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A Report On

RENEWABLE ENERGY
Policy Analysis of Major Consumers

Introduction

Based on REN21's 2016 report, renewables contributed 19.2% to humans' global energy consumption and
23.7% to their generation of electricity in 2014 and 2015, respectively. This energy consumption is
divided as 8.9% coming from traditional biomass, 4.2% as heat energy (modern biomass, geothermal and
solar heat), 3.9% hydroelectricity and 2.2% is electricity from wind, solar, geothermal, and biomass.
Worldwide investments in renewable technologies amounted to more than US$286 billion in 2015, with
countries like China and the United States heavily investing in wind, hydro, solar and biofuels. Globally,
there are an estimated 7.7 million jobs associated with the renewable energy industries, with solar
photovoltaics being the largest renewable employer. As of 2015 worldwide, more than half of all new
electricity capacity installed was renewable.

Country wise analysis and suggestions

Case Study of Nigeria (The Renewable Energy Master Plan (REMP) )

Nigeria is facing the need for larger electricity supply and improved grid reliability and security. The
Renewable Energy Master Plan (REMP) seeks to increase the supply of renewable electricity from 13%
of total electricity generation in 2015 to 23% in 2025 and 36% by 2030. Renewable electricity would then
account for 10% of Nigerian total energy consumption by 2025.

Investment Incentives Under REMP (Nigeria)


 COMPANIES INCOME TAX
The current rate in all sectors, except for petroleum, is 30 percent.

 TAX RELIEF FOR RESEARCH AND DEVELOPMENT

Up to 120 per-cent of expenses on (R&D) are tax deductible, provided that such R&D activities are carried
out in Nigeria and are connected with the business from which income or profits is derived. Also, for the
purpose of R&D on Local raw materials, 140 per-cent of expenses are allowed. Where the research is long-
term, it will be regarded as a capital expenditure and will be written off against profit. The result of such
research could be patented and protected in accordance with internationally accepted Industrial Property
Rights.

 CAPITAL ALLOWANCES

The amount of capital allowance to be enjoyed in any year of assessment is restricted in Nigeria to 75% of
assessable profit in case of manufacturing companies and 66% in case of others, except such companies in
agro-allied industries that are not affected by this restriction. If leased assets are used in agro-allied ventures,
the full (100%) capital allowance claimed will be granted. Moreover, where the leased assets are
agricultural plants and equipment, there will be an additional investment allowance of 10% on such
expenditure.

 IN-PLANT TRAINING

This is applicable to industrial establishments that have set up inplant training facilities. Such industries
enjoy a two percent tax concession for a period of five years.

 INVESTMENT IN INFRASTRUCTURE

This is a form of incentive granted to industries that provide facilities that ordinarily, should have been
provided by government. Such facilities include access roads, pipe borne water and electricity. Twenty
percent (20%) of the cost of providing these infrastructural facilities, where they do not exist, is tax
deductible.

 INVESTMENT IN ECONOMICALLY DISADVANTAGED AREAS

Without prejudice to the provision of the pioneer status enabling law, a pioneer industry sited in
economically disadvantaged Local Government Area is entitled to 100% tax holiday for seven years and
an additional 5% capital depreciation allowance over and above the initial capital depreciation allowance.

 LABOUR INTENSIVE MODE OF PRODUCTION

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Industries with high labour/capital ratio are entitled to tax concessions. These are industries with plants,
equipment and machinery, which essentially are operated with minimal automation. Where there is
automation, such automation should not be more than one process in the course of production. The rate is
graduated in such a way that an industry employing 1,000 persons or more will enjoy 15 percent tax
concession, while an industry employing 200 will enjoy 7 percent and those employing 100 will enjoy 6
percent and so on.

 LOCAL VALUE ADDED

10% tax concession for five (5) years. This applies essentially to engineering industries, where some
finished imported products serves as inputs. The concession is aimed at encouraging local fabrication rather
than the mere assembly of completely knocked down parts.

 RE-INVESTMENT ALLOWANCE

This incentive is granted to companies engaged in manufacturing which incur qualifying capital expenditure
for the purposes of approved expansion, etc. the incentive is in the form of a generalized allowance of
capital expenditure incurred by companies for the following:-
· Expansion of production capacity
· Modernization of production facilities
· Diversification into related products

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Case Study of Sweden

Sweden was once heavily reliant on oil, but a sustained programme of investment has seen it gain one of
the highest shares of renewables in Europe. It has already reached 50% of consumption from renewable
energy

In 1970, oil accounted for more than 75 per cent of Swedish energy supplies; today, the figure is around
20 per cent, chiefly due to the declining use of oil for residential heating.

Taxation and Incentive structure on RE(Sweden)

The taxation structure aims to do the following-

1) Increase taxation on non RE sources to encourage transition to RE


Excise duties on energy – (two components): –
 Energy tax on fuels and electricity.
 CO2 tax on fossil fuels.

Energy tax: – Introduced in: 1924 petrol; 1951 electricity; 1957 oils and coal; 1964 LPG; 1985
natural gas; 2013 low blended bio in motor fuels.

CO2 tax: – Based on fossil carbon content of fuels.

– Introduced in 1991, along with existing energy tax. Part of major general tax reform.

