Costa Rica taxes and incentives for renewable energy KPMG Global Energy & Natural Resources
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:
These exempt products include:
Moreover, tax reductions for green technology have been introduced, such as a 10 to 30 percent tax reduction for hybrid cars.
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.
Costa Rica currently has no feed-in tariff policy.
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.
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.
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.
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).