kWh depending on 49 power structures/stations and two 2020 through a tender process. the energy efficiency, the nature of power-increase systems with a total In April 2012, the French government the resources used and the power of power capacity of 5,300 MW. announced an award of four offshore the plant. The concessions due for renewal are wind farm development zones (2 GW Électricité de France (EDF) and other located in the Alps, the Pyrenees and in of offshore wind energy capacity). electricity distributors must purchase the center of France. The hydropower On 16 March 2013, the French Energy the electricity produced by a renewable stations are currently run by EDF and Regulatory Commission issued a energies producer at fixed tariffs and for by a GDF-Suez subsidiary, the Société second tender for offshore wind farms a minimum duration. For example, there Hydroélectrique du Midi. with 1 GW of new capacity. On May is a purchase obligation for EDF during a A statement issued in 2013 by the 7, 2014, the French government has 15 year period for onshore wind power, French Ministry in charge of energy, the awarded a tender to build and run two geothermal power, and biomaterial selection will be made, interalia, on the offshore windfarms to a consortium led power and a 20 year period for offshore following three criteria: by French gas and power group, GDF. wind power, solar power (subject to the Furthermore, the Ministry of date of the operational start up of the • The energetic efficiency of the environment indicated that France facilities) and for hydro power. The tariffs bidders to modernize the existing wants to have 6000 MW offshore mentioned above correspond to the structures or to create additional capacity before 2020. Therefore, tariff applied to the power plants located equipment. specific organisms have to identify in metropolitan France. Increased • The financial remuneration to be paid new zones for the construction of tariffs apply with respect to Corsica and to the State by the concessionaire, offshore wind parks and in the coming overseas departments. since a capped royalty proportional months, the French government should Additional information to the turnover made with the announce a new tender. hydropower stations will be paid Building and Construction to the French State and to the local Grid access: Authorization and Permission (BCAP): authorities. The producer/owner of a new power The construction of a power plant is plant has to apply for a grid connection • The protection of the ecosystems. subject to the issuance of a building to the public distribution system such as (The bidders shall especially respect permit. However, solar power plants Réseau de Transport d’Electricité (RTE), the commitments convention for (subject to certain conditions) and wind Electricité Réseau Distribution France the development of a sustainable turbines smaller than 12 meters are not (ERDF) or a local distributing company. hydroelectricity, signed on 23 June subject to the issuance of a building Some agreements have to be made 2010). permit. Specific authorizations exist for by the owner of the power plant for hydro and biomaterial power stations. However, due to lack of consensus over the distribution of the electricity that it In addition to the building permit, an the tender process, it appears that, to produces: exploitation authorization issued by the date, no calls for tender have yet to be • public grid contract (Contrat d’accès Minister of Energy is required for power launched. Consequently, several expired au réseau public) plants with an installed load/installed concessions – including 2 that expired in power higher than 4.5 MW. For power 2012 – have yet to be renewed and are • grid connection contract (Contrat de plants with an installed power lower or still being operated by the incumbent raccordement) equal to 4.5 MW, only a declaration is utility company. This process shall take • contract regarding the use of the required. into account the rules of EU competition equipment necessary for the grid for any public – private mechanism For the installation of PV, the invitations connection (Contract d’exploitation which could be created by French to tender are maintained. des ouvrages de raccordement). government in the form of this process Renewal of hydroelectric A decision as regards the tender concessions: process should be taken in the coming Pursuant to the liberalization of the months. electricity sector decided by the European Union (EU), the French

Taxes and incentives for renewable energy | 27

Support schemes – heat networks with a minimum KfW Offshore Wind Energy Program of 50 percent of heat generated KfW Programs • Special promotion of offshore wind by renewable energies or with a energy projects within the 12 nautical KfW Renewable Energies Program minimum of 20 percent of heat mile zone or the German Exclusive • Investments are available in three generated by solar energy and with Economic Zone (EEZ) of the German programs: heat sales of a minimum of 500 North and Baltic Sea. Project kWh per year and meter of route financing for up to 10 offshore wind – Standard: in plants for electricity parks is available in the form of: generation from renewable – heat storages with more than energies photovoltaic (PV), biogas, 10 cubic meters – direct loans granted by bank hydro, onshore wind or geothermal – biogas pipes with a minimum syndicates (a maximum of EUR400 energy and heat generation in length of 300 meters (for biogas million/project), combined heat and power (CHP) used for CHP purposes or as – finance packages comprising loans systems. biofuel) from KfW on-lent through a bank, – Premium: in large plants for – heat pumps with a rated heat – direct loans limited to 70 percent heat generation from renewable capacity of more than 100 kW of the total debt capital required energies (solar panels, biomass, per project and EUR700 million per biogas, deep geothermal energy) as – facilities for the development and project, well as CHP installations and heat use of deep geothermal energy networks/pumps not promoted with a drilling depth of more than – direct loans to finance unforeseen under the Standard program. 400 meters, a minimum thermal additional costs (a maximum of fluid temperature of 20°C and a EUR100 million per project). – Storage: in new installations of minimum geothermal heat output stationary battery storage systems of 0,3 MW . • Eligible to apply: all project companies combined with photovoltaic th investing in the German EEZ or in the systems. • All plants shall be commissioned in 12 nautical mile zone of the North Sea accordance with their designated and the Baltic Sea. • Premium funding was initiated to purpose for at least 7 years. strengthen the establishment of the • Maximum funding: EUR5 billion. In renewable technologies in the heat • The funding shall be granted as a 2013, KfW provided a credit volume of market through low-interest KfW long-term, interest-reduced loan up EUR194 million. loans and repayment subsidies by the to 100 percent of the investment • Loan-term: up to 20 years with a Federal Ministry for Economic Affairs costs (excluding VAT), maximum total repayment-free start-up period of up and Energy. These technologies lending of EUR25 million per project to 3 years. include: (Standard) and EUR10 million per project (Premium). KfW Energy Efficiency Program – solar panel systems with more than 40 square meters gross • Additional reduced interest rates are Low-interest loans are granted for collector area for the purpose of available for small to medium-sized investments in and outside Germany water heating and/or space heating enterprises (Premium). that achieve substantial energy- saving effects. As part of the joint of properties with three or more • Eligibly for funding depends on the initiative “Energy Efficiency of Small residential units or non-residential program part. properties with minimum 500 and Medium Sized Enterprises” by square meters of usable area • In 2013, KfW provided a total credit KfW and the Federal Ministry for volume of EUR298 million for Economic Affairs and Energy, SMEs are – biomass plants for the combustion Premium and around EUR4.4 billion additionally supported by favourable of solid biomass with a rated heat for Standard. Funding for Storage interest rates. capacity of more than 100 kW since initiating the program in May • Outside the EU, the share provided by 2013 amounted to EUR45 million. – heat-controlled biomass CHP with the German partner will be financed. a thermal output at par with at least • Loan-term: 5, 10 or 20 years with a • Replacement investments must 100 kW and a maximum of 2 MW repayment-free, start-up period of up lead to energy end-use savings of to 3 years. at least 20 percent on the basis of

28 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. the average consumption of the • Eligibly to apply: large commercial Applicability previous 3 years. New investments enterprises in and outside Germany Remuneration is available for electricity must achieve energy savings of at with an annual group turnover produced. All tariffs and ranges in least 15 percent compared with the EUR500 million to EUR4 billion. principle apply to plants commissioned industry average. Incentives for energy efficiency and as of 1 August 2014. Plants approved • The funding is available as a loan corporate environmental protection, prior to 23 January 2014 that begin to finance investments in energy housing, home modernization and operations by 31 December 2014 will efficiency measures (i.e. renewal of the reduction of carbon emissions still be governed by the provisions of to the previous EEG 2012. machine base, new building etc.) up • Low interest rates on loans and grants to 100 percent of investment costs used for the efficient production of Expansion Corridors and usually up to EUR25 million energy, usually accessed by SMEs. The percentage of renewable enegies is per project. to be expanded within specific corridors: • Subsidies for new privately owned • Loan-term: 5, 10 or 20 years with buildings or buildings which are • by 2025 renewables are to produce up to three repayment-free start-up brought to a new standard in 40 to 45 percent of the total energy years. renewable energy or energy savings. mix, It is complemented by the “SME Reduced interest rates, abatement of • by 2035 rising to 55 – 60 percent. Energy Effiency Advice” program, instalment payments on loans, direct which subsidizes small and medium subsidies for modernizing buildings These targets are to be achieved by enterprises identifying energy savings and reducing carbon emissions. individual corridors laid down for the potential as well as reducing costs by • Commitment volume in 2013 around specific technology. improvement of energy efficiency. EUR10.4 billion. Mandatory Direct Marketing KfW Energy Turnaround Financing Administrative procedures: Plants are to market their power Initiative Applications must be filed via credit directly. Compulsory direct marketing is High volume loans for large-scale institution or with the governmental- introduced in stages: investment projects in Germany in the owned bank KfW. • As of 1 August 2014, plants with areas of energy efficiency, innovative Sources: KfW Bankengruppe, BMWi an output of 500 kW and above are projects in the areas of energy Förderdatenbank obligated to direct marketing. conservation, electricity generation, storage and transmission as well as the Operating subsidies • As of 1 January 2016 for plants with use of renewable energies. Based on current information, the an output of 250 kW, • Two promotional funds are available: reformed Renewable Energies Act (EEG • As of 1 January 2017 for plants with 2014) shall be in force as of 1 August an output of 100 kW or more. – Direct loans under a banking 2014. Legislative procedure being on- consortium, with KfW contributing going, the following statements are Market Premium 50 percent to the financing of the provided on the basis of the Draft Law In addition to the revenue from directly project. of 11 April 2014 and may be subject to sold electricity a market premium – Financing package composed of a further amendments. can be claimed. The market premium consists of a fixed statutory payment loan on-lent through a bank and a The reformed law aims to make (anzulegender Wert) differentiated by syndicated loan with participation renewable energy development more technology and rated power minus a by KfW predictable and more efficient by technology-specific monthly market using tools as expansion corriodors. • Amount of loan: usually from EUR25 value (Monatsmarktwert). million up to EUR100 million per Furthermore, a new approach or project. renumeration is pursued by replacing In order to receive the market premium, the feed-in tariffs with renumeration of plants must be remote-controllable as of • Loan-term: up to 20 years with a subsidized direct marketing. 1 January 2015, including plants already repayment-free start-up period of up commissioned. to 3 years.

Taxes and incentives for renewable energy | 29

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. © 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Exemptions from Mandatory Direct • Degression: according to ‘breathing – Decreases or increases in Marketing caps’ between 0.5 and 1.27 percent a range between zero and Exemptions from mandatory direct per quarter as of 2016. 1.2 percent depending on reaching breathing caps. marketing exist for small plants and in Other methane gas (mine, landfill, sewage case of so called ‘default marketing’ sludge gas, etc.) Offshore when plant operators are temporarily unable to market their electricity, • Fixed statutory payment depending • Expansion corridor: 6.5 GW until receiving a tariff in the amount of on nominal generation capacity of 2020, 15 GW until 2030. the individual plant: ct4.00/ kWh to 80 percent of the respective fixed • Fixed statutory payment: statutory payment. ct8.42/kWh. – Basic payment: ct3.90/kWh Technology-specific corridors and • Plants with a nominal generation remunerations capacity of more than 100 kW: – Increased initial payment (Basic model): ct15.4/kWh during the Hydro – Fixed statutory payment just for first 12 years after commissioning 50 percent of nominal generation • No individual expansion corridor (extended depending on water capacity per annum. • Fixed statutory payment depending depth and distance from shore) – Additional flexibility premium: on nominal generation capacity of the – Acceleration model: if the OWP EUR40 per kW installed capacity individual plant: will be commissioned until 31 and annum. – up to 5 MW: cent (ct)6.31/kWh to December 2019, operator can ct12.52/ kWh • Degression: 1.5 percent p.a. as of select an increased initial payment 2016. of ct19.4/kWh for 8 years (extended – more than 5 MW: ct4.28/kWh to depending on location with a Geothermal ct5.54/kWh payment of ct15.4/kWh for the • Fixed statutory payment: ct25.20/ – more than 50 MW ct3.3/kWh. prolonged period). kWh. • Degression: 1 percent per annum • Degression: • Degression: 5 percent p.a. as of 2018. (p.a.). as of 1 January 2016. – For Basic model: annually ct0.5/ Wind Biomass kWh as of 1 January 2018, ct1.0/ Onshore kWh as of 1 January 2020 and • Expansion corridor: annual increase of ct0.5/kWh as of 1January 2021. approximately 100 MW (gross) • Expansion corridor: annual expansion 2.5 GW (net) – For Acceleration model: ct1.0/kWh • Fixed statutory payment depending – Repowering measures will be as of 1 January 2018 p.a. (in 2019 on nominal generation capacity of degression will be suspended) the individual plant: ct5.85/kWh to considered only with respect to the ct13.66/ kWh. net increase of nominal power. • Grid connection from the offshore • Fixed statutory payment: switch station to the shore borne by • Plants with a nominal generation the TSO (Sec 17 par 2a EnWG). capacity of more than 100 kW: – ct4.95/kWh (basic payment) Solar – Fixed statutory payment just for – Increased basic payment (initial • Expansion corridor: annual growth of 50 percent of nominal generation payment) of 8.9 ct/kWh for at least 2.5 GW (gross) capacity per annum 5 years; possibility of extension – Additional flexibility premium: for locations with a reference yield • Plants from 10 kW installed capacity EUR40 per kW installed capacity below 130 percent. must be remote-controllable, and annum. • ‘Breathing Caps’ • Plants of 800 watts to 10 kW must be equipped with adustable performance • ‘Breathing Caps’: financial support • Degression: increases or decreases if growth inverters. exceeds or falls below the targets of – Basically 0.4 percent per quarter as the expansion corridor. of 2016

30 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. In and on buildings • Depending on the amount of nominal generation capacity: ct9.23/kWh to ct13.15/kWh • Degression: – 0.5 percent per month as of 1 September 2014. – Degression decreases or increases according to ‘breathing caps’ in a range between zero and 2.8 percent on a quarterly basis. Ground-mounted plants in open spaces Support of plants in open spaces is shifted from feed-in tariffs to a support involving tendering. Therefore, a pilot project of tendering 400 MW is launched organized by the Federal Network Agency. If this concepts proofs to be successful, it is to be adopted for all other renewable technologies.

• Fixed statutory payment: up to a nominal generation capacity of 10 MW ct9.23/kWh • Available for plants in areas being subject to an approved land-use plan that has been: – approved prior to 1 September 2003 or – approved after 1 September 2003 where plants were erected either on land to be devoted to different usage (Konversionsfläche) or alongside freeways (Autobahnen) or railroad lines or – a land-use plan that designated the area as commercial-industrial prior to 1 January 2010. • Degression is equivalent to plants erected on buildings. Additional information Duration of subsidied market premium: Up to 20 years plus year of initial operation.

