Taxes and incentives for renewable energy KPMG International kpmg.com/energytax Taxes and Incentives for Renewable Energy is designed to help energy companies, investors and other entities stay current with government policies and programs that support renewable energy from wind, solar, biomass, geothermal and hydropower. Compiled by KPMG’s Global Energy & Natural Resources tax practice, the 2015 edition provides updates on renewable energy promotion policies for 31 countries. It also includes information on adoption trends for renewables, the growing prominence of emerging markets, new solar and wind initiatives, and key investments in renewable energy around the world. Lars Behrendt Tax Partner, KPMG in Germany © 2015 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 2015 industry trends 4 Global investment in renewable energy production 6 Renewable energy promotion policies by country 10 Argentina 12 Australia 13 Austria 15 Belgium 16 Brazil 17 Canada 19 China 22 Costa Rica 25 France 27 Germany 30 Greece 34 India 38 Ireland 40 Italy 42 Japan 44 Mexico 45 The Netherlands 47 New Zealand 48 Norway 49 Peru 51 Philippines 52 Poland 56 Romania 59 South Africa 61 South Korea 63 Spain 65 Sweden 67 Turkey 68 United Kingdom 69 United States 73 Uruguay 75 Top Five Countries 2014 77 Appendix A: REN21 2014 Renewable Global Status Report 78 © 2015 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. Introduction Growth in taxes and incentives for renewable energy Start 2004 2013 2014 Countries with policy targets 48 144 164 States/provinces/countries with feed-in policies 34 106 108 States/provinces/countries with RPs/quota policies 11 99 99 Countries with tendering/public competitive bidding n/a 55 60 Countries with heat obligation/mandate n/a 19 21 States/provinces/countries with biofuels mandates 10 63 64 Source: REN 21 Renewables 2015 Global Status Report The past year has seen a number generation accounted for an avoidance Equally important are economic factors. of remarkable milestones and of 1.3 gigatonnes of emissions in 2014.3 Over 7.6 million people worldwide developments related to renewable The effect of carbon emissions on global now work directly or indirectly in the energy: climate will be the main focus for the renewables sector.5 Renewables 2015 United Nations Climate Change are seen as a sound investment • Global investments in renewable Conference (COP21) in Paris during and a way to mitigate economic risk energy increased 17 percent, the first November and December. As with by increasing energy diversity and 1 increase since 2011. previous conferences, the overarching reducing dependence on fossil fuels. • Renewable energy accounted goal is to reduce greenhouse gas Renewables are also becoming more for 48 percent of new generating emissions through binding agreements attractive due to advances in technology capacity installed globally. among all the nations in the world. and decreased costs. Solar photovoltaic (PV) panels have dropped in price by Renewables also support energy access • Renewable energy provided 80 percent since 2008, with further and affordability. Currently, 15 percent 9.1 percent of global electricity declines expected in the future.6 generation.2 of the world’s population — over a billion people mostly in emerging In line with these industry drivers, • Developing economies almost Asia and Africa — has no access to policy support continues to encourage matched developed economies in electricity.4 In many emerging countries, significant investment and low costs renewable energy investments. energy sources such as wind and solar through economies of scale.7 The • Solar in China and Japan and offshore can support decentralized, mini-grid number of countries with renewable wind in Europe received record and off-grid solutions such as small energy targets and policies increased financing. wind turbines for powering remote again in 2014, and several jurisdictions telecommunications and solar-powered made their existing targets more The continued growth in renewables irrigation kits. In developed countries ambitious — including a rising number has been driven by several factors. First like Australia, Europe, Japan, and North with 100 percent renewable energy of all, we see a continued awareness America, we see significant growth in or electricity targets. As of early 2015, worldwide that renewable energy plays “prosumers”— residential customers at least 164 countries had renewable a key role in helping to mitigate the rise who produce their own electric power energy targets, and an estimated in greenhouse gas emissions. According through solar panels. 145 countries had renewable energy to recent estimates, renewable energy support policies in place.8 1. Global statistics from REN 21 Renewables 2015 Global Status Report; IEA 5. Ibid. World Energy Outlook 2015 Special Report; Global Trends in Renewable Energy 6. Solar energy to be cheapest power source in 10 years, International Business Investments 2015 (UNEP, Bloomberg New Energy Finance); Bloomberg New Times, February 24, 2015 Energy Outlook 2015 7. Op. cit., REN21 2. Excluding hydroelectric generation 8. Ibid. 3. Global Trends in Renewable Energy Investments 2015 4. Ibid. 2 | Taxes and incentives for renewable energy © 2015 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. Power generation is the focus of most accompanied by other policy tools biofuel and electric vehicles into public renewable energy policies. Feed-in such as solar-specific renewable heat transportation fleets. tariffs (FITs) and Renewable Portfolio mandates. Transport-related policies In addition, the private sector is Standards (RPS) policies remain the currently focus on the biofuel sector and rethinking its attitude about renewables. most commonly used mechanisms. on road transport, although other modes For example, Google has announced Policymakers — particularly in Europe — of transportation also are attracting agreements to fund over US$2 billion continue the recent trend of amending attention. in renewable energy projects, and the existing policies rather than adopting Cities continue to lead the way for company has set for itself a goal of new mechanisms. RPS policies are renewables by setting and achieving powering operations with 100 percent most popular at the state and provincial ambitious targets that, in turn, have renewable energy.10 levels. Tendering schemes, net metering influenced national policies. By early or net billing policies, green banks With growing energy demand, 2015, several countries had achieved and green bonds represent other a strong commitment to reduce 100 percent of their renewable energy options that are gaining support from carbon emissions, further advances or electricity targets, with the vast policymakers. Counter to these policies, in technology, greater incentives for majority of targets enacted at the city/ however are new charges or fees on investment, and continued policy local level.9 Many municipalities have renewable energy power that have been support, renewable energy will play an achieved their targets by mandating introduced in an increasing number of increasingly important role in the global energy-saving methods through building countries. energy mix for the 21st century. codes and local distribution systems. For renewable heating or cooling, Local and national policymakers have (For additional information about these financial incentives remain the most also supported the integration of policies, see appendix A/page 78). widely used form of policy support, 9. Ibid. 10. http://www.google.com/green/energy/#investments Taxes and incentives for renewable energy | 3 © 2015 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. 2015 industry trends Over the long term, the prospects for Again, China was the leader with to expand, energy consumption will be renewable energy remain positive, US$38 billion in investments, marked by greater peak demand periods marked by steady growth across all representing almost two-thirds of driven by home appliances, cooling and sectors. Between now and 2040, wind financing in developing countries. heating systems and transportation. research and analysis suggest that:11 These investments were driven by However, renewables such as solar national policies as well as anticipated and wind are variable energy sources, • Overall energy demand will rise by reductions in FITs. Germany, the UK dependent on whether the sun shines over 30 percent. and the Netherlands invested over and the wind blows. To incorporate these • Renewables will grow to account for US$5 billion in wind power, much of renewables into their traditional energy 56 percent of power capacity. it for offshore installations. Seven mix, utilities will need to continue their projects costing US$1 billion or more development of battery storage systems, • Developing countries will build three reached “final investment decision” smart metering,