In addition to the feed-in tariff program, the solar industry has also benefited from the “Golden Sun Program” demonstration program that launched in 2009 as a strategy to support and further the development of the technology progress and scale of the national solar industry. Under the Golden Sun Program, the central government provided subsidies to eligible solar power plants interconnected to the power grid in an amount of 50% of its total investment and to eligible off-grid solar power plants located in remote areas without electricity supply at the amount of 70% of its total investment. Solar power plants participating in China’s feed-in tariff program described below were not eligible to participate in the Golden Sun Program. The Golden Sun Program expired in 2013.
Chinese financial institutions may offer preferential loans with a financial interest subsidy to renewable energy development and utilization facilities that are listed in the national renewable energy industrial development guidance catalog and satisfy certain conditions for granting loans.
Finally, under applicable Chinese tax law and regulations, an enterprise engaged in public infrastructure facilities approved after January 1, 2008, including solar and wind power plants, that satisfy certain requirements are entitled to a three-year full exemption from the enterprise income tax followed by a three-year 50% exemption commencing from the first year it generates operating income. In addition, solar and wind power plants are entitled to a 50% refund of the value-added tax levied on their electricity sales.
The main incentives available to encourage the use of renewable energy in Brazil include: (i) tax benefits; (ii) discounted transmission and distribution tariffs; (iii) special public funding provided by the National Bank for Economic and Social Development (“BNDES”); and (iv) research and development investment.
Tax benefits. Renewable energy power plants may benefit from an exemption of monthly federal income taxes and may also be eligible for the exemption of certain import taxes. For example, the purchase of items needed for the construction of the wind and solar plants are exempted from certain import and value added taxes.
Discount on transmission and distribution tariffs. Solar plants injecting up to 30 MW into the grid that start commercial operation prior to December 31, 2017 benefit from an 80% discount on transmission and distribution tariffs for the first ten years of operation and 50% thereafter. Wind plants injecting up to 30 MW into the grid are also eligible for similar discounts.
Special public funding. Subject to certain limitations, BNDES may finance up to 70% of all renewable energy power plants investments at reduced rates. Repayment of such loans may only commence once construction of the energy plant has finished and the plant is operative. BNDES also provides special public funding for manufacturers willing to commence Brazilian productions of the supply chain in connection with the renewable energy industry.
Research and development investment. All generators, except hydro-electric generators with installed capacity under 30 MW, thermoelectric generators with installed capacity under 5 MW, biomass generators, solar generators and wind energy generators, must invest at least 1% of their net revenue in research and development facilities.
Solar power plants
In 2010, the Indian government launched its flagship solar initiative known as Jawaharlal Nehru National Solar Mission (the “National Solar Mission”). The National Solar Mission establishes a target of 100 GW of installed solar capacity by 2022 and stipulates the implementation and achievement of this target in multiple phases.
Solar projects in India are set up under state solar policies or under the National Solar Mission. Capacity allocation under the National Solar Mission is staggered and through competitive bidding. Competitive bidding under the National Solar Mission is conducted using one the following schemes: (a) a bundling scheme, under which relatively expensive solar power is bundled with cheaper thermal power and sold to distribution utilities at a more affordable tariff; and (b) a viability gap funding scheme, under which viability gap funding is made available to project developers to subsidize the project cost.
Phase I of the National Solar Mission focused on promoting the development of grid-connected solar power capacity of 1,000 MW and mandated that NTPC Vidyut Vyapur Nigam Limited (“NVVN”) serve as the offtake counterparty to purchase the solar power under 25-year PPAs with solar power producers. NVVN is a wholly owned subsidiary of NTPC Limited, which is approximately 70% owned by the Indian national government. NVVN purchases the solar power from a solar power plant as a trading licensee, thereby minimizing the credit risk to the solar power plant. The tariff levels for Phase I were determined based on a competitive bidding process subject to a cap determined by the CERC under the bundling scheme.