Taxes and incentives for renewable energy | 31

Support Schemes • Cash grants provided by the State for medium-size enterprises, that cover part of the expenses of the EUR300 000 for small enterprises Investments and Incentives under investment project and EUR200 000 for very small Investment Incentives Law 3908/2011 enterprises. The above minimum • Leasing subsidies provided by the Various entities can apply for incentives, amounts are reduced to 50 percent State that cover part of payable including joint ventures (JVs) that qualify for General Business Investments as synergy and networking JVs and installments related to the leasing engage in the production of energy from of new equipment. It is noted also • The enterprises must be established renewable resources such as wind and that the leasing subsidies do not in Greece and have the form of hydro. Entities active in the production exceed a seven-year period. These either a sole trader, a commercial of energy from photovoltaic systems are incentives may be granted solely or entity/partnership or a co-operative. not eligible (NACE Code 35.11.10.091). in combination. However, apart from Enterprises must maintain double- Investments are separated in to General tax relief (which is available to all entry accounting books or an income Business Investments and Special investments qualifying for incentives and expenses book (category B of the Investment Plans2. under Law 3908/2011), cash grants Code of Books and Records). Also, and leasing subsidies may not be enterprises that submit business Incentives Available available to all qualifying investments. plans exceeding EUR500,000 Investment Incentives Law 3908/2011 (instead of EUR300,000 which was General Eligibility Requirements: became effective February 2011, provided by the prior investment According to Law 3908/2011, certain replacing the previous incentive Law scheme of Law 3299/2004) must criteria should be met in order for 3299/2004. However, investments operate in the form of a commercial the aforementioned incentives to made under the previous incentive Law entity or co-operative be granted. In general, these criteria 3299/2004 continue to be subject to the include the following: • Investor’s own participation of at least requirements of that law and are eligible 25 percent is required for investments for the incentives of that law. According • The investment should be initiated for which cash grants or tax relief is to Law 3908/2011, the following after the official eligibility approval. provided incentives are available: Under certain conditions, the investment may be initiated prior • Certain requirements exist in respect • Tax relief. It is noted that the tax relief to the official approval as above but to loans received that are to be used incentive constitutes an income tax in any case after the filing of the for the subsidized investment exemption on profits before taxes respective application. as determined on the basis of tax • Special requirements may apply legislation. The amount of the tax • The minimum amount of the depending on the nature of each relief granted becomes a tax free investment is set at EUR1 million investment project. reserve for the equivalent amount for large enterprises, EUR500 000

1. Limited capacity investments in photovoltaic systems by individuals and small entities may be eligible for subsidies under EU-sponsored investment schemes. 2. Certain criteria related to the purpose, nature and value of the investment should be met in order to qualify as a Special Investment Plan, whereas all other eligible investments qualify as General Business Investments. 32 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Operating Subsidies According to the provisions of the relevant legislation (Laws 3468/2006, 3734/2009 and 3851/2010) the following apply: Feed-in Tariff Price of energy (EUR/MWh) Electricity generated by: Electricity Price (EUR/MWh) Non-connected Connected System Islands a. Wind energy generated from onshore wind farms with capacity 87.85 99.45 above 50 kW b. Wind energy generated from stations with capacity of less than or 250 equal to 50 kW c. Photovoltaic systems with capacity up to 10 kW peak used in the household sector and in small enterprises (i.e. installed on buildings – 550 Ministerial Decision 12323/175/4.6.2009) d. Hydroelectric plants with a capacity up to 15 MWe 87.85 e. Solar energy from solar thermal stations 264.85 f. Solar energy from solar thermal stations with storage system which 284.85 ensures at least 2 hours of operation in the nominal capacity g. Geothermal energy of low temperature (25˚ to 90˚ C) 150 h. Geothermal energy of high temperature (above 90˚ C) 99.45 i. Biomass from stations with installed capacity of 1 MW or less 200 (excluding the biodegradable fraction of household waste) j. Biomass from stations with installed capacity of between 1 MW and 175 5 MW (excluding the biodegradable fraction of household waste) k. Biomass from stations with installed capacity of more than 5 MW 150 (excluding the biodegradable fraction of household waste) l. Gas released from landfills and biological cleaning installations and biogas produced by biomass (including the biodegradable fraction of 120 waste) with installed capacity of 2 MW or less m. Gas release from landfills and biological cleaning installations and biogas produced by biomass (including the biodegradable fraction of 99.45 waste) with installed capacity of more than 2 MW n. Biogas from biomass (animal farm and feed stock organic waste) with 220 installed capacity of 3 MW or more o. Biogas from biomass (animal farm and feed stock organic waste) with 200 installed capacity of less than 3 MW p. High-efficiency co-generation of electricity and heat 87.85 x Natural Gas 99.45 x Natural Gas Factor Factor q. Other RES (including the stations for the energy exploitation of the biodegradable fraction of municipal waste which meet the 87.85 99.45 requirements of the European legislation as in force from time to time)

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SMCn-1 = System Marginal Cost during the previous year n-1 Law 3851/2010 provides that the electricity produced by stations developed without use of a public grant (except for photovoltaic and solar thermal stations) is priced on the basis of the feed-in tariffs mentioned above with an increase of: a. 20 percent for technologies listed under (a), (d), (g), (h) and (q); b. 15 percent for technologies listed under (i) to (o); c. as regards the technology listed under (p), the 15 percent increase applies to the stable part of the pricing, provided that the investment is made without a grant from any national, European or international program or incentive law and it is not subject to any kind of tax relief (including the non taxed reserves). Especially for RES stations installed on non interconnected islands and rocky islets throughout the country that are connected with the System through an independent undersea cable necessary for the transmission of the electricity to the System (note that the construction cost of the undersea connection is exclusively borne by the producers), there is a special increase on the pricing tariff which may vary from 10 percent up to 25 percent depending on the length of the connection line and the installed capacity of the RES stations. This increase will continue to apply after the interconnection of the island to the System and is added to the increase that may be applicable in accordance with the above paragraph. Source: KPMG International, Taxes and Incentives for Renewable Energy, 2011

Additional Information combined heat and power is valid for • Approval of environmental terms 20 years and may be extended under • Conclusion of connection agreement Operating Incentives: Law 3468/2006 certain conditions. The sale agreement with Public Power Corporation (PPC) implemented the EU directive 2001/77 for electricity produced by solar thermal concerning the promotion of renewable stations is valid for 25 years and may be • Conclusion of sale agreement of energy sources and regulates the extended under conditions. electric power with the Administrator production of electricity from renewable (DESMIE or PPC). energy sources in Greece, as amended Administrative Procedures: The specific by Laws 3734/2009 and 3851/2010. licenses required depend on the Grid Access: Generally, priority access installed power. Main licenses and to the grid is provided to renewable The feed-in tariffs referred to in the authorizations include the following: energy producers for connection to the previous table were introduced by Law mainland grid, subject to the fulfillment 3851/2010. • Production license of all conditions and requirements Duration: In general, the sale agreement • Establishment/installation license provided by the Code of Grid’s for electricity produced by stations Administration. • Operation license using renewable resources and

34 | Taxes and incentives for renewable energy

Support schemes Recently, the Finance Minister has depreciation under straight line method. released the Direct Taxes Code, 2013 However, a company can claim either Investment and other subsidies (DTC 2013) for public discussion/ accelerated depreciation or GBI (but Foreign Direct Investment (‘FDI’) comments. However, next development not both). in DTC depends on the policies and The growth of the clean energy sector Quota obligations in India has been impressive. India priorities of the next government. permits FDI up to 100 percent in the The draft provisions of the Direct Renewable Purchase Obligation (RPO) Taxes Code provide for alternative sector under the automatic route in The National Action Plan on Climate mechanisms for providing tax incentives Renewable Energy Generation and Change (NAPCC) has receommended to power companies. As regards this Distribution projects that are subject to renewable purchase obligation (RPO) incentive, almost all revenue and capital the provisions of the Electricity Act of target of 10 percent by 2015 and expenditures will be allowed as a tax 2003. Under the Act, no prior approval of 15 percent by 2020 at the national level. regulatory authorities is required. deduction upfront instead of claiming amortization/depreciation on the capital Several measures such as RPO and REC Giving a boost to infrastructure sectors, expenditure. In addition, there would be (Renewable Energy Certificate) have Rserve Bank of India (‘RBI’) has relaxed no tax holiday. been created to promote renewable the External Commercial Borrowings energy. Under RPO rules, distribution Financing (‘ECB’) norms. Earlier, ECB was companies, open access consumers allowed to be raised for investment in The Indian Renewable Energy and captive consumers are obligated to infrastructure sector which included Development Agency has been buy a certain percentage of their power power. Now, the RBI has expanded established under the Ministry for from renewable sources of energy. the definition of infrastructure to cover Non-Conventional Energy Sources as a sector such as Energy which in turn specialized financing agency to promote To meet RPO targets, REC market has covers sub-sectors such as Electricity and finance renewable energy projects. been introduced and RECs started generation/transmission/distribution, Oil trading in Feb 2011. However, REC pipelines, Oil/Gas/Liquefied Natural Gas Operating subsidies mechanism has not adequately picked up yet and steps are being considered to (LNG) storage facilities, Gas Pipelines Feed-in tariff (includes city gas distribution network). review the market. We believe that going Generation Based Incentives (GBI) forward, enforcement of RPO will create With a view to strengthen the flow of To attract foreign investors, the the volumes needed for the REC market. resources to infrastructure sector, RBI government has taken several has also now permitted raising ECB for initiatives such as introducing GBI Additional information project use in SPVs in the infrastructure schemes to promote projects under Jawaharlal Nehru National Solar Mission sector under the automatic route/ Independent Power Producers (IPP) (JNNSM) approval route, as the case may be. mode for wind and solar power. The objective of JNNSM, which was Accelerated depreciation Tax holiday under the domestic income launched in 2010, is to establish India tax law Under the domestic income-tax law, as a global leader in solar energy and Undertakings engaged in the generation companies involved in renewable to deploy 20,000 MW of solar power and/or distribution of power has energy such as solar and wind was capacity by 2022. JNNSM targets to been offered a 10-year tax holiday provided with accelerated depreciation achieve this in three phases: Phase 1 for renewable energy plants if power at 80 percent. However, the government (upto early 2013), Phase 2 (2013-17) and generation begins before 31 March has restricted the accelerated Phase 3 (2017-22). 2014. This date has not been extended depreciation of 80 percent to windmills In the Phase 2 – Batch 1, Solar Energy as there was a vote on account budget. installed on or before 31 March 2012. Corporation of India (SECI) auctioned Post forming of new Government, Windmills installed after 31 March total 750 MW of solar projects divided the budget may either extend the tax 2012 will be eligible for depreciation of in two categories - open and domestic holiday or may not extend the same 15 percent instead of 80 percent on the with 375 MW in each. This had a strong (which is unlikely). However, the plants written-down value method. interest with bids from 58 developers have to pay a minimum alternative It may be noted that 80 percent for 2,170 MW as against 750 MW tax at the rate of approximately 20 to depreciation is still available for solar capacity on offer. 21 percent (based on the income), power projects. which can be offset in future years Besides the national program, solar (10 years). Further, power companies have been programs at the state level are also provided with an option to claim driving solar growth in the country.

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Renewable Energy in India structuring from a tax perspective helps maintenance of the power plant. India’s grid-connected renewable renewable energy companies to achieve The taxability of an Operation and energy capacity has reached 31.7 major tax efficiency upfront. In the case Management (O&M) contract has GW by the end of March 2014 with of multiple parties coming together been the subject of disputes in Wind energy at 21.1 GW and solar and bidding as a consortium, contract various decisions. structuring is critical to avoid the risk energy at 2.6 GW. The Ministry of New The exemption provided under the of the consortium being taxed as an & Renewbale Energy (MNRE) has Customs and Excise Act is subject to Association of Persons. prepared an action plan to take solar various conditions and compliances. energy installations to 10 GW by 2017 In India, based on the nature of Hence, it is very important to ensure the and add total 30 GW of renewable operation, different forms of entity can compliance of the respective conditions energy to its energy mix by 2017. be established. Operating through a as otherwise the benefits envisaged Tax and fiscal incentives limited liability company by forming a may not be available. joint venture/wholly owned subsidiary Tax cost forms a substantial part The proposed introduction of the Goods could be one of the possible options of Engineering Procurement and and Services Tax will also play a major where the foreign company is looking at Construction (EPC) project costs, which role in the costing of a renewable a long-term presence in India. However, can range from 10 percent to 20 percent energy power project. one needs to rule out other relationships of the total renewable energy project and entities before proceeding with Given the vast variety of tax and fiscal cost. Considering the special focus these options. incentives available, one needs to on renewable energy, the Central quantify the tax cost and explore the Government has given various incentives In addition, the renewable energy structuring options, before planning the on setting up the renewable energy sector is capital intensive, so investing capex, at the tender/bid stage and also power project which includes exemption companies need to carefully explore at the time of awarding contracts, so from customs and excise duties on the options available for funding their that tax costs are optimized. specific goods required for setting up the projects and repatriating profits in a tax- renewable energy projects. efficient manner. However, these exemptions are EPC contracts subject to the fulfilment of prescribed The taxation of EPC contracts offers conditions and compliances to be various challenges and opportunities. The undertaken by the EPC contractor or IPP. EPC contract can be either structured as Furthermore, some of the state a single contract or as divisible contract. governments have provided the The selection of either option can cause a incentives in the form of a VAT at a huge impact on the tax costs and working reduced rate (5 percent) whereas the capital of the project. other states levy a VAT of 15 percent. The selection of schemes for the Given the vast variety of tax and fiscal payment of indirect tax liabilities incentives available, one needs to on renewable energy power plant quantify the tax cost and explore the construction offers various tax planning structuring options before investing in avenues for renewable energy power the solar sector. projects. Furthermore, any scheme Tax planning can involve difficulties in compliance, such as a restriction on procurement of For investors based overseas, an entry goods outside the state. strategy for India is highly important. To achieve tax efficiency with regard The procurement of goods and supply to taxability of gains on sale of shares, chain structuring play a vital role in the many companies opt to route the solar power project costs, since the tax investments through an intermediate rates are different for procurement of entity in a taxfriendly jurisdiction. goods from outside India, from other states or from the same state. Typically, renewable energy companies in India procure equipment and services Generally, the EPC contractor from overseas. In this scenario, contract also undertakes the operation and

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Support schemes (i.e. a 25 percent credit for every euro ensure that, by 2020, 16 percent of all incurred) on the first EUR200,000 energy consumed in Ireland across Investments and other subsidies of qualifying expenditure for periods the electricity, heat and transport Corporate tax relief commencing between 1 January 2013 sectors is from renewable sources. Irish tax law provides tax relief for and 31 December 2013 and the first The Irish government has planned that corporate equity investments in certain EUR300,000 for periods commencing the 16 percent overall target will be renewable energy projects. Commonly on or after 1 January 2014. Qualifying achieved by 40 percent of electricity known as Section 486B relief, the law expenditure includes expenses such as consumed being from renewable allows a deduction from a company’s salaries, overhead, materials consumed, sources, 12 percent of consumption in profits for its direct investment in etc. A tax deduction is also available the heat sector being from renewable new ordinary shares in a qualifying against the company’s profits which sources, and 10 percent of consumption renewable energy project. There are are taxable at 12.5 percent. This can in the transport sector being from a number of conditions that must be result in a 37.5 percent net subsidy for a renewable sources. satisfied for the investment to qualify trading entity (12.5 percent corporation Feed-in Tariff for the relief, and the relief is capped at tax deduction and a 25 percent R&D tax certain levels. Examples of renewable credit). The tax credit can be used in the Ireland currently has two Renewable energy projects that would qualify for first instance to shelter a group’s current Energy Feed in Tariff (REFIT) schemes the relief include those in the solar, year corporation tax liability. It can also open for applications. The REFIT 2 wind, hydro and biomass categories. be carried back for offset against the scheme applies to onshore wind, company’s corporation tax liability in the small hydro and landfill gas. The EII scheme preceding period, or carried forward to REFIT 3 scheme applies to biomass In 2011, the Irish government reduce future corporation tax liabilities. technologies. The schemes operate by introduced the Employment and Instead of carrying the credit forward, a guaranteeing a minimum floor price Incentive Investment (EII) scheme, company may elect (subject to certain for supplies of energy generated from designed to promote the creation of conditions) to have any remaining renewable sources. The 2014 reference jobs and encouraging R&D activities. excess credit paid as a cash refund by prices for the REFIT 2 and REFIT The EII scheme provides tax relief Revenue over 3 years. 3 schemes are as follows: for eligible individuals who invest in certain qualifying small and medium Accelerated capital allowances sized trading companies. The relief Companies are entitled to claim REFIT 3 takes the form of a deduction from an accelerated capital allowances (tax Category Price individual’s taxable income in the year depreciation) of 100 percent for capital AD CHP (units EUR157.299/MWh of investment and a further deduction expenditures incurred on the purchase less than or of certain energy-efficient equipment equal to 500 after a three-year investment term has kWe) passed (subject to certain conditions or vehicles. AD CHP (units of EUR136.326/MWh being met). A number of conditions Operating subsidies greater than 500 must be satisfied for an investment to kWe) qualify under the scheme. However, Quota obligation AD (non CHP) EUR115.353/MWh the legislation includes some helpful Under an EU Directive, the Irish (units less than provisions designed to ensure that or equal to 500 government has an obligation to kWe) renewable energy projects meet the qualifying criteria. AD (non CHP) EUR104.866/MWh REFIT 2 (units of greater R&D tax credit Category Price than 500 kWe) A company can claim an additional Onshore wind EUR69.581/MWh Biomass CHP EUR146.812/MWh (units less than tax credit of 25 percent on qualifying (above 5 MW) or equal to 1500 expenditure incurred on R&D activities. Onshore wind EUR72.023/MWh kWe) The credit is typically claimed on (equal to or less Biomass CHP EUR125.839/MWh incremental qualifying expenditure over than 5 MW) (units of greater the amount spent on R&D activites than 1500 kWe) Hydro (equal to or EUR87.892/MWh in the base year (i.e. an accounting Biomass EUR99.623/MWh for less than 5 MW) period ending in 2003). Companies combustion using energy crops (non-CHP) can avail of a volume based regime Biomass Landfill EUR85.451/MWh EUR89.136/MWh for Gas all other biomass

