Subsidies & Incentives

Several governments have enacted subsidies and incentives designed to encourage the development of renewable energy resources. Government subsidies and incentives generally focus on grid-connected systems and take several forms, including tariff subsidies, renewable portfolio standards, rebates, tax incentives and low interest loans.

  • Under a tariff subsidy