– CO2 tax achieves cost effective emission reductions

2) Investment incentives and policy frame work

 The electricity certificate system

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In 2003, Sweden introduced the electricity certificate system (Electricity Certificates Act),
on the basis of a quota obligation, as the primary policy instrument for promoting
renewable electricity. This technology-neutral scheme is designed to encourage investments.in cost-
effective RES technologies. All renewable energy technologies are eligible for certificates, including
solar, wind, geothermal, tidal and hydro power, and solid biofuels. Under the Swedish electricity
certificate system, the demand for certificates is created by an obligation on electricity suppliers,
certain electricity consumers and some industries to annually acquire renewable energy certificates in
proportion to their electricity sales and consumption to prove that a certain proportion or quota of the
electricity supplied by them was generated from renewable energy sources.
In order to achieve the new target of 25 TWh electricity produced from renewable sources. In 2020,
the quota has to increase over time. The size of this quota obligation increases from year to year so as
to increase the demand for certificates and renewable electricity. The average spot price of electricity
certificates fluctuated between 2003 and 2009 from SEK 150 per MWh to SEK 350 per MWh. Since
2010, the certificate price has decreased to approximately SEK 150 per MWh in 2011.
Importantly, the electricity certificate system, supporting cost-efficient technologies, has
limited the overall cost of renewable energy support to final consumers. The cost of
suppliers’ certificates is included in the price of electricity paid by consumers. In 2011,
half of the overall cost of SEK 4 100 million (EUR 477 million) was paid by households.

 Investment Subsidies

Besides the certificate system, Sweden currently provides investment subsidies to solar PV and
innovative biogas, which are still in the early phase of their development in Sweden. Investment subsidies
are granted for innovative biogas projects, mostly for the production of biogas which could be fed into to
the gas grid or used for transport. The government proposed to Parliament to prolong the support for solar
PV and biogas until the end of 2018. The government has also assigned a public investigation to propose
how a system for net metering for household’s microgeneration (solar PV systems and wind generators
for households) can be introduced.

The investment aid programmes in support of solar heating and heat pumps have also been discontinued
after 2011. Until 2009, the climate investment programmes (LIP and KLIMP) granted subsidies to
municipalities for ecologically sustainable and environment friendly CHP projects. Around 260 projects
were supported in the district heating sector.
Support continued under the programme “Sustainable Cities” until the end of 2012.

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 Promotion RES in Transport

In the transport sector, Sweden promotes the use of flexible fuel vehicles and energy efficient
technologies, such as electric vehicles and plug-in hybrids, as well as the use of
renewable energy sources, in particular biogas, ethanol, hydrogenated vegetable oils (HVO)
and biodiesel (rapeseed-oil methyl ester or FAME).

Sweden has the approval of the European Commission to exempt biofuels from energy
and carbon dioxide taxes until the end of 2013. From 1 January 2011, the level of tax
exemption for a low-biofuel blend of ethanol in petrol is a maximum of 6.5% by volume,
and for biodiesel in diesel, a maximum of 5% by volume. Low blending above these
levels is subject to the same tax as petrol or diesel. However, high blends, e.g. 85%
bioethanol or 100% biodiesel, are subject to full tax exemption. The tax loss due to the
above tax exemption was SEK 2.54 billion in 2010 and SEK 2.83 billion in 2011. The tax
loss could be reduced or avoided if mandatory blending was introduced, which is the
case in many other EU countries. In the 2013 Budget Bill the government presented a proposal to tax
biofuels used for low-blend purposes from 2013 onwards.
The government considers introducing an energy tax on biofuels which would be set at such a level that it
is does not discourage the use of low-blend on the market. As of 2014, it also considers the introduction
of a quota system aimed at 10% and 7% blending of biofuels in low-blended fossil fuels and diesel, as
allowed by the EU Fuel Quality Directive.

Recommendation for India-

The following inferences can be drawn out from the economic policy of Nigeria on renewable energy and
the suggested strategies for implementation in India are listed below-

 Tax relief on R&D for RES similar to the one in Nigeria which provides up to 120 per-cent of
expenses on (R&D) are tax deductible, provided that such R&D activities are carried out in the
country and are connected with the business from which income or profits is derived.

 CO2 taxation and energy tax structure with continuous industry monitoring to be set up.

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Global Renewable Energy Policy Organisation- REN21

REN21 is the global renewable energy policy multi-stakeholder network that connects a wide range of
key factors. It brings together governments, non governmental organisations, research and academic
institutions, international organisations and industry. REN21 is an international non-profit association
and is based at the United Nations Environment Programme (UNEP) in Paris, France

Economic Aspects on Grassroot level

Analysis of Global Status Report on Local Renewable energy by


REN21
Aims to summarise the local renewable energy policies in different cities across the world mainly
focusing on urban planning, subsidies, grants and taxes, government investments and funds and electricity
utility policies.

Key Observations-
1. Delhi, India Subsidies to non-commercial institutions for solar hot water on buildings of system
size 100–6000 liters hot water per day (6,000–60,000 rupees/system)

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Suggested Policies to be implemented to promote renewable energy in urban households-
1. Waive consent fee for residential solar hot water installations (Dunedin, New Zealand )
2. Loans to households for solar PV, solar hot water, and wind (Kanagawa, Japan)
3. Solar Roofs Loan Program to provide low-interest loans (0-2%) and installation in partnership
with local electric utility, for low-income residents ( Honolulu Hi, USA)