38 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. The energy supplier is also entitled to 33 percent reduction in energy use regulated investment environment, its a balancing payment for every kWh in the public sector. As a result of strong emphasis on investor protection, purchased from the generator. The these energy reduction measures, its efficient tax structure (with a balancing payment under REFIT 2 and substantial investments in renewable 12.5 percent corporate tax rate) and its REFIT 3 is fixed at EUR9.90/MWh. The energy projects/funds are being actively dynamic, innovative business culture. full EUR9.90/MWh is payable to the encouraged resulting in real investment In addition to Ireland’s credentials as supplier where the market payment opportunities in Ireland. a leading investment funds location, is equal to or less than the reference Ireland as a hub for green asset the case for Ireland as a global center price. If the market price exceeds the management for green asset management is even reference price but is less than the more compelling. For many years a combination of the reference price Global investment is booming in green large number of Irish companies have plus balancing payment, the balancing and clean-tech industries that produce successfully developed renewable payment shall be EUR9.90 less the renewable energy, increase energy and sustainable projects and related amount by which the market payment efficiency or provide sustainability technologies on a global scale. As a exceeds the reference price. However, solutions. Major investors include result, Ireland has been able to create where the market payment is equal to pension funds, life funds, large an unparalleled talent pool with the or greater than the combination of the corporations and high net worth requisite expertise to support green reference price plus balancing payment, individuals. These investors are attracted investments. The combination of these no balancing payment is payable. to a variety of fund structures to diversify the risk between different green two factors sets Ireland apart. Additional information investments and different geographies. A number of green investment funds have In addition to the above, the Irish With almost 25 years expertise established operations in Ireland and all government has committed to a and experience, Ireland has one of indications would suggest that the scale 20 percent notional energy savings the most sophisticated investment of this activity will increase considerably in target by 2020 which represents a management industries globally. This the short to medium term. A public private reduction of approx EUR2.4 billion includes expertise in fund servicing, partnership body known as the Green in energy spend across all sectors. administration and asset management. IFSC (GIFSC) has been established to To boost this, the government has Fund promoters are attracted to Ireland promote Ireland as a center of excellence set itself the target of achieving a due to its open, transparent and well for green asset management.

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Support schemes The regulatory changes of 2013 have Solar plants going into operation between had the biggest impact on existing 1 June 2011 and 31 December 2012 Renewable energy in Italy: recent large ground-mounted plants, hit by The Ministerial Decree of 5 May 2011 changes to legislation the reductions in guaranteed minimum (the “Fourth Energy Incentive”) offered In 2013 several changes to the law prices and higher taxation. The changes a fixed premium based on the type and adversely affected the photovoltaic may discourage future investments nominal power of the plant. business in particular and the overall in plants used in the industrial sector renewable energy industry in Italy. (>200kW) and power plants (>1 MW), The premium is paid for 20 years The system of incentives for energy making grid parity very difficult to after the plant starts operating. For generated from renewable sources achieve without a significant amount of thermodynamic plants, the premium is (introduced by the Ministerial Decree ‘self-consumption’. Thanks to efficient paid for 25 years. consumption systems (SEUs), plants of 5 July 2012 – the “FER Decree”) Solar plants going into operation between of under 200 kW still have the best was abolished and, as a result, several 27 August 2012 and 31 December 2013 energy incentives expired at the end of prospects, as net-metering (the Italian 2013. mechanism is called “Scambio sul A Ministerial Decree of 5 July 2012 (the Posto”) remains viable, despite the “Fifth Energy Incentive” or – as defined In particular, the FER Decree introduced: changes. above – the FER Decree), redefined the subsidy system for the production of • the Fifth Energy Incentives Plan Subsidies available under the FER photovoltaic energy. revising the system of incentives Decree for the production of electricity from Feed-in tariff premiums for solar energy The tariff scheme is the following: photovoltaic plants; Various feed-in tariff systems are • for plants with capacity of up to • new procedures supporting the affected by the changes introduced 1 MW, there is a feed-in tariff based production of electricity from other by the Destinazione Italia Decree. on the electricity sold to the GSE (the renewable energy sources at plants These schemes, listed below, are still national energy manager). with a capacity of at least 1 kW. in force for plants up and running by • for plants with capacity exceeding The FER Decree applies to plants 31 December 2013. 1 MW, there is a premium tariff based already operating by 31 December 2013. Solar plants going into operation by on the electricity generated and not To safeguard investments in projects 31 May 2011 sold to the GSE. approaching completion and to support The Ministerial Decree of 6 August 2010 • for ‘self-consumption’, there is a existing plants already benefiting from (the ‘Third Energy Incentive’) offered a special tariff. incentives (green certificates, feed- fixed premium (a bonus on top of the Subsidies for plants using other renewable in tariffs or premium tariffs), further market price of electricity). changes to the rules were introduced energy sources and entering into operation early in 2014 by Law Decree no. The size of the premium depends on: by 31 December 2013 1 145/2013 (the “Destinazione Italia • the type of plant; There are two separate subsidies, which Decree”). This Decree introduces an can be used as an alternative to net optional incentive system for existing • the nominal output; metering and simplified purchase/resale plants and new rules for plants • when the plant started to operate. arrangements. benefiting from incentives based on electricity rates. The premium ranges from EUR0.251/ An inclusive feed-in tariff kWh to EUR0.402/kWh. The end of 2013 also saw the expiry of There is an inclusive feed-in tariff for a number of fuel and energy efficiency The premium is paid for 20 years plants with a capacity of up to 1 MW. incentives; it is unclear whether or when after the plant starts operating. For This capacity is the sum of a base feed- the legislation will be passed to extend thermodynamic plants, the premium is in tariff (defined for each energy source, these incentives. paid for 25 years. type of plant and capacity class) and

1. Converted, with amendments, into Law no. 9 of 21 February 2014, and in force since 22 February 2014.

40 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. any premiums, such as those for high This incentive is the difference New rules governing the other types of efficiency, emission reductions, etc. between the base feed-in tariff – plus support: the Destinazione Italia Decree any premiums for which the plant is For plants entering into operation Among other things, the Destinazione eligible – and the hourly zonal electricity from 2013, the FER Decree identifies Italia Decree offers a new optional price. The electricity generated by plants the base feed-in tariff for each energy incentive scheme to certain renewable benefiting from the incentive remains source, type of plant and capacity class. electricity producers. Producers owning the property of the producer. The tariffs decrease by 2 percent in each power plants that have already obtained subsequent year until 2015, except in Other types of support for energy producers green certificates and/or all-inclusive certain specific cases. tariffs, may do one of the following: In addition to the subsidies available The FER Decree also provides a number under the FER Decree, there are other • They may continue to benefit from of premiums on top of the base tariff forms of support: their existing incentive scheme over for plants that meet specific operating the remaining original period. In this • Green certificates, representing the requirements. case, for 10 years after the end of environmental value of the renewable the original incentive period, any A special incentive energy generated. new initiative on the same site will There is a special incentive for: • All-inclusive tariffs, these are a type of not benefit from further incentives, premium tariff and differ according to including dedicated withdrawal2 and • plants with a capacity of more than the length of the incentive period, the net-metering. 1 MW; source of renewable energy, and the • They may restructure their existing • those with a capacity of up to 1 MW type of incentive scheme. incentive scheme. In this case, the that do not opt for the all-inclusive existing incentive is reduced by feed-in tariff.

2. “Dedicated withdrawal” means the electricity taken by GSE from the producer and fed into the grid.

Taxes and incentives for renewable energy | 41

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. © 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. a percentage which differs according Important changes were made The surtax tax applies when the to the type of plant, while the by the Italian Revenue Agency in following thresholds are both exceeded incentive period is extended by seven Circular no. 36/E/2013 (concerning in the previous fiscal year: years. This new scheme operates photovoltaic systems − land register • gross revenues of EUR3 million; from the first day of the month and tax aspects), with effect from following the deadline for exercising 1 January 2014: • a corporate income tax base of the option. EUR300.000.6 • photovoltaic systems, that have This rule does not apply to power plants been built on land, are now classified In 2014, the surtax is 6.5 percent. which benefit from: as ‘immovable property’ (cadastral Therefore, the total corporate income category D/1-D10) and, as such, are tax rate is 34 percent (27.5 percent + • the CIP 6 incentives scheme3; subject to taxation on the cadastral 6.5 percent). • the incentives available under the FER income,to property tax “Unified Non-operating or dormant companies Decree, with the exception of those Municipal Tax” (called “IMU”, that covered by the interim regime. has replaced the old Municipal tax The IRES rate is 38 percent for dormant on real estate called ICI) starting companies. Guaranteed minimum prices defined by from January 2012) and to an annual AEEG for simplified purchase and resale A company is considered to be dormant if: depreciation rate, currently 4 percent; arrangements • it makes a tax loss (reported in its tax • photovoltaic system on the rooftop Guaranteed minimum prices were return) for three consecutive years; are exempt by IMU, because they introduced by AEEG Resolution no. are classified as ‘movable property’. • it is subject to a minimum IRES and 34/054 to cover the production costs This type of photovoltaic system, on IRAP charge; of power plants with a capacity of less flat roofs both of private buildings and than 1 MW and generating electricity • it is not eligible to claim a VAT refund. public buildings, is considered as an from renewable sources. The prices integral part of the existing building There is a special test to determine are available for the first 2 million kWh and, as such, contribute to the whether a company is dormant: if the produced and injected into the grid. determination of the total land rents actual amounts reported in the profit With effect from 1 January 2014, the of housing units because it is part of and loss account are lower than the Destinazione Italia Decree made two the same building. In this case, the presumed amounts, the company is important changes: photovoltaic plants built on rooftop deemed to be dormant. are subject to an annual depreciation • it reduced the minimum prices Depreciation rate, currently 9 percent. significantly, to the hourly zonal Wind and solar plants are subject electricity price. Robin Hood Tax to ordinary depreciation rules for • it eliminated the guaranteed In 2011, a surtax was introduced for the tax purposes. minimum price for plants with a energy industry, known as the ‘Robin capacity of more than 100 kW. Hood Tax’5. It applies to companies with the following business activities: Additional information Taxation • transmission and distribution of electricity; Companies are subject to IRES (corporate income tax) of 27.5 percent • transportation and distribution of gas; and IRAP (a regional business income • production of renewable energy tax) of 3.9 percent to 4.82 percent. (biomass, photovoltaic, wind).

3. Regulated by Inter-ministerial Price Committee Resolution no. 6 of 29 April 1992. 4. AEEG is the Italian Electricity and Gas Authority. 5. Law Decree no. 138/2011 (the “Mid-August Measure”). 6. Law Decree no. 69/2013

42 | Taxes and incentives for renewable energy

Feed-in tariff without time limit. However, since some approval for the FIT and acquires solar or Feed-in tariffs (FIT) for renewable plans might have received approval to wind power generation equipment and energy became available in Japan in secure the FIT tariff without a concrete places in business within 1 year from July 2012. The FIT rate for the period investment schedule, the Ministry of the acquisition. The taxpayer can choose from 1 April 2014 to 31 March 2015 is Economy, Trade and Industry (METI) one incentive from the following. The 34.56 Japanese yen (JPY)/1kW for solar changed its approval procedure from equipment is required to be placed in energy, JPY23.76/1kw for wind power April 1, 2014 for solar power equipment. business by 31 March 2016 for 1) and 3), energy, respectively. The operation Thus, from the application received by 31 March 2015 for 2), respectively. by the METI on or after April 1, 2014, period is 20 years. The FIT rate is revised 1) 30 percent special depreciation in the applicant is required to submit annually. addition to ordinary depreciation copies of land register and purchase In order to get the FIT, the applicant agreement/order for equipment to the 2) 100 percent depreciation (i.e. total is required to have the following METI within 180 days from the next acquision costs can be expensed conditions: day of approval. The METI rescinds its upfront.) approval if the required documents are 1. The power plant development plan is 3) Tax credit (7 percent of acquisition not submitted within the deadline or the approved by the government. costs, only available for small and submitted documents are not sufficient medium sized enterprise (SME). SME 2. The development plan applied for to substantiate land and equipment for is a company with its paid-in capital interconnection to transmission line solar energy. with the electric power company. of JPY100 million or less and is not Green Investment Tax Incentive 50 percent or more owned by a large Applicants who fulfilled these two Green Investment Tax incentive is corporation with its paid-in capital of conditions by 31 March 2015 will be available for the taxpayer who obtained JPY100 million.) awarded the FIT, which is applicable

Taxes and incentives for renewable energy | 43

Support schemes sector companies. These technologies refinery and oil chemistry studies. are also tax deductible as investments. A new bid is expected for 2014. The New Mexico’s Income Tax Law The following equipment is included Fund for hydrocarbon projects (ITL) provides a 100 percent deduction in this program: air conditioners, incentive for taxpayers who carry out water pumps, air compressors, high The Renewable Energies Exploit investments in renewable energy pressure sodium vapour (HPSV) lamps, and Energy Transition Financing Law equipment or cogeneration systems of light-emitting diode (LED) lighting, (LAERFTE: Ley para el Aprovechamiento efficient electricity. Qualifying sources fluorescent compact lamps, electric de Energías Renovables y el like sun, wind, water and geothermal motors, electronic ballasts, energy Financiamiento de la Transición energies, as well as biomass fuel generators on a small scale with Energética in Spanish) allows industrial, equipment, are eligible for this alternative sources, transformers, commercial and residential installation incentive. processing equipment, remote of renewable technologies for the It is important to mention the country monitoring systems, presence generation of electricity for private is currently undergoing discussions detectors, renewable energy systems consumption only. According to of new Energy Reforms. Its’ potential for refrigeration, ventilation, speed Mexican legislation, only the Electricity effects would be important to Mexico control, thermal insulators, and other Federal Commission (CFE) is allowed to in the mid and long term as well as for energy efficiency equipment. Applicants sell electricity. If the energy production potential investors, from the social and must file a request for the fund and be exceeds the amount used by an entity economic point of view. Therefore, new approved. during a given month, the excess can be fed into the CFE’s grid and becomes information and business opportunities FIDE business Eco-credit can be expected, both in terms of a credit that can be applied against the significant changes in renewable energy Projects up to USD27,000 are funded entity’s electricity bills in the future. regulations and available funds to for replacing obsolete equipment Alternatively, contracts may be signed promote the creation and development with high efficiency equipment. The with the CFE stating different means of of alternative energy projects. program applies to companies of any consideration for the sale of this excess size in the private sector. Besides the production. This proposed legal reforms consist funding, the companies are awarded a Fund for energy transition and sustainable on allowing production gains sharing 10 percent scrapping bond. Technologies exploit of energy contracts looking forward to secure financed under this program include air investment from the private sector, conditioning, commercial refrigeration In 2008, LAERFTE was released. sharing gains and risks related to systems, electric motors, LED lighting, It establishes Mexico’s strategy to such activity. In this sense, drilling, high efficiency lighting and electrical support policies, programs, actions and processing, transport, storage and substations. Applicants must file a projects oriented to increase the usage marketing of hydrocarbons could be request for the fund and be approved. of renewable energy sources and clean performed either by the government technologies, promote energy efficiency Fund for hydrocarbon projects or a private party. In consecuence, this and sustainability, and decrease oil would lead to greated integration in the In 2012, the Ministry of Energy (SENER) dependency as the main source of upstream value chain, allowing sufficient and the National Council of Science and energy. suppy of gasoline, methane gas and Technology (CONACYT) released a fund To finance sustainability projects, liquefied petroleum gas at competitive oriented to R&D and the adoption of the Fund for Energy Transition prices. new technology related to hydrocarbon and Sustainable Exploit of Energy sources of energy. The fund aims Additional information was created in 2009. The Federal to increase efficiency in the use of Expenditure Budget for the mentioned FIDE (Fideicomiso para el Ahorro de Energía hydrocarbon sources of energy, prevent fiscal year assigned 3.1 billion Mexican Eléctrica) energy efficiency pollution, and repair environmental pesos (MXN) (USD260 million) to damages derived from the oil industry Through this Trust for energy saving the fund. An amount has since been activities. The official bid for 2012 called projects are funded for the installation budgeted each year for the fund. For for universities, research centers and of new high efficiency technologies by fiscal year 2014, the Federal Expenditure private entities to propose projects micro, small and medium enterprises, Budget allocated (MXN) 1.53 billion related to exploration, production, municipalities, industries and service (USD117 million).

