a platform for sharing economic thoughts
a platform for sharing economic thoughts
Today is World Environment Day. On this occasion, it is necessary for us to reflect on the progress made towards saving our environment from catastrophic effects of climate change.
In this regard, ensuring affordable and clean energy for all is one of the biggest challenges of this century. It is also extremely vital to make the Paris Agreement a success.
A sustainable world needs clean energy. That is why “Affordable and Clean Energy” is goal 7 under the Sustainable Development Goals.
Governments all around the world have been working to provide clean energy to its population. The scenario is no different in South Asia.
Still, there are lapses in policies. In this article, I will focus on the issues with the financial incentive and solar tax measures of three South Asian countries: Bangladesh, India and Sri Lanka.
Financial Incentive Measures
Incentives under Energy Efficiency and Conservation Master Plan up to 2030
Sustainable and Renewable Energy Development Authority (SREDA) has a master plan for energy efficiency called “Energy Efficiency and Conservation Master Plan up to 2030”.
It aims for 20% improvement of Bangladesh’s Primary Energy Consumption per GDP by 2030.
The master plan includes financial incentives like subsidies, preferential taxation, and low-interest loans.
Limitations of the Master Plan
But the plan itself states that providing subsidies and preferential taxation will be tough because it would put the extra financial burden on the government.
Remedies for the Limitations
If the government imposeda carbon tax in the latest budget, it would have generated a huge amount of revenue.
That revenue could have been used to finance the expansion of the renewable energy sector and to subsidize energy efficient initiatives under the master plan.
Sri Lanka’s incentive policies are based on providing different types of tariffs for both the producer and the consumer. They areFeed-in Tariffs, Net Metering etc.
Feed-in Tariffs are payments to ordinary energy users for the renewable electricity they generate.
Net Metering is a billing system where the customer is connected to the grid through a net metering system and must pay only for the total amount of electricity consumed.
In Sri Lanka, if the solar electricity production of the user exceeds the electricity consumption of the premises, it can be measured through net metering.
The balance amount can be carried forward up to 10 years. No fee will be paid for the excess electricity produced.
Thus, if a consumer generates more than he uses, the excess is credited and carried over and can then be used in subsequentbilling cycles.
The inefficiency of the Incentive Policies
According to ADB and UNDP’s report titled “Assessment of Sri Lanka's Power Sector - 100% Electricity Generation through Renewable Energy by 2050”, these incentive policies haven’t been able to attract the necessary interest needed to transition to a 100 percent renewable energy sector.
According to the report, this lack of interest has primarily been because of the fact that some of these interventions are not attractive to potential investors.
For example, the Feed-in Tariff policy has some flaws. These are:
The lack of priority for renewables along with the low operating cost of fossil fuel based power plants has encouraged investors to invest in non-renewable energy rather than in renewable electricity generation systems.
Reformed and New Initiatives Required
Therefore, these intervention policies need to be reevaluated in order to create an attractive investment climate for the investors. New initiatives should also be implemented for this purpose.
The new initiatives can include initiatives like Generation Based Incentives, Investment Tax Credit, Duty Exemptions, and Capital Subsidy etc.
In India, there are policies such as Feed-in Tariff, Net Metering, Capital Subsidy, Investment Tax Credits etc.
Capital Subsidy is the subsidy provided to the consumer for installing renewable energy platforms such as solar panels.
Flaws of the Incentive Policies
The Indian government has allotted 5,000 crore rupees to provide thirty percent capital subsidy for rooftop solar panel installation.
But this is only a one-time subsidy which doesn’t cover any future repair costs.So, the policy hasn’t been efficient.
The government needs to revisit the capital subsidy policy to make it more attractive for the end-level consumers.
Solar Tax Measures
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