Costa Rica

Costa Rica

Costa Rica taxes and incentives for renewable energy KPMG Global Energy & Natural Resources


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Support schemes

Investment and other subsidies

Law 7447

Law 7447 (Regulation of the Rational Use of Energy), Article 38, lists a number of energy-related products that are exempt from the following taxes:

  • excise tax
  • ad valorem
  • general sales tax
  • specific customs tax

These exempt products include:

  • Multipurpose solar water heaters
  • Water storage tanks for solar heating systems (boiler type)
  • PV panels for power generation, any capacity
  • Control systems for PV panels, wind and hydro generators working with direct current (DC)
  • Static DC to alternating current (AC) converters for PV systems, wind and hydroelectric generators with DC systems
  • Deep-cycle, lead-acid batteries and nickel-cadmium or nickel-iron batteries, with capacities greater than 50 amps per hour
  • Head economizers for hot water showers and sinks, with consumption of less than 9.5 liters per minute
  • Efficient fluorescent and halogen lighting
  • Wind and hydro-generators for use not related to private generation of electricity (Law 7200 of 28 September 1990)
  • Equipment for controlling voltage and frequency for wind and hydro generators
  • DC electronics equipment for use with PV panels, wind and hydro generators
  • Materials to build equipment for renewable energy use
  • Tempered glass with less than 0.02 percent iron content
  • Thermal insulation for thermal solar collectors such as polysocyanurate and polyurethane insulation, additives for preparing them, or both
  • Plate-finned tubes and absorbent plates for water heaters
  • Specific aluminum profiles to build solar water heaters
  • Thermal insulation for water pipes
  • Any heat insulator useful to improve the insulation of storage tanks with solar heated water systems
  • Measuring instruments related to renewable energies variables, such as: temperature gauges, pressure gauge fluids, solar radiation meters, and anemometers to measure wind speed and direction
  • Pump-fed systems with PV and wind systems
  • Refrigerators, solar cookers and hydraulic ram pumps.

Moreover, tax reductions for green technology have been introduced, such as a 10 to 30 percent tax reduction for hybrid cars.

Temporary import

Law 7557 (General Customs Law), Article 165, states that the products listed above are exempt from import taxes if they are imported with a temporary purpose related to a renewable energy project. After the renewable energy project is finished and the imported products are no longer needed, they can be exported without incurring any customs tax. The products must remain in the country for no longer than 1 year and must then be exported or definitively imported without any transformations.

Operating subsidies

Costa Rica currently has no feed-in tariff policy.

Other aspects

Expansion Plan Generation (PEG)

The Expansion Plan Generation (Plan de Expansion de Generacion or PEG) is Costa Rica’s framework for medium and long-term planning from 2014 to 2035 in the electricity sector. The first period of the Plan covers construction sites until 2017, including the Reventazón Hydroelectric Project (300 MW), which will come online in 2016. The next period starting in 2018 includes a recommended general program of action until 2035.

Established renewable resources

Under the PEG, Costa Rica is developing a variety of renewable energy resources to meet electricity demand. Hydropower has been the main source of power, due to its abundance, quality and cost, followed by geothermal and wind. Biomass, based on bagasse, and solar are also contributing to the energy matrix.


The identified potential of this resource includes about 1,700 MW that partially or totally affects indigenous reserves.

Another 780 MW is located in national parks, where the law does not allow any kind of exploitation.


The identified potential of geothermal is based on a very preliminary and limited estimate. Most sources are located within national parks in the Central and Guanacaste volcanic mountain ranges and are not available for use. The only fields that can be developed are Miravalles and Rincon de la Vieja (Pailas and Borinquen). These fields have a potential of 300 MW, out of which 195 MW is already in operation.


Costa Rica has been the pioneer of wind energy in Latin America. Since 1996, about 5 percent of the country’s energy needs are met by wind. The annual cycle of wind generation complements hydropower, since the strongest winds occur in the dry season.

Biomass bagasse

For bagasse, sugar cane mills have installed their own generation equipment and are able to produce more energy than they need at a low cost. Additional investments in new generation equipment have increased these benefits. The seasonality of growing sugar cane complements the seasonality of hydropower plants.

Emerging renewable resources

Along with existing sources of renewable energy, Costa Rica is:


Biogas is the energy source that is obtained from biomass. As with the sugar mills mentioned above, some small farms have developed systems for personal consumption, with the potential for larger-scale developments in the future.

Municipal solid waste

Solid waste can be used to generate electricity through steam-producing processes. Several municipalities in Costa Rica have announced their interest in adopting this technology.


As prices for PV solar panels continue to decline, this technology is becoming increasing attractive to investors. Costa Rica's Regulatory Authority for Public Services (ARESEP) has recently proposed new feed-in tariffs for PV projects ranging in capacity from 1 MW to 20 MW.


Biofuels may become a significant addition to the country’s energy mix in the coming years. Mixtures of diesel with 5 to 20 percent of biodiesel can be used at any of the thermal plants in the country, without adjustments or major retrofits.

There is still no infrastructure for large-scale production, storage or distribution chains. Small amounts have been experimentally used in thermal floors by the Costa Rican Electricity Institute (ICE).

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