44 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Companies or individuals compete waves, ocean currents, hydraulic for cash incentives from the fund equipment, nuclear energy and the by submitting proposals for projects measurement of gas emissions. No that involve renewable energies and official bids were published during 2012 energy transition. The bid for 2010, and 2013, nor has a public bid been ‘Bioeconomy,’ called for projects that released for 2014. promote the production and use of Some of the main government projects alternative fuels in primary sectors. funded include the following: Since the government is currently • Municipal Street Lighting National undergoing through new energy Program: For 2011, the Fund has reforms discussions, this fund may not authorized MXN120 million (USD10 publish future bids in the short term, million) for the execution of projects however, a boost could be expected for energy-efficient street lighting. once these reforms take place in the midterm. • Sustainable Light Program: This program aims to decrease the Fund for energy sustainability energy consumption in homes by Every fiscal year SENER and the substituting 45.8 million lights during CONACYT establish a special fund for 2011 and 2012. The first stage of the energy sustainability projects oriented program is to be concluded within for universities and research centers. the first months of 2012. The second The bid in force calls for projects of stage aims to double the number of universities and/or research centers lights by the end of this year. along with public or private companies • Integral Energy Services Program: interested in creating a Mexican This program is designed to provide Geothermal Energy Investigation a greater percentage of rural Center. This center must be responsible populations in Mexico with electricity for addressing existing scientific and through renewable energy and technologic challenges, develop new smallscale energy generation. The projects related to geothermal energy, program will be supported by the promote the development of specialized Global Fund for the Environment human resources and serve as a (GFE), the Bank of Reconstruction and connection between the academic and Promotion (BIRF) and the National the industrial sectors. The project will Committee for Indigenous Towns have duration of 48 months, and will be Development (CDI). funded for the corresponding expenses biannually. • National Sustainable Energy Exploit Program: A review carried Fund for R&D in energy out by the National Sustainable The CFE and the CONACYT created Energy Exploit Program (PRONASE) a fund to provide resources for R&D identified several areas in which projects in the electric sector. The energy efficiency might be increased distribution of resources was carried out over a medium to long-term period. by a competition among participants, These areas include transportation, and the CONACYT released one lighting, industrial motors and home program in 2010, which ended in equipment. PRONASE will continue February 2011. This program involved to define new strategies to encourage seven types of projects related to the use of renewable energy in these specific categories such as ocean areas for Mexico.

Taxes and incentives for renewable energy | 45

Support schemes invested in qualifying environmentally – Free depreciation of up to friendly assets under the 75 percent of the investment Investment and other subsidies Environmental Investment Allowance costs of the qualifying asset is The following schemes are applicable (Milieu-investeringsaftrek or MIA): granted. The maximum qualifying for solar, wind, geothermal, hydro, investment costs that are taken into – Depending on the asset, the biomaterial and offshore technologies. account amount to EUR25 million amount that can be deducted per taxpayer per calendar year. • An additional deduction of from the fiscal profit is 13.5, 27, 41.5 percent of the amount invested or 36 percent of the investment – The total amount of qualifying in qualifying assets is available under costs. The maximum qualifying investments must be more than the Energy Investment Allowance investment costs that are taken EUR2.500 per application. (Energie-investeringsaftrek or EIA): into account are EUR25 million per – No prior use of asset that is the taxpayer per calendar year. – Investments must be included on object of investment is permitted. the Energy List (Energielijst) to be – Investments must be included on – Certain formal conditions apply qualifying assets. the Environmental List (Milieulijst) to requests for the accelerated to be qualifying assets. – The maximum amount of depreciation. investment for which EIA can be – The amount per qualifying – Free depreciation/depreciation at claimed per calendar year per investment must be more than will is subject to a maximum annual taxpayer is EUR118 million. Pro rata EUR2,500. calculation applies in the case of budget, to be determined annually transparent entities. – A granted MIA will be revoked (EUR38 million in 2014). partially or in full (added back to the Applicability: Not directly applicable to – The amount per qualifying fiscal profit) on alienation of the renewable energy, although assets for investment must be more than assets within a five-year period. EUR2,500. which this tax incentive is applicable – No prior use of asset that is the can be used as part of the production of – A granted EIA will be revoked object of investment is permitted. energy from renewables. partially or in full (added back to the fiscal profit) on alienation of the – The EIA and the MIA cannot be • Capital invested in green funds assets within a five-year period. applied simultaneously. (appropriated funds invested in environmentally friendly projects – Certain formal conditions apply to – No prior use of the asset that is the or groene fondsen) is exempt from requests for the MIA. object of investment is permitted. personal income tax: – The MIA is subject to a maximum – The EIA and the Environmental – A private investor will not be taxed annual budget, to be determined Investment Allowance (see below) for capital invested in green funds. cannot be applied simultaneously. annually (EUR93 million in 2014). – The maximum amount of invested Applicability: Not directly applicable to – Certain formal conditions apply to capital exempted on an individual renewable energy, although assets for requests for the EIA. basis is EUR56,420. which this tax incentive is applicable – The EIA is subject to a maximum can be used as part of the production of – A tax credit will be granted of annual budget, to be determined energy from renewables. 0.7 percent of the invested capital, annually (EUR111 million in 2014). with a maximum amount of • Free depreciation/depreciation invested capital of EUR56,420 on Applicability: Not directly applicable to at will is granted on qualifying an individual basis. renewable energy, although assets for environmentally friendly assets which this tax incentive is applicable (Willekeurige afschrijving Applicability: Investments in green can be used as part of the production of milieuinvesteringen or VAMIL): funds. energy from renewables. – Investments must be included on • An additional deduction is granted the Environmental List (Milieulijst) of up to 36 percent of the amount to be qualifying assets.

46 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Operating subsidies Feed-in tariff As of 1 April 2014, the regulation for the feed-in tariff (Stimulering Duurzame Energieproductie or SDE+) for 2014 has opened. This regulation includes the following features: • a budget ceiling is established for all types of renewable energy such as wind, geothermal, solar photovoltaic, biomass and hydro • phased opening • a ‘free category’ to enhance investments in certain technologies • feed-in tariff granted for a certain period (5, 12 or 15 years) • a maximum subsidy amount for the Netherlands, to be determined annually (EUR3.5 billion in 2014).

Taxes and incentives for renewable energy | 47

Support schemes Operating subsidies Investments and other subsidies Feed-in tariff Schemes are applicable for solar, wind, Remuneration is available for electricity hydro and biomaterial energy sources. produced. Historically, renewable generation Additional information projects may have qualified for free allocation of carbon credits. Current Operating incentives policy is that generation which results Wind generation is required to be in greenhouse gas (GHG) emissions bid into the market. However, it is will incur a carbon cost under the automatically dispatched, and the NZ Emissions Trading Scheme. This generator receives the same pool includes geothermal generation. price as other dispatched generation. Generation from all other renewable sources is treated the same as generation from carbon. The lowest bid price is dispatched first.

48 | Taxes and incentives for renewable energy

Support schemes The total tax allowance may not exceed in the Norwegian-Swedish electricity NOK22million per company per year. certificates market. Power suppliers Investments and other subsidies and certain power users are required Energy Fund Operating subsidies to purchase electricity certificates for a The state-owned corporation Enova is Feed-in tariff share of the electricity they sell or use. the driving force for an environmentally There are no national-based feed-in The following power producers may friendly energy conversion by private tariffs in Norway. However, there is a apply, subject to certain requirements, and public enterprises. Enova’s main green certificate scheme. for electricity certificate approval for commission is through the Energy whole or parts of its production based Premium Fund that supports environmental on its total production: change in the use and production Electricity certificatescertificates of energy. The management of the The issuance of electricity certificates is • power plants based on renewable Energy Fund is governed by an an economic subsidy scheme that will energy sources and built after agreement between the Ministry of Oil make it more remunerative to invest in 7 September 2009 and Energy and Enova. Enova manages power production based on renewable • hydro plants generating 1 MW and the EU program (Intelligent Energy energy sources such as hydro, wind, built after 1 January 2004 Europe) and the International Energy solar and bio energy. The scheme is Agency (IEA) program. In addtition regulated by the Green Certificates Act. • existing renewable power plants Enova, inter alia, represents the that permanently increase their IEA activity Energy Technology Data The Norwegian government has electricity production with new Exchange (ETDE) in Norway. entered into an agreement with the construction beginning on or after Swedish government establishing a 7 September 2009. Enova offers financial support based on common electricity certificate market defined programs for various renewable for electricity that will contribute to Any entity that delivers power to end energy and environmentally friendly increased production of renewable consumers is obliged to purchase projects based on an application energy. Moving toward 2020, Sweden electricity certificates, and it is the end principle. In 2013 the Energy Fund and Norway will increase their power consumer who finances the scheme supported 1 350 new projects within production from renewable energy through increased costs when invoiced energy effectiveness, conversion and sources with 26.4 TWh. Power plants for usage. The electricity certificate increased utilization of renewable that are included in the scheme receive scheme is managed by the Norwegian energy amounting to approximately electricitycertificates that can be sold Water Resources and Energy Directorate. 1.8 billion Norwegian krone (NOK). Other allowances The General Tax Act includes regulations regarding tax allowances known as Certificate SkatteFUNN to support R&D project government costs. Under the SkatteFUNN scheme, any type of business enterprise engaged in R&D activities may apply Total energy to the Research Council for support for Producers of market of Electricity R&D projects. Support is granted in the renewable energy renewable energy consumer form of a tax deduction, and in certain 26,4TWh cases direct funding to the company. R&D projects under the SkatteFUNN Payment scheme are aimed at obtaining new knowledge or technical skills that can Power suppliers benefit the company in connection with Certificate Payment the development of new or improved goods, services or means of production.

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. © 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Quota obligation on the allocation, issue, holding, Nitrous Oxide (NOx) tax: The NOx tax Starting in 2008, the Norwegian transfer, surrender and cancellation is calculated per kg for NOx emissions emissions trading system for of allowances. An operator will by generated during the production of greenhouse gas (GHG) emissions 30 April each year transfer a number energy from the following energy expanded to include nearly 40 percent of allowances corresponding to sources: of the emissions related to Norway. It is the volume of emissions for which reporting is mandatory, generated by • propulsion machinery with a total also affiliated with the European system installed capacity of over 750 kW for quotas. The Norwegian system the installation in the previous calendar for quota obligation applies to GHG year to a specified settlement account • motors, boilers and turbines with a emissions in Norway and to emissions in the registry. total installed capacity of more than 10 MW from activities on the Norwegian part of Additional information the continental shelf. • flares on offshore installations and on Indirect taxes: Indirect taxes are The quota system applies to emissions facilities on land. used as a policy instrument to reduce in connection with: the consumption of products that are Enterprises that join the Environmental • energy production detrimental to the environment. Agreement on NOx are entitled to a tax exemption from the date when CO tax: Gasoline, mineral oil, gas for • refining of mineral oil 2 they joined. From the same date, inland usage and petroleum activities the enterprise will have a payment • coke production are subject to a CO tax. A CO tax 2 2 obligation vis-a-vis the business sector’s related to petroleum activities shall • production and processing of iron and NOx Fund. According to the Participant be paid per liter of oil and natural gas steel including roasting and sintering Agreement, affiliated enterprises will liquids and per standard cubic meter of of iron ore develop a measure plan identifying gas burnt off or emitted directly to air possible NOx reducing measures within • production of cement, lime, glass, on platforms, installations or facilities 2 years after affiliation. glass fiber and ceramic products, as used in connection with the extraction well as the production of paper, board or transportation of petroleum on the The purpose of the plan is to identify and pulp from timber or other fibrous Norwegian continental shelf. The tax is profitable measures the enterprise can materials classified as a deductible operating cost implement on its own accord, and to • aviation activities. associated with petroleum activities, identify cost-effective NOx reducing which contributes to reducing the measures whose implementation are Any person engaged in any of the ordinary tax and special tax actually paid dependent on support from the NOx activities mentioned above is required by the oil companies. Fund. As of 23 May 2014, a total of 787 to surrender allowances corresponding enterprises, ships and rigs had joined The CO tax was reduced according to to any emissions to which the duty 2 the Environmental Agreement on NOx the estimated emissions trading price to surrender allowances applies. 2011–2017. The Norwegian Emissions Trading when the Norwegian emissions trading Registry shall contain information system was introduced.

50 | Taxes and incentives for renewable energy

Support schemes Income tax assessment: Geothermic Accelerated depreciation is applicable to concessionaires having more than electricity plants entering into operation Investments and other subsidies one geothermic resource concession as of 29 June 2008. Accelerated Peru has not implemented subsidies, agreement that may also perform depreciation is applicable to machinery, but it has implemented certain tax activities related to geothermic equipment and building infrastructures incentives for energy producers resources and connected activities shall required for the installation and producing energy on renewable individually and annually assess their operation of electricity plants generating resources. income tax liability by each contract power through renewable resources. and activity. However, Peru has not implemented Electricity generated with RERs is feed-in tariff schemes, premiums If one of the contracts generates tax considered when it is first delivered into to renewable energy producers or losses that carry forward, such losses the electricity distribution network. renewable energy quota obligation to could be offset against the profits Early recovery of the Input VAT derived energy producers. derived from another contract or by electricity generating corporations: geothermic related activities. Additional information Concessionaires of electricity- Investments applied to a geothermic generating activities through RERs are Peru is a country with abundant natural resource concession agreement that entitled to the early recovery of the resources. However, which resources may not have reached the exploitation Input VAT paid for capital expenditures, are considered renewable is determined stage can be accumulated with services and building contracts directly only by a general consensus rather the same kind of investment made related to the electricity generating than legal definitions. This consensus with another contract that may have activities, provided they do not enter appears to be changing, and some reached the exploitation stage. These into the productive stage. resources like water, which was once accumulated investments can be considered renewable, are no longer Selective Consumption Tax (Impuesto amortized either on a production basis considered as such. Selectivo al Consumo or ISC): The or proportionally over a five-year period ISC excise tax is applicable to the Apart from issues related to water, on a straight line method. consumption of fuels. Beginning no clear tax policy exists that might Import of goods: Import of goods and 1 January 2008 and extending promote investment into renewable inputs required to exploit geothermic until 1 January 2016, the Peruvian energy. However, a number of benefits resources under concession are exempt government has established a schedule can be identified in the Peruvian from all existing or to be existed taxes for applying a specific amount of taxation system. provided such goods or inputs were Peruvian nuevo sols (PEN) as an ISC on Geothermic resources law: The Peruvian included in the specific list approved by certain fuels such as diesel 2, kerosene government grants 30-year concessions the Energy and Mining Ministry. and others that contain harmful to explore and/or exploit aboveground contaminants like sulfur. Investment in generating electricity and underground geothermic resources through hydro-power and other Renewable that are not hydrocarbon-based. Energetic Resources (RER): Electricity Income tax stability: Geothermic generation through hydro, wind, concessionaires will be subject to the solar, geothermic, biomass, wave or 30 percent income tax regime in force tidal powers or other RERs is subject at the time of signing the concession to an annual maximum 20 percent agreement during the term of the accelerated depreciation regime for concession. Income Tax purposes.

