El Salvador May Extend Tax Breaks For Renewable Energy Projects

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El Salvador may extend tax breaks available to renewable energy project developers, as the government prepares for a project auction.

Tharsis Solomon Lopez, El Salvador’s Economy Minister and Chairman of the National Energy Council, recently presented a proposal in the country’s legislative assembly for the extension of tax breaks for renewable energy project developers.

At present, new renewable energy projects with over 10 MW capacity enjoy a 10-year exemption from import duties on equipment and raw material. The government has proposed to drop the 10 MW capacity limit and offer these incentives to small projects, as well as extending the time frame.

The proposal, if implemented, would also see these incentives being extended to existing projects.

In August, El Salvador’s National Energy Council announced plans to auction 150 MW of renewable energy projects, with targets for operation by 2018. The South American country conducted its last renewable energy auction in 2014, when it offered 100 MW capacity, of which 94 MW capacity was allocated to solar power projects. In the 2014 auction, 26 companies placed bids to set up solar power projects, though only three were eventually awarded contracts. The largest project of 60 MW was awarded to a joint venture between French developer Neoen and local conglomerate Almaval, to supply electricity under a 20-year power purchase agreement at a tariff of US$0.10 per kWh.

According to a recent assessment (PDF) by USAID, El Salvador could theoretically add 170 MW of solar power capacity by 2016, 40 MW wind energy capacity by 2017, 81.5 MW biomass-based power capacity by the end of this year, and 146 MW hydro power capacity and 102 MW geothermal capacity by the end of 2021.

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