Taxes and incentives for renewable energy | 51

Investments and other Department of Energy (DOE) is obtained h. Cash Incentive of Renewable subsidies before importation. The machinery, Energy Developers for Missionary equipment, and material must be Electrification Republic Act 9513 or the Renewable directly and actually needed and used RE developers shall be entitled to a cash Energy Act of 2008. exclusively in the RE facilities. incentive per kilowatt-hour of power In 2009, Republic Act (RA) 9513, d. Net Operation Loss Carry-Over generated, that is equal to 50 percent of otherwise known as the Renewable (NOLCO) of 7 years the universal charge for power needed Energy Act, was passed. The law is to service missionary areas where it intended to accelerate the development The RE developer’s NOLCO during operates. This incentives is chargeable and commercialization of renewable the first 3 years starting commercial against the universal charge for energy resources in the Philippines. operation may be carried over as a missionary electrification. Among other items, the Act includes deduction from the gross income for the setting up of the Renewable the next 7 consecutive taxable years i. Tax Exemption of Carbon Credits Portfolio Standard which sets a immediately following the year of loss, All proceeds from sale of carbon emission minimum percentage of generation provided it has not been previously credits are exempt from all taxes. from renewable energy resources offset and it does not result from the by power generators, distribution availment of the incentives under j. Tax Credit on Domestic Capital utilities and suppliers; the creation RA 9513. Equipment and Services of a Renewable Energy Market and e. Zero percent Value-Added Tax Rate RE operating contractor holders the adoption of the Feed-In Tariff (FIT) purchasing RE machinery, equipment, System. The sale of fuel or power from RE materials and parts from a domestic sources shall be subject to 0 percent RA 9513 also provides for fiscal manufacturer shall be entitled to a tax value-added tax (VAT) rate. All RE incentives to renewable energy (RE) credit equivalent to 100 percent of the developers are entitled to zero-rated developers of renewable energy value of the VAT and customs duties VAT on purchases of local supply of facilities, including hybrid systems, in that would have been paid on the goods, properties and services needed proportion to and to the extent of the equipment, materials and parts had they for plant facilities. This may be claimed RE component, for both power and non been imported. throughout the whole process of power-applications. Incentives include exploring and developing RE sources k. Exemption from the Universal the following: up to its conversion to power, including Charge a. Income Tax Holiday (ITH) those performed by subcontractors and Power and electricity generated through contractors. Duly registered RE developers are the RE system for the generator’s own exempt from income taxes for the f. Special Realty Tax Rates on consumption or for free distribution to first 7 years of commercial operations. Equipment and Machinery off-grid areas shall be exempt from the Additional investments are entitled universal charge. Realty and other taxes on equipment, to additional income tax exemptions machinery and other improvements l. Payment of Transmission Charges during an entitlement period not actually and exclusively used for RE exceeding 3 times the period of the Power and electricity produced from an facilities shall not exceed 1.5 percent initial availment of the ITH. intermittent RE resource may opt to pay of their original cost less accumulated the transmission and wheeling charges, b. 10 percent Corporate Tax Rate normal depreciation or net book value. on a per kilowatt-hour basis at a cost In an integrated resource development A corporate tax rate of 10 percent equivalent to the average kilowatt-hour and generation facility, only the power (reduced from the regular 30 percent) rate of all other electricity transmitted plant shall be imposed real property tax. on net taxable income shall be imposed through the grid. on all RE developers after 7 years of g. Accelerated Depreciation m. Hybrid and Cogeneration Systems the ITH. If an RE project fails to receive an ITH Incentives and tax exemptions under RA c. 10-year Duty-free Importation of before its full operation, it may apply 9513 may be claimed by registered RE RE Machinery, Equipment and for an accelerated depreciation in its developers of hybrid and cogeneration Materials tax books and be taxed accordingly, systems using both RE sources and although the project or its expansions This incentive is available within the conventional energy, but only for the shall no longer be eligible for an ITH. first 10 years of RE Certification, equipment and machinery using RE provided that an endorsement from the resources.

52 | Taxes and incentives for renewable energy

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. n. Benefit of a Priority Dispatch exemption from VAT and importation q. Tax Rebate for Purchase of RE tariffs and duties Components Qualified and registered RE generating units with intermittent RE resources • Tax Credit on Domestic Capital Rebates for all or part of the tax paid shall be considered ‘must dispatch’ Components, Parts and Materials for purchases of RE equipment for based on available energy and shall enjoy residential, industrial, or community use. • Income Tax Holiday and Exemption the benefit of priority dispatch. An RE- – available for 7 years from day of generating unit with intermittent RE Operating subsidies accreditation resources includes plants utilizing wind, Feed-in Tariff solar, run-of-river hydro or ocean energy. • Zero-rated VAT Transactions with local The FIT system is a scheme that suppliers o. Incentives for RE involves the obligation on the part of the Commercialization p. Incentives for Farmers of Biomass power industry participants to source Resources electricity from RE generation at a Incentives are given to all guaranteed fixed price applicable for manufacturers and suppliers of For a period of 10 years from the a given period of time, that shall in no locally-produced RE equipment and enactment of RA 9513, those engaged case be less than 12 years. components, provided they are duly in the cultivation of crops and trees accredited by the DOE. used as biomass resources are entitled The FIT system is mandated for wind, to duty-free importation and VAT solar, ocean, run-of-river, hydropower • Tax and Duty-free Importation of exemption on all types of agricultural and biomass energy sources. Components, Parts and Materials – inputs, equipment and machinery.

ERC Approved FIT rates1 Resource/Technology Installation Targets (PhP/kWh) (USD/KWH) Run-of-River Hydropower 5.9 0.14 250 Biomass Energy 6.63 0.15 250 Wind Power 8.53 0.19 200 Solar Power 9.68 0.22 50 Ocean Energy – – 10 Total 760 exchange rate: 1 USD = PhP 43.00

Additional information • Green Energy Option – End-users • Nationality Requirement – Under reserved for Filipino citizens or are given the option to choose RE the Philippine Constitution, the domestic companies with at least resources as their source of energy exploration, development and 60 percent of its capital owned by by enrolling under this program. utilization of natural resources in Filipino citizens. the Philippines is an area generally

1. Energy Regulatory Commission Resolution No. 10, series of 2012. Taxes and incentives for renewable energy | 53

Support schemes 7. production of electricity in high Other incentives efficiency cogeneration biomass – to Investment and other subsidies Besides aid sources mentioned above, 5 MWe. • Support schemes are applicable the investor may also apply for other for solar, wind, geothermal, • All companies may apply for incentives related to broadly defined hydro, biomaterial and offshore support. energy sector, in particular: technologies. • The level of support, given in – grants from EU funds for the • Renewable energy is exempt from the form of preferential loan, is Financial Framework for 2014- excise tax. between 30 percent and 75 percent 2020 and national programmes of eligible cost of the project designed inter alia for investment • In some cases solar photovoltaic (depending on the investment and employment (i.e. new modules could be excluded from real type). The amount of support manufacturing plants, innovative estate tax as other constructions. reaches from 2 million Polish Zloty technologies), R&D activities (i.e. • Agriculture tax payers may claim a (PLN) up to PLN 40 million. development or improvement of refund of investment costs if the • The Stork Programme will be products, services or technologies), investment relates to renewable implemented in the years 2014 – other activities, such as energy (up to 25 percent). 2022, the spending is possible up environmental protection, training sessions, logistics. • Subsidies and grants from the EU to 2020. Structural Fund in Poland or other – Support for of a low-carbon – incentives from the Polish domestic institutions (for example, and resource-efficient Government (R&D projects, the National Fund of Environmental economy: part 1) energy environmental projects, the Protection and Water Management). and electricity audits, part Programme of support of investments of considerable Currently the following sources of 2) improvements of energy effectiveness of companies, importance for Polish economy for financing for renewable energy projects years 2011-2020), are available: part 3) e-accumulator- ecological battery for industry Incentives obtained by the investors – The Stork Programme – financing • Companies investing in in Poland are subject to Polish and of distributed, renewable energy European Union state aid rules which sources (RES) undertakings leading to energy savings may apply for support. determine, inter alia the maximum • Support under the Stork Programme level of support, beneficiaries and the will be given for investments involving • Support under Part 1) will be detailed conditions of support. given in the form of grant up to construction or reconstruction of RES Operating subsidies installations with capacities from the 70 percent of eligible investment following ranges: costs. Support under Part 2) and Green certificate system Part 3) is given in the form of Remuneration for renewable energy 1. wind power plants – from 3 MWe, preferential loan. The amount of produced: the average market price support reaches from PLN 300 000 2. photovoltaic systems – from 200 kWp of 181.55 PLN/MWh for the last year up to PLN 50 million. The maximum to 1 MWp, (2013) plus the market value of green level of the loan may not exceed certificate (certificate of origin) granted 3. energy from geothermal waters – 75 percent of eligible cost of by the Energy Regulatory Office. from 5 MWt to 20MWt, the project. Quota obligation 4. hydropower plants – to 5 MW, • All three parts will be implemented Rates (2014): 13 percent of all energy 5. biomass-fired heat Sources – to in the years 2014 – 2017, the produced (floors relate to all types 20MWt, spending is possible up to 2017. of renewable energy). The quota is 6. biogas plants – from 300 kW to increasing in stages and will reach 2 MWe, 14 percent in 2015 to 20 percent in 2021.

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Additional information Administrative procedures: Business certificates are similar to securities; activity in the area of production of they are transferable and tradable on Legal basis: The Act of Energy Law renewable energy is a licensed activity the regulated market (for example, the enacted on 10 April 1997 and the and requires a permit granted by the Polish Power Exchange) or within the respective decrees from the Ministry of president of Energy Regulatory Office. over-the-counter market. Generally, if Economy. Such a permit can be sought by an entity energy producer does not achieve the In April 2014, the Council of Ministers that meets requirements specified in minimum level of share of renoweble announced the draft of the act on the Energy Law, especially the ability energy (for 2014 – 13 percent), he is renewable energy resources which will to provide the financial, organizational obliged to purchase green certificates implement the provisions of Directive and technical resources required to at the market (for redemption) or has to 2009/28/WE into the Polish law. perform the licensed activity. As a rule, make a compensation payment. permission is given for the fixed term According to the new act, the level of Sale: Electricity distributors have a but not longer than 50 years. support for renewable energy will differ legal obligation to acquire a certain depending on the source of renewable Grid access: Priority access is granted amount of renewable energy generated energy. The highest support will be over nonrenewable electricity in Poland. For the year of 2014, the provided for small energy installations producers. The costs of connecting to above percentage limit of renewable (e.g. photovoltaic installations and the electricity grid are determined by energy will amount to 13 percent. micro-instalations used solely for the actual costs incurred to construct Otherwise, the electricity distributor is energy producer’s purpose). This act the line. Those costs may be partially obliged to buy the missing amount of provides also new mechanism for refunded to the investor, depending on renewable energy (by means of green sale of renewable energy at auction. the year and production capacity. certificates) on the market. The prices of Additionally, it is not entirely sure renewable energy have been determined Green certificates scheme: Electricity whether the current regime of RE based on average prices of energy in producers may apply to the president support will be applicable to the existing the previous year. (The amount for 2013 of Energy Regulatory Office for green energy installations once the new act was 181.55 PLN/MWh). The renewable certificates (also known as certificates on renewable energy resources comes electricity producers have priority over of origin), if they have produced into force (under the current wording of other producers with regards to the renewable energy or if they are required the new act, the energy producers will distribution of produced energy. be eligible to chose between the current to pay substitute fees calculated in scheme and the new one). line with the energy law. The green

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Support schemes – The profit which can be reinvested and the secondary relating legislation represents the balance of profit issued by ANRE. Investment and other subsidies (loss) account for the period, Administrative procedures: The activity of Tax incentives namely the accumulated production of electricity from renewable accounting profit from the In Romania, the following tax incentives sources requires a license granted by beginning of the year, in the year in may be applicable to energy produced ANRE. Such a license can be obtained which the investment is realized. from the following renewable sources: by an entity by filling a request for The tax relief is granted up to the wind, solar, geothermal, hydraulic accreditation and accompanied by a limit of corporate tax due for the utilized in power plants with an installed specific set of documentation. capacity of maximum 10 MW, biomass period in which these investments and residues fermentation gas. are made. The license is granted for a fixed term, but no longer than 15 years. In case of – The corporate tax relief applies • Electricity from renewable sources is production of electricity from renewable only for new fixed assets. Also, excise duties exempt. sources, the maximum period during taxpayers which benefit from this which ANRE should issue the relating • Accelerated depreciation for incentive are required to keep the license is of 30 days. tax purposes can be used for specific fixed assets for at least half technological equipment, tools and of their normal economic useful Green certificate scheme: In order to installations computers and related life established according to the promote investments in renewable peripheral equipment. accounting applicable regulations, electricity production capacities, a • Buildings and land used within but no more than 5 years. Tradable Green Certificates (TGC or GC) system has been in place in Romania hydroelectric, thermoelectric and – Also, taxpayers who benefit from since 2004, coupled with a supplier nuclear power plants, as well this incentive cannot apply the quota obligation system. Under this as buildings and land relating to accelerated depreciation method framework, energy producers are transformation and connection posts, for this equipment. are not subject to local taxes. entitled to receive a set amount of GCs Operating subsidies according to the amount of electricity • Reinvested dividends can be dividend generated and delivered by them from tax exempt, provided the dividends Green certificate system renewable sources. The revenue from are used for the purpose of creating The price of a green certificate has GC sales represents additional revenue new work places or developing the been set between the Romanian for eligible renewable producers on top activities of Romanian entities. new leu (RON) equivalent of EUR29/ of electricity sales on the market. General Certificate (GC) and EUR59/GC. • Incentives (for example, exemption According to Law 220/2008, the Currently, the price of a green certificate from payments to unemployment producers of electricity from renewable is equivalent with the maximum value of funds or monthly grants) can also be sources benefit from a different number EUR59/GC, since the demand of GC is available to companies which provide of green certificates depending on the higher than the offer. places of work for students, recent fuel used. For example: graduates or disabled persons. Quota obligation • 0.7 GC/MWh for new hydroelectric • Reinvested profit - starting 1st of July On 21 march 2014, the Romanian power plants with installed capacity 2014, is applicable the tax relief for the Regulatory Authority in the Field of of maximum 10 MW; profit reinvested in the production and/ Energy (ANRE) calculated the estimated or acquisition of technical equipment • 1 GC for each 2 MWh for quota of GCs acquisition for 2014 for the (machines, equipment and work hydroelectric power plants with an electricity suppliers as 0.237 GC/MWh installations) used for carrying out installed capacity of maxim 10 MW; supplied to final consumers. economic activities put into operation • 0.5 GC/MWh for wind power, up to no later than 31 December 2016. Additional information 31 December 2017 and 0.25 GC/MWh – The types of equipment eligible Legal basis: Electricity Law 123/2012 starting with 1st of January 2018 for this tax relief are defined in and Law 220/2008 for approval of the • 3 GC/MWh for solar power. subgroup 2.1 of the Catalogue support scheme for electricity from regarding the classification and the renewable sources (Law 220/2008) The support scheme is granted for a normal useful life of fixed assets. period of 3 to 15 years, depending on

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. the age of the plants and the installed the supply of end consumers directly been established by ANRE as between capacity. Eligible electricity producers connected to the power plant. the RON equivalent of EUR29/GC and will be able to enter the scheme only if EUR59/GC. Currently, the price of a Electricity suppliers and electricity the commissioning/refurbishment of green certificate is equivalent with the producers previously mentioned have the power plant are performed before maximum value of EUR59/GC, because the obligation to acquire annually a 31 December 2016. the demand of GC is higher than the offer. number of GCs which is equivalent Sale: The annual mandatory GCs to the product between the annual During the period 1st of July 2013 – 31 acquisition quota is established mandatory GCs acquisition quota and March 2017 it is temporarily deferral based on the quantity of renewable the quantity of electricity detailed in the from trading of a certain number of GC electricity produced and on the paragraph above, supplied annually to for each 1MWh generated and delivered final electricity consumption of the final consumers. by the electric energy producers from previous year, without exceeding the renewables resources, accredited by For 2014, the estimated quota of level corresponding to the mandatory ANRE up to the date of 31 December acquisition of GCs for the electricity quota for the electricity produced from 2013, as follows: suppliers is 0.237 GC/MWh delivered renewable sources. to final consumers. Any supplier that • 1GC for hydroelectric power plants The quantity of electricity for which the fails to fulfil this obligation must pay the with installed capacities of maximum annual mandatory GCs acquisition quota equivalent value of the GC at a premium 10 MW; is established includes the electricity of EUR119.293 per each non-purchased • 1GC for wind power plants; purchased by electricity suppliers for certificate. their own consumption or for the sale to • 2GC for solar power plants. The GCs are issued by the transmission final consumer, the electricity used by system operator and are valid for the electricity producers for their own 12 months. The trading value of a GC has consumption (other than CPT), and for

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Support schemes Section 12I provides for an additional assessment. The deduction is calculated allowance on assets (new or used), at 45 cents per kilowatt hour (or Investment and other subsidies applied to a project that qualifies equivalent) of energy efficiency savings. Carbon emissions incentives as an Industrial Policy Project (IPP) The energy efficiency savings have defined in relation to assets used in the to be measured and confirmed by a Certified emissions reduction exemption manufacturing sector. The project must measurement and verification body as Section 12K of the Income Tax Act be approved by the Minister of Trade defined in the published regulations in provides for a tax exemption on any and Industry. Only greenfield projects relation to section 12L. No deduction amount accrued in respect of the costing more than 200 million South is allowed if the taxpayer receives a disposal of any certified emission African rand (ZAR) qualify or brownfield concurrent benefit in respect of energy reduction (CER) credit derived in projects costing the higher of ZAR 30 efficiency savings. the furtherance of a qualifying clean million; or the lesser of ZAR 200 million No person may receive the section development mechanism. or 25 percent of expenditure on existing 12L allowance in respect of energy assets will qualify for this allowance. To stimulate the uptake of Clean generated from renewable sources Development Mechanism (CDM) The incentive in relation to a qualifying or co-generation other than energy projects in South Africa, income from project comprises: generated from waste heat recovery. primary certified emission reductions, Furthermore, a person generating which was exempted from income tax • 75 percent of the cost of a new energy through a captive power plant from 2009 to 2012, will be extended and unused manufacturing asset may not receive the allowance unless to 31 December 2020, in line with the used in an IPP within an Industrial the kilowatt hours of energy output of adoption of the second commitment Development Zone (IDZ); or that captive power plant for that year of period of the Kyoto Protocol. • 35 percent of the cost of a new and assessment is more than 35 percent The VAT Act does not provide for unused manufacturing asset that is of the kilowatt hours of energy input in exemption from VAT on the disposal used in an IPP respect of that year of assessment. of a CER credit. It is arguable that the • If the qualifying project constitutes Production of renewable energy and fuels disposal of CER credits should be a Preferred Project (as defined), the allowance viewed as a supply of services for VAT incentive comprises: purposes and that, on exportation of Section 12B provides for an accelerated CER credits, this service is zero-rated – 100 percent of the cost of a new capital allowance for machinery, plant for VAT purposes. and unused manufacturing asset implements, utensil or articles, owned used in an IPP within an IDZ; or by the taxpayer which was brought into Energy efficiency incentives use for the first time by the taxpayer for – 55 percent of the cost of a new and purpose of its trade. Industrial policy projects additional unused manufacturing asset used allowance in an IPP. This section applies where the assets This is an incentive in relation to are used for purposes such as the The incentive (i.e. tax deduction) is industrial policy projects, including generation of electricity from wind, limited to: greenfield and brownfield manufacturing sunlight, gravitational water forces projects. One of the qualifications • ZAR900 million for greenfield projects of not more than 30 megawatts or for eligible projects is the use of with preferred status biomass. improved energy efficiency and cleaner • ZAR550 million for greenfield projects The allowance is calculated as production technology. Measurement with qualifying status 50 percent of the cost and construction and verification (M&V) of savings will of the assets for the taxpayer in the be required to verify that savings are • ZAR550 million for brownfield first year, 30 percent in the second sustained over the incentive benefit projects with preferred status year, and 20 percent in the third year. period of 4 years. • ZAR350 million for brownfield The allowance also applies to all Under Section 12I of the Income Tax projects with qualifying status. improvements (other than repairs) and Act (Industrial Policy Projects), projects supporting structures that would form Energy efficiency savings allowance that have already received incentives or part of the machinery, plant, implement, grants under other types of schemes Section 12L allows as a deduction, utensil or article. will be excluded. Such projects need in determining the taxable income Research and development allowance to be ring-fenced and taken out of the of a taxpayer, an amount in respect equation when calculating and reporting of energy efficiency savings by the Aside from the general 100 percent savings for the tax claim. taxpayer with regard to that year of deduction, this allowance (Section 11D)

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. provides for an additional 50 percent for exceed the income generated by the all expenditures incurred in respect of taxpayer on the productive land. eligible R&D activities. Furthermore where a taxpayer agrees The additional 50 percent uplift will to the declaration of its land as a nature only apply to R&D approved by the reserve, game reserve or the like and Department of Science and Technology. certain additional requirements are met, R&D in respect to green and energy then broadly, the taxpayer is entitled to; saving industries has been identified as • A deduction of expenditure incurred a new area of focus. to conserve and maintain such land; Environmental incentives and Environmental treatment and recycling or • The land is deemed to constitute a waste disposal asset allowance deductible donation for purposes of Section 37B provides for an allowance the Income Tax Act. with regard to the cost incurred In this regard the aggregate deduction in acquiring a new and unused will be limited to 10 percent of taxable environmental treatment and recycling income. asset or environmental waste disposal asset used in the context of Special Economic Zones (SEZ) manufacturing and which assets are Special Economic Zones (legislation to yet required by any law for purposes of in force) protecting the environment. In terms of section 12R, any qualifying The allowance in respect of an companies, which are South African environmental treatment and recycling incorporated companies, alternatively, asset is 40 percent of the cost of the companies which have their place of asset in the first year and 20 percent per effective management in South Africa, annum for the next 3 years. The cost of and which are located in a SEZ, will waste disposal assets can be written be entitled to apply a reduced income off on a straight line basis over 20 years tax of 15 percent (as opposed to (five percent per year). 28 percent). Deductions in respect of environmental The precise requirements to qualify for conservation and maintenance the reduced rate of tax referred to above Section 37C deems that expenditure have not yet been determined by the incurred by a taxpayer to conserve legislature. or maintain land in terms of a 5 year New or improved buildings in a SEZ biodiversity management agreement (legislation to yet in force) entered into in terms of the National A qualifying company located within Environmental Management: Biodiversity a SEZ may deduct from its income Act will be deemed to be expenditure an allowance equal to 10 percent of incurred in the production of income and the cost to the qualifying company of will therefore be deductible. any new or unused building owned Land used by the taxpayer for the by the qualifying company or any new production of income and for the or unused improvement to a building purposes of trade (the productive land) owned by the qualifying company. The needs to be in the immediate proximity building must be used by the qualifying of the land that is subject to the company and used by it in the course biodiversity management agreement of trade. for section 37C to find application. In addition, the expenditure deductible in terms of this section is not allowed to

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Grants Potential Grant Description Rates/Basis Source Manufacturing The MCEP is a cost-sharing incentive available to existing Broadly the maximum Department Competitiveness manufacturers for expanding or upgrading their facilities. grant available varies of Trade and Enhancement depending on the size Industry (DTI) The MCEP is broken into several components, each Programme of the enterprise and of which qualify for a separate grant, including Capital is typically limited to a Investment, Green Technology and Resource Efficiency benefit of approximately Improvement, Enterprise Level Competitiveness, etc. 30 percent of qualifying The main qualifying criteria for this grant to apply is that jobs expenditure, capped at should be maintained for 2 years and the company must be ZAR 30 million. a level four B-BEEE contributor or must have plans in place to achieve this score in 2 years.

Incentives Potential Grant Description Rates/Basis Source Critical The CIP is a cost sharing grant that is available to the The grant ranges from Department Infrastructure approved applicants for infrastructure projects in respect of 10 percent to 50 percent of Trade and Programme infrastructure development costs. of qualifying cost, capped Industry (DTI) at ZAR 30 million. The infrastructure must typically be available for public use, for example, road, bridges, telephone lines, etc.

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Support schemes • To accommodate small renewable • The total RPS target for 2014 was energy facilities that could not confirmed as being 11,578,809 MWh; Investments and other subsidies receive support by RPS, the Seoul increasing 26 percent from last year’s In 2004, the South Korean government Solar Power Plant Support Plan target (9,210,381 MWh), while the passed the Act on the Promotion of the was announced in May 2013. The RPS target for solar power rose Development, Use and Diffusion of New plan supports operations from the 87 percent from 723,000 MWh to And Renewable Energy (the Act). With installation of solar power plants 1,353,000 MWh in the same period. the goal of becoming one of the five to sales for small entities under largest producers of new and renewable 50kW capacity in Seoul. According Additional information energy, the government has announced to the plan, the small entities can One Million Green Homes Project: As a part that a total of 40 trillion South Korean receive KRW50/kWh (approximately of the 2009 budget, the government won (KRW) (EUR25.8 billion, USD34.2 10 percent of installation cost) for five appropriated KRW94.3 billion (USD72 billion) will be invested in renewable years from 2013. million) for the One Million Green Homes energy by 2015. Premium Project. The intent is to build one million This investment includes KRW22.4 homes by 2020 that use one of the The R&D tax credit program is applied trillion invested by the nation’s 30 following renewable energy technologies: for renewable energy technologies. largest industrial groups by 2013, KRW7 solar thermal, solar photovoltaic, Import duties are reduced by 50 percent trillion of government contribution, geothermal, biomass and wind energy. for all components and/or equipment and KRW10.6 trillion from other private Each year, the government will set a new used in renewable energy power plants. sectors. South Korea has already budget for the coming year. The Financial Support Program for seen substantial financial investment The green homes being built are Renewable Energy in South Korea is in renewable energy in recent years, environment-friendly and use new comprised of four main categories: including KRW1.8trillion (EUR1.3 billion, and renewable energy resources. In R&D support, soft loan for renewable USD1.8 billion) from the government in addition, green homes create no carbon projects, Feed-in-tariff and renewable the last 2 years (2012–2013). emissions and use less energy, water energy distribution support. According to the second national and natural resources. The total budget in 2014 is KRW802 energy plan announced in January 2014, Other support programs: The government billion, KRW249 billion for R&D, the former renewable energy target, will support 10 major green projects KRW103 billion for R&D, KRW336 11 percent of the total energy supply that have impressive promotional and billion for FIT and KRW114 billion for from renewable sources by 2030, has installation effects. been reaffirmed. distribution. To reach this goal, the government Quota obligation is implementing initiatives in four major areas: • In 2012, the existing feed-in tariff was replaced by an RPS that was • strategic R&D and commercialization approved by the government • promotion of industrialization and assembly in March 2010. market creation • The RPS requires 13 state-run and • promotion of exports of new and private power utilities with a capacity renewable energy products in excess of 500 MW to generate two percent of the energy production • infrastructure development. from renewable sources by 2015. Operating subsidies This percentage will be increased in stages to 10 percent by 2022. Feed-in tariff • In terms of the standard price per • The feed-in tariff was abrogated at the certificate, REC for solar power was end of 2011 due to introduction of a KRW175,503 averagely in 2013, renewable portfolio standard (RPS) while REC for non-solar power was in 2012. (The government maintains determined to be KRW 137,844. a feed-in tariff only for existing recipients).

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Support schemes average of those incurred in the two Taxes on Energy preceding years, the rate established Tax incentives in the preceding paragraph shall apply Taxes on electricity generation The following includes a brief up to that average, and 50 percent to These taxes are not strictly description of certain tax incentives that the amount by which that average is environmental taxes. Revenues which have not been specifically created for exceeded. will arise from them will finance the the renewable energies sector. Careful Technological innovation activities tax Spanish deficit of the cost of generation tax planning is therefore required to take and distribution of electricity. advantage of these tax incentives. credits: The tax credit base shall consist of the amount of the expenses incurred • Tax on electricity generation. Reduction of income from certain in the technological innovation activities. intangible assets The tax credit rate is 12 percent. • Tax on spent nuclear raw and radioactive waste. The net income derived from the license R&D and Technological innovation of the right to use or exploit or from the activities tax credits which have not • Tax on spent nuclear raw and transfer of certain intangible assets as been applied in a given fiscal year and radioactive waste storage. defined in article 23 of CIT Law, shall be which have not been used in that fiscal • Fee on use of continental waters to included in the CIT taxable base with a year as the tax due was insufficient may 60 percent reduction, provided certain generate electricity (hydroelectricity be carried forward to the following 18 generation). requirements are met. tax years. In addition to that, in case tax Corporate Income Tax credit for due is insufficient for the application The electrical energy attributable to investments in assets to protect of these tax credits, a cash refund in the use of fuels in facilities that use environment the amount of the pending tax credits any of the non-consumable renewable energies as primary energy shall not be Article 39 of Spanish CIT set forth can be requested to the Spanish Tax subject to a premium-based economic that investment in fixed assets aimed Administration, with a discount of regulation. This affects solar-thermal to protect the environment (facilities 20 percent of the amount of the pending installations in particular. to avoid atmospheric or acoustic tax credits (i.e. the payment in cash pollution from industrial installations, implies a reduction of the pending Operating subsidies or water pollution). 8 percent tax amount of the tax credit). Remuneration of energy production credit of any investment included in Capital duty exemption facilities under the special regime has programs, arrangements or agreements been recently revised through Royal entered with the environmental public As a result of the modifications Decree-Law 9/2013, which entered authorities (Regional Governments). introduced by RD 13/2010, Spanish Transfer Tax Law foresees an exemption into force on Sunday July 14. Such Those tax credits which have not been of the Capital Duty regarding: Royal Decree-Law comprises the main applied in a given fiscal year and which following provisions: have not been used in that fiscal year • incorporation of companies 1. The amendment of Article 30.4 of the as the tax due was insufficient may be • share capital increase Electricity Sector Law, which basically carried forward to the following 15 tax provides that: years. • contributions of shareholders that do not constitute a share capital increase • The new remuneration framework Research & Development Corporate Income of special regime facilities Tax credits • transfer to Spain of the office of effective management of a company (including facilities in operation) will R&D tax credits: The tax credit base not previously located in the EU. be established by Royal Decree shall consist of the amount of research issued by the Council of Ministers. and development expenses and, if Tax allowances on local taxes • In addition to the compensation applicable, investments in tangible For certain local taxes such as for the sale of energy valued fixed assets and intangible assets, construction and urban canon, tax at market price, facilities may excluding real estate and land. Tax allowances could be agreed with the receive a credit rates are set at 30 percent of the corresponding local authority. The tax “specific remuneration expenses incurred in the tax period allowances to be agreed would depend consisting of a term per unit of for this purpose. In the event that the on each local authority, and should be installed capacity, to cover, where expenses incurred in pursuing the R&D negotiated on a case-by-case basis. appropriate, the investment costs activities in the tax period exceed the of a typical installation that cannot

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. be recovered from the sale of which are not applicable throughout apply temporarily, except for certain energy and a term per operation, if all of Spain (i.e. regional authorizations aspects, pending the approval of applicable, to cover the difference and registrations) will not be taken the Royal Decree with the new between operating costs and into account. Also, the costs and regulation. Thus, the facilities will revenues for the market share of investments that do not respond solely continue receiving the current such typical installation”. to the activity of electricity production. compensations under the transitional provisions commented above subject The regulated tariff regime, for 2. The introduction of an additional first to regularization with the new a given period and updatable provision, called “reasonable return methodology as of July 14, 2013. according to a prefixed formula, is on production facilities entitled to consequently abolished. economic premium regime” which, as 6. Two immediate measures to reduce explained by the Minister, will mean the costs of the electricity system are • In order to calculate the specific that, as of July 14, 2013, special regime approved. The efficiency complement remuneration of a typical installation, facilities shall receive a “supplement to facilities that were receiving it it is necessary to consider, “over its for their investment costs based on under Article 28 of Royal Decree regulatory life” and referring to the standards by technologies”, according 661/2007 is abolished, as well as the activity of an “efficient and well- to a cost formula of 10-year Treasury + reactive power bonus of article 29 of managed company”: 300 basis points, representing a return the same regulation. – Standard revenues from the sale of 7.5 percent. Currently, it is been processed the of energy generated, valued at the 3. The above-mentioned return is enactment of the Proposal of Royal market price of production. ‘before taxes’ and may be revised Decree passing the regulations of the – Standard operating costs. every 6 years. activity of electricity generation through renewable sources, cogeneration and – Standard value of the initial 4. The repeal of the following provisions: wastes. investment. • Royal Decree 661/2007, of May 25. Additionally, new Renewable RD Therefore, the determination of • Royal Decree 1578/2008 of 26 foresees the drafting and enactment of these parameters or assumptions September. a new Ministerial Order that shall set will be critical in order to assess the the new remuneration parameters of remuneration for each installation. • Article 4 and paragraph 2 of the the existing installations. Such Order is It will be necessary to wait for the fifth transitional provision of Royal currently being processed too. approval of Royal Decree. Decree-Law 6/2009, of April 30. • The costs or investments that are 5. To maintain compensation flows to made in connection with rules or acts facilities, such repealed rules shall

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Support schemes aggregate book value in any year, the up to a certain percentage of the annual depreciation allowance may power distributed. In this way a market Depreciation of windmills be increased correspondingly. The is established for selling and buying Swedish tax law allows tax payers to depreciation allowance is calculated on certificates. depreciate windmills for (corporate) a pool basis, with the book value of all To support the transition to more income tax purposes at a rate that the taxpayer’s assets taken into account sustainable energy sources for heating is much faster than the actual rate in order to calculate the maximum and transportation, no taxes are levied of economic loss. The maximum depreciation allowance. depreciation allowance is 30 percent on renewable fuels while energy taxes, Operating subsidies CO taxes and sulphur taxes are levied of the aggregate book value at the 2 beginning of the tax year, plus the For each MWh produced by renewable on fossil fuels. building or acquisition costs that have sources (solar, geothermal, wind, wave, There is also a fee-based system for been made during the year. bio fuels or hydro) the producer receives the reduction of greenhouse gas (GHG) one certificate. (Some limitations emissions. If a straight-line depreciation of exist for hydro power generation). A 20 percent per annum results in a lower distributor is obliged to buy certificates

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Support schemes – Documents and transactions 30 March 2013. Under this law, an related to the power plants 85 percent discount is applied to the Investment and other subsidies and concluded throughout the lease, easement and utilization right of General Investment Incentive Regime investment period are exempted energy transfer lines for 10 years in both has changed in June 2012. This new from stamp tax and duties. investment and operating periods to the incentive regime is applicable to ENR power plants that are in operation or to investments, mainly by providing Operating subsidies be in operation until 31 December 2020. the following: Feed-in tariff Additional information • VAT exemption on purchase (or The tariff and the government purchase • If the mechanical and import) of investment equipment guarantee are applied for 10 years electromechanical equipment used in following the start of operations • customs duty exemption on import of renewable energy facilities that have of a generation power plant until investment equipment started operation before 31 December 31 December 2015. 2015 are manufactured in Turkey, an • exemption from other funds and Resources: additional incentive of between USD surcharges. ct0.4 and USD ct.3.5/kWh for 5 years Other subsidies • Hydro: USD cent (ct)7.3kWh will be provided to such facilities, • Wind: USD ct7.3/kWh under certain conditions. • The new Electricity Market Law 6446 became effective as of 30 March • Geothermal: USD ct10.5/kWh • Renewable energy sources based 2013. The incentives provided under electricity generation power • Solar: USD ct13.3/kWh this law apply to investors holding plants with an installed capacity of a generation license and who start • Biomass (including landfill): USD maximum 1 MWe and other similar operating before 31 December 2015: ct13.3/kWh investments are allowed to operate without a generation license. – A 50 percent discount is applied to Discount on fees the transmission system utilization The new Electricity Market Law fee for 5 years following the start of 6446 has become effective as of operations.

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Support schemes Feed-in tariff (small scale generation) generation and the Carbon Price Floor Tariff support payments for small-scale which imposes a fossil fuel tax. Investments and other subsidies electricity generation from a variety of The CfD for each low carbon generation Exemptions are in effect from the technologies. Climate Change Levy and EU Emissions technology is available from 2014/15 and Trading Scheme. Renewable Heat Incentive is scheduled to replace the Renewable Obligation Scheme by 2017. For most Long term tariff support payments for renewable technologies, the CfD is Operating subsidies renewable heat generation. expected to last for at least 15 years and Renewables Obligation Scheme Additional information take effect from 2014/15 onwards. Long term banded quota mechanism designed to support renewable Electricity Market Reform: The Energy Act The table below sets out the CfD strike electricity generation. 2013 brought in major reforms to the prices for renewable technologies for UK electricity market. The key market 2014/15 to 2018/19 (with each year Feed-in Tariff with Contract for mechanisms relevant to this publication beginning on 1 April). Support will be Difference are Feed-in Tariffs with Contracts for paid based on net renewable electricity Tariff support payments for large-scale Difference (CfDs) to give revenue generated. electricity generation from a variety of certainty to investors in low-carbon technologies.

Strike Prices GBP/MWh (2011/12 prices) 2014/15 2015/16 2016/17 2017/18 2018/19 Advanced Conversion Technologies (with or without CHP) 155 155 155 140 140 Anaerobic Digestion (with or without CHP) 150 150 150 140 140 Dedicated Biomass (with CHP) 125 125 125 125 125 Energy from Waste (with CHP) 80 80 80 80 80 Geothermal (with or without CHP) 145 145 145 140 140 Hydro 100 100 100 100 100 Landfill Gas 55 55 55 55 55 Sewage Gas 75 75 75 75 75 Onshore Wind 95 95 95 90 90 Offshore Wind 155 155 150 140 140 Biomass Conversion 105 105 105 105 105 Wave 305 305 305 305 305 Tidal Stream 305 305 305 305 305 Large Solar Photo-Voltaic 120 120 115 110 100 Scottish Islands Onshore N/A N/A N/A 115 115

Source: Department of Energy and Climate Change; Investing in renewable technologies – CfD contract terms and strike prices.

Renewables Obligation (RO) scheme: This MWh of electricity generated, and has an insufficient number of ROCs requires electricity suppliers to source these ROCs can be sold independently to meet an obligation, it must pay an a specific percentage of electricity of the electricity generated, allowing equivalent amount of GBP 43.30 per from renewable sources. Renewable renewable generators to receive a MWh (2014/2015 rate) into a buy-out generators receive Renewables premium to the wholesale electricity fund. This fund is used to cover the Obligation Certificates (ROCs) for each price. Where an electricity supplier administration cost of the scheme and

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. the rest is distributed back to suppliers ROC mechanism whereby different according to their technological maturity in proportion to the number of ROCs renewable electricity technologies and levelized costs (see table below). they produced. There is a banded receive different levels of support

A table summarising the banding levels for the banding review period (2013-17) in England and Wales:

13/14 14/15 15/16 16/17 Band support support support support (ROC/MWh) (ROC/MWh) (ROC/MWh) (ROC/MWh) Advanced gasification/pyrolysis 2 2 1. 9 1. 8 Anaerobic Digestion 2 2 1. 9 1. 8 Co-firing (low- range) 0.3 0.3 0.5 0.5 Co-firing (mid-range)* 0.6 0.6 0.6 0.6 Co-firing (high- range)* 0.7 0.9 0.9 0.9 Co-firing (low-range) with CHP* 0.8 0.8 1** 1** Co-firing (mid- range) with CHP* 1. 1 1. 1 1.1** 1.1** Co-firing (high-range) with CHP* 1. 2 1. 4 1.4** 1.4** Co-firing of regular bioliquid 0.3 0.3 0.5 0.5 Co-firing of regular bioliquid with CHP 0.8 0.8 1** 1** Co-firing of relevant energy crops (low range) 0.8 0.8 1 1 Co-firing of relevant energy crops with CHP 1. 3 1. 3 1. 5 1. 5 (low range) Conversion (station or unit) 1 1 1 1 Conversion (station or unit) with CHP 1. 5 1. 5 1. 5 1. 5 Dedicated biomass 1. 5 1. 5 1. 5 1. 4 Dedicated biomass with CHP 2 2 1. 9 1. 8 Dedicated energy crops 2 2 1. 9 1. 8 Energy from waste with CHP 1 1 1 1 Geothermal 2 2 1. 9 1. 8 Geopressure 1 1 1 1 Hydro 0.7 0.7 0.7 0.7 Landfill gas – closed sites 0.2 0.2 0.2 0.2 Landfill gas heat recovery 0.1 0.1 0.1 0.1 Microgeneration 2 2 1. 9 1. 8 Onshore wind 0.9 0.9 0.9 0.9 Offshore wind 2 2 1. 9 1. 8 Sewage gas Solar PV 0.5 0.5 0.5 0.5 Building mounted solar PV 1. 7 1. 6 1. 5 1. 4 Ground mounted solar PV 1. 6 1. 4 1. 3 1. 2 Standard gasification/pyrolysis 2 2 1. 9 1. 8 Tidal barrage 2 2 1. 9 1. 8 Tidal lagoon 2 2 1. 9 1. 8 Tidal stream*** 5 5 5 5 Wave*** 5 5 5 5

Source: Department of Energy and Climate Change website *Includes solid and gaseous biomass and energy crops **These support levels are only available in circumstances where support under the RHI is not available *** 5 ROCs subject to 30 MW cap at each generating station. 2 ROCs for any additional capacity added above 30 MW cap.

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Supplies of commodity liable to: 2014-15 2015-16 2016-17 Carbon Price Support rates of CCL Natural gas (GBP per kilowatt hour) 0.00175 0.00334 0.00331 LPG (GBP per kilogram) 0.02822 0.05307 0.05280 Coal and other taxable solid fossil fuels 0.81906 1.56860 1.54790 (GBP per gross gigajoule) CPS rates of fuel duty Gas oil; rebated bioblend; kerosene (GBP per litre) 0.02642 0.04990 0.04916 Fuel oil; other heavy oil; rebated light oil (GBP per litre) 0.03011 0.05730 0.05711

Source: HMRC; Carbon Price Floor: Reform

Feed-in tariffs (small scale generation): deducted to avoid a double subsidy. allocated to the main pool. This is Feed-in tariffs are available for small- Non-domestic RHI, which provides reduced to 8 percent if the asset’s scale, low-carbon electricity generated a subsidy, payable for 20 years, to useful expected economic life exceeds by private/business users (maximum eligible, non-domestic renewable 25 years capacity 5 MW) providing payment heat generators and producers of • Most businesses can claim the of up to GBP0.2223 /kWh generated biomethane. The tariff payments are Annual Investment Allowance (depending on the type and size of the dependent on the technology of the (AIA) on the majority of plant and system used to generate renewable heat generation source and the size machinery except cars. From energy); plus a guaranteed GBP0.0464 of the plant, with payments ranging 2013 the AIA is being increased /kWh sold on to the UK electricity grid. from between GBP0.010/kWh to GBP500,000 in relation to Typically the tariffs last for 20 years. and GBP0.094/kWh for the period expenditure incurred on or after 1 commencing 1 April 2014. Renewable Heat Incentive (RHI): two April 2014. From 1 January 2016 the schemes operate to provide long EU Emissions Trading Scheme exemption: AIA will reduce to GBP25,000. term tariff support for renewable heat Renewable generators are exempted • Enhanced Capital Allowances generation: from the requirement to purchase (ECAs) give a 100 percent First Year carbon allowances in order to generate • Domestic RHI, which is available Allowance for expenditure incurred electricity, as stipulated by the EU for domestic properties where on specified energy-saving plant Emissions Trading Scheme. households receive payments of and machinery. A 19 percent cash between GBP0.073 and GBP0.192/ Other direct tax allowances / incentives tax credit of its surrenderable loss is kWh depending on the technology potentially relevant to renewables available for loss-making companies generating the renewable heat. Any generators: up to a maximum of GBP250,000 public grants previously received, or the company’s PAYE and NIC The rate of capital allowances is including the Renewable Heat liabilities, whichever is less. However, 18 percent reducing balance for capital Premium Payment (RHPP), will be ECAs are explicitly not available in expenditures on plant and machinery

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. respect of expenditure on plant or • The Patent Box enables companies to seeking to achieve an advance machinery which generates electricity apply a lower rate of corporation tax through the resolution of scientific or heat or produces biogas or biofuel, of 10 percent to profits derived from or technological uncertainty. From that attracts a FiT (small scale patented inventions and certain other 1 April 2013, large companies may generation) or RHI payment. innovations, phased in over 5 years instead claim an ‘above the line’ tax from 1 April 2013. The company credit which gives a taxable payment • Land remediation relief provides a must own or exclusively license-in of 10 percent (effective benefit of deduction of 100 percent, plus an the patents, and must undertake 7.9 percent after tax in 2014/15) on additional deduction of 50 percent, qualifying development on them qualifying revenue expenditure. If the for qualifying expenditure incurred to be eligible for the lower tax rate. R&D expenditure is capital in nature, a by companies in cleaning up land Research and Development (R&D) 100 percent allowance can be claimed acquired from a third party in a tax relief enables an enhanced tax on the R&D capital expenditure in contaminated state. A 16 percent deduction of 130 percent for large that year. cash tax credit of the qualifying companies and 225 percent for land remediation surrenderable SMEs from 1 April 2012 for revenue loss can be claimed for loss-making expenditure on qualifying projects businesses.

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Support schemes taken into account in determining Investment Tax Credit (ITC) whether physical work of a Applicable for solar, geothermal, Investment and other subsidies significant nature has begun. qualified fuel cell or micro turbine Production Tax Credit (PTC) – Whether a taxpayer has begun property, combined heat and power Applicable for wind, geothermal, construction of a facility before systems, small wind and geothermal landfill gas, trash combustion, open- 1 January 2014, will depend on the heat pumps. loop biomass, closed-loop biomass, relevant facts and circumstances. hydropower and wave tide. • The ITC provides a credit for qualifying – The IRS will closely scrutinize a energy property. • The PTC provides a tax credit for facility, and may determine that • The ITC for any taxable year is the the production of electricity from construction has not begun on a energy percentage of the basis renewable sources and the sale of facility before 1 January 2014, if of each energy property placed in that electricity to an unrelated party. a taxpayer does not maintain a service during the taxable year. • Credit amount is: continuous program of construction. • Credit amount is: – USD cents (ct) 2.3/kWh for • The safe harbor rule provides that – 30 percent of eligible costs for fuel wind, closed-loop biomass and construction of a facility will be cell, solar, and small wind property geothermal considered as having begun before 1 January 2014, if: – 10 percent of eligible costs for – ct1.1/kWh for other renewable combined heat and power, micro energy resources. – the taxpayer pays or incurs – within the meaning of Reg. section turbine property and geothermal • Available for facilities that begin 1.461-1(a)(1) and (2) – 5 percent or heat pumps. construction prior to 1 January 2014. more of the total cost of the facility • The ITC is generally available for • Available for a 10-year period before 1January 2014; and eligible property placed in service on beginning the year the facility is – subsequently, the taxpayer makes or before 13 December 2016. placed in service. continuous efforts to advance Grant in lieu of PTC and ITC towards completion of the facility • There are two methods that a Applicable for tangible personal property (as determined under Notice taxpayer may use to establish that or other property that is an integral part 201329). construction has begun: of a qualified facility (as defined by the – A taxpayer may establish the Investment Tax Credit (ITC) in lieu of the PTC PTC and ITC rules). beginning of construction when Applicable for facilities that are eligible • The American Recovery and “physical work of a significant for the PTC and that begin construction Reinvestment Act of 2009 (ARRA) nature” is started. before 2014. enacted a grant program which – A taxpayer may establish the • The ITC is available in lieu of the PTC. provides a cash grant in lieu of the beginning of construction by PTC or ITC. meeting a safe harbor rule. • The ITC provides a credit for qualifying energy property. • ARRA permits PTC or ITC projects to • In general: elect a grant of up to 30 percent of • The credit amount is 30 percent of costs of construction of PTC or ITC – Work performed by the taxpayer the eligible cost basis of the property. energy property in lieu of tax credits. and work performed for the taxpayer by other persons • Eligible property is tangible personal • Projects must begin construction under a binding written contract property or other property that is before 2012 and submit a that is entered into prior to the integral to a PTC-eligible facility. grant application no later than manufacture, construction, or • The definition of ‘begin construction’ 30 September 2012. production of the property for use is the same for the ITC in lieu of the • Projects must be placed in service: by the taxpayer in the taxpayer’s PTC as for the PTC. trade or business (or for the – before 2014 for PTC-eligible taxpayer’s production of income) is facilities (before 2013 for wind) – before 2017 for other ITC eligible projects.

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Operating subsidies that are permitted to achieve Massachusetts, Michigan, Minnesota, compliance, such as renewable energy Missouri, Montana, Nevada, New Quota obligation credits (RECs). Currently no federal Hampshire, New Jersey, New Mexico, Renewable Portfolio Standards (RPS) RPS legislation has been enacted. A New York, North Carolina, Ohio, Oregon, This standard generally places an total of 29 states and the District of Pennsylvania, Rhode Island, Texas, obligation on electric supply companies Columbia have an RPS. The states Washington and Wisconsin. to produce a specified fraction of their include Arizona, California, Colorado, electricity from renewable energy Connecticut, Delaware, Hawaii, Illinois, sources and enumerates mechanisms Indiana, Kansas, Maine, Maryland,

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Support schemes Particular Investment Regime for Promotion of solar thermal energy renewable energy In 2009, Law 18.585 declared of national Investment and other subsidies Within the frame of Law 16.906, Decree interest the investigation, fabrication, General Investment Regime 354/009 establishes particular benefits implementation and development of Investment Law 16.906 declares the for the generation of electricity from solar thermal energy. The law, along national interest of the promotion and non-traditional renewable sources with Decree 451/011, established protection of domestic and foreign (defined as the native renewable the exemption of VAT, Internal Excise investment and, through Decree 2/012, sources such as wind, solar thermal, Tax (IMESI), duties and custom taxes establishes the following benefits photovoltaic (PV), geothermal, tidal applicable to: for the investments carried out in and wave energy, as well as the energy • National and imported (non the country: produced from the use of different competitive with the national types of biomass). • Corporate Income Tax (CIT) industry) goods and services exemption equivalent to a percentage The main benefit consists of CIT necessary to fabricate solar collectors of the investment in fixed assets exemptions equivalent to: in Uruguay. (machinery, equipment and civil • 90 percent of net fiscal income • Sale of solar collectors fabricated in works).1 The referred percentage generated by the promoted Uruguay. varies between 20 percent and activity for all fiscal years up to 100 percent of eligible investment • Import of solar collectors non 31 December 2017. and it is determined by the score competitive with the national the project receives for its impact in • 60 percent of net fiscal income industry. terms of: generated by the promoted activity In 2012, the Government launched a for all fiscal years from 1 January 2018 – employment Solar Program focused on developing to 31 December 2020. solar thermal energy for residential – decentralization • 40 percent of net fiscal income users. The new program provides – exports generated by the promoted activity loans, financial discounts and payment for all fiscal years from 1 January facilities for those who install solar – clean production 2021 to 31 December 2023. thermal technology in their houses. – industrial indicator. Other benefits: Quota obligation • Capital Tax exemption for the fixed • The law declares of national interest assets included in the investment: Law 18.585 also introduced the obligation the national production of machines of incorporating solar thermal technology – civil works: 8 years for civil works in and equipment necessary for the in sport clubs, hospitals, hotels and Montevideo and 10 years in the rest production of these renewable heated swimming-pool, under certain of the national territory energies and also applies to this circumstances. According to this law, at activity the CIT exemption described least 50 percent of the energy required – machinery and equipment for the in the Particular Investment Regime useful life to heat the water should come from solar for renewable energy. As a condition thermal energy. If this requirement is not • Fiscal credit for VATs included in civil for the application of this exemption, fulfilled, the permit for the construction works. at least 35 percent of their cost must works is denied. correspond to Uruguayan inputs. • Exemption from all taxes and duties New public buildings (that is, state levied on the import of machinery and • Purchase of the wind turbine and its owned) are also obliged to incorporate equipment that is not competitive accessories are exempt from VAT. this source of energy. with national industry.

1 Corporate Income Tax regular rate is 25 percent of the net Uruguay-sourced income of the company.

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© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. As from June 2012, the Ministry of Uruguay has several natural resources Industry is entitled to request to all that can be used as primary elements new industrial and agro-industrial for the generation of biomass energy: developments to perform a technical study on the feasibility of incorporating • extensive forests providing wood for solar thermal technology to the project. energy generation Additional information • industrial forestry residues (saw mill residues, black liquor, etc) Uruguay is recognized as a country • rice husks with excellent conditions for the development of renewable energy, • residues from sugar cane, sweet attracting the attention of national and sorghum and other cereals international investors. The government • excellent conditions for elephant with the support of the opposition grass parties – has set forth the goal of becoming a model country in this area. • a guaranteed supply of biomass from The authorities intend that, by the year livestock and agriculture. 2015, at least 50 percent of the primary Solar Photovoltaic (PV) energy matrix of the country will come from renewable sources. At the moment, the only ongoing project is a solar PV farm of 480 kilowatts-peak Wind (kWp) and 10.000 m2 of PV modules, Although the focus is placed on all types located in the north of the country. The of renewable energy, the most popular farm is owned by UTE and was financed these days is wind power. The initial goal by the International Cooperation of reaching 300 MW of wind generation Agency of Japan under the scope of the by 2015 is expected to be fully achieved, “Cool Earth Program” of the Japanese as well as the 2016 goal of 1200 MW, government. assuming all the awarded wind farm In May 2013 the Government launched projects are implemented. Investment a tender call for the purchase of solar in this area has reached USD2 billion. PV energy. The tender contemplates Biomass projects of three different ranges: i) 500 In 2010 the government set the goal of kW to 1 MW, ii) 1 MW to 5 MW and iii) incorporating 200 MW from biomass 5 MW to 50 MW. sources to the primary energy matrix For ranges i) and ii), the bidders had to by 2015. Accordingly, the Uruguayan offer a price and the total amount to be energy utility (Usinas y Trasmisiones awarded could not exceed 6 MW. On Eléctricas or UTE) promoted one the other hand, for range iii), bidders had tender during 2011, in which the to adhere to a pre-established price of total amount offered by the private USD 91.5/MWh, and the total amount to companies exceeded the 350 MW. be awarded could not exceed 200 MW. However, not all the projects offered are currently coming to life and, in The companies that participated in the virtue of this, a new tender call for referred tender call, proposed projects biomass projects is expected to be for a total amount of 166 MW. Some launched during 2014. of these projects are already under construction. New tender calls are expected to be launched in 2015.

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TOP FIVE COUNTRIES 1 2 3 4 5 Annual investment / net capacity additions / production in 2013 Investment in renewable power China United States Japan United Kingdom Germany and fuels Share of GDP 2012 (USD) invested1 Uruguay Mauritius Costa Rica South Africa Nicaragua Geothermal power capacity New Zealand Turkey United States Kenya Philippines Hydropower capacity China Turkey Brazil Vietnam India Solar pv capacity China Japan United States Germany United Kingdom CSP capacity United States Spain United Arab India China Emirates Wind power capacity China Germany United Kingdom India Canada Solar water heating capacity2 China Turkey India Brazil Germany Biodiesel production United States Germany Brazil Argentina France Fuel ethanol production United States Brazil China Canada France Total Capacity Or Generation6 As Of End-2013 POWER Renewable power (including hydro) China United States Brazil Canada Germany Renewable power (not including hydro) China Unites States Germany Spain / Italy India Renewable power capacity Denmark Germany Portugal Spain / Sweden Austria per capita (not incl. hydro)3 Biopower generation United States Germany China Brazil India Geothermal power United States Philippines Indonesia Mexico Italy Hydropower4 China Brazil United States Canada Russia Hydropower generation4 China Brazil Canada United States Russia Concentrating solar thermal Spain United States United Arab India Algeria power (CSP) Emirates Solar PV Germany China Italy Japan United States Solar PV capacity per capita Germany Italy Belgium Greece Czech Republic Wind power China United States Germany Spain India Wind power capacity per capita Denmark Sweden Spain Portugal Ireland HEAT Solar water heating2 China United States Germany Turkey Brazil Solar water heating Cyprus Austria Israel Barbados Greece capacity per capita2 Geothermal heat5 China Turkey Iceland Japan Italy

1 Countries considered include only those covered by BNEF; GDP is for 2012 and from the World Bank. The following renewable energy projects are included: all biomass, geothermal, and wind generation projects of more than 1 MW; all hydropower projects of between 1 and 50 MW; all solar power projects, with those less than 1 MW estimated separately and referred to as small-scale projects or small distributed capacity; all ocean energy projects; and all biofuel projects with an annual production capacity of 1 million litres or more. 2 Solar water collector (heating) rankings are for 2012, and are based on capacity of water (glazed and unglazed) collectors only; however, including air collectors would not affect order. Note that past editions of this table have not considered unglazed water collectors. 3 Per capita renewable power capacity ranking considers only those countries that place among the top 20 worldwide for total installed renewable power capacity, not including hydropower. 4 Country rankings for hydropower capacity and generation differ because some countries rely on hydropower for baseload supply whereas others use it more to follow the electric load and match peaks in demand. 5 Not including heat pumps. Rankings are based on a mix of 2010 data and more recent statistics for some countries. 6 Capacity, otherwise noted.

Note: Most rankings are based on absolute amounts of investment, power generation capacity or output, or biofuels production; if done on a per capita, national GDP, or other basis, the rankings would be quite different for many categories (as seen with per capita rankings for renewable power, solar PV, wind, and solar water collector capacity).

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Table 1. Renewable energy support policies

FISCAL INCENTIVES COUNTRY REGULATORY POLICIES AND PUBLIC FINANCING

, VAT, 2 g grants taxes REC n/RPS ering targets Renewable energy Electric utility quota obligatio Net met Tradable Tenderin mandate mandate Capital subsidy or rebate Investment or production tax credits Reductions in sales, energy, CO or other payment loans, or Heat obligation/ Biofuels obligation/ Energy production Public investment, Feed-in tariff/ premium payment

HIGH INCOME COUNTRIES

Andorra  Australia  R*      Austria        Barbados     Belgium       *   Canada  R*         Chile R      R  Croatia    Cyprus      R Czech Republic  5      Denmark          R Estonia      Finland        France R R  R   R   Germany  R       Greece  R       Ireland       Israel        Italy  R    R       Japan         Kuwait   Latvia       Lithuania  R    Luxembourg     Malta      Netherlands  R R        New Zealand   Norway         Poland    R    Portugal R R     5 5  5 Russia    Singapore     Slovakia  R    Slovenia         South Korea          Spain1        Sweden         Switzerland     Trinidad and Tobago    United Arab Emirates       United Kingdom R R     R    United States R* R* R* R*  R  R  5   R Uruguay R   R      

 – existing national,  – existing sub-national,  – new, R – revised, – removed/expired, * – sub-national

1. Spain removed FIT support for new projects in 2012. Incentives for projects that had previously qualiﬁed for FIT support continue to be revised.

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FISCAL INCENTIVES COUNTRY REGULATORY POLICIES AND PUBLIC FINANCING

, VAT, 2 Electric utility quota obligation/RPS Net metering Tradable REC Tendering Heat obligation/ mandate Biofuels obligation/ mandate Capital subsidy or rebate Investment or production tax credits Reductions in sales, energy, CO or other taxes Energy production payment Public investment, loans, or grants Feed-in tariff/ premium payment Renewable energy targets

UPPER-MIDDLE INCOME COUNTRIES

Albania            Algeria     Angola   Argentina    R      Azerbaijan   Bahrain  Belarus   Bosnia and Herzegovina     Botswana    Brazil   R  R  R R Bulgaria     China RR          Colombia   R Costa Rica      Dominican Republic         Ecuador2      Fiji    Grenada    Hungary       Iran     Jamaica       Jordan        Kazakhstan     Lebanon    Libya R  Macedonia   Malaysia  R   R   Maldives    Marshall Islands   Mauritius  5   Mexico       Palau   Panama        Peru      Romania      Serbia    South Africa    R     St. Lucia   Thailand RR     Tunisia     R Turkey  R   

 – existing national,  – existing sub-national,  – new, R – revised, – removed/expired, * – sub-national

2 Ecuador’s FIT that expired in 2012 was re-launched in 2013. 3 The area of the Palestinian Territories is included in the World Bank country classiﬁcation as “West Bank and Gaza.” They have been placed in the table using the 2009 “Occupied Palestinian Territory” GNI per capita provided by the United Nations (USD 1,483). Note: Countries are organised according to annual GNI per capita levels as follows: “high” is USD 12,616 or more, “upper-middle” is USD 4,086 to USD 12,615, “lower-middle” is USD 1,036 to USD 4,085, and “low” is USD 1,035 or less. Per capita income levels and group classiﬁcations from World Bank, 2014. Only enacted policies are included in the table; however, for some policies shown, implementing regulations may not yet be developed or effective, leading to lack of implementation or impacts. Policies known to be discontinued in 2013 are marked with an X; historic discontinuations have been omitted from the table.. Many feed-in policies are limited in scope of technology. In cases where a national and sub-national policy exist within the same policy category, the national policy is displayed. Source: See Endnote 1 for this section.

76 | Taxes and incentives for renewable energy

FISCAL INCENTIVES COUNTRY REGULATORY POLICIES AND PUBLIC FINANCING

, VAT, 2 obligation/ g grants taxes REC n/RPS ering Renewable energy Feed-in tariff/ premium payment Electric utility quota obligatio Net met Tradable Tenderin mandate Biofuels mandate Capital subsidy or rebate Investment or production tax credits Reductions in sales, or other payment loans, or energy, CO Heat obligation/ targets Energy production Public investment,

LOWER-MIDDLE INCOME COUNTRIES

Armenia  Cameroon  Cape Verde      Côte d’Ivoire   Egypt R  R   El Salvador R     Federated States of Micronesia   Ghana  R        Guatemala       Guyana   Honduras       India R   *  R  R R  R  Indonesia  R        Lesotho        Moldova    Mongolia    Morocco    Nicaragua    Nigeria      Pakistan      Palestinian Territories3     Paraguay   Philippines      R      Senegal     Sri Lanka          Syria      Ukraine  R      Uzbekistan  Vanuatu   Vietnam       

LOW INCOME COUNTRIES

Bangladesh     Benin   Burkina Faso     Ethiopia     Gambia  Guinea   Guinea-Bissau   Haiti  Kenya        Kyrgyzstan    Madagascar   Malawi    Mali     Mozambique    Nepal       Niger   Rwanda     Sudan   Tajikistan   Tanzania    Togo  Uganda  R    Zambia    Zimbabwe  R

es f Taxes and incentives for renewable energy | 77

André Boekhoudt Head of Global Energy and Natural Resources Tax Practice T: +31 20 6 561358 E: [email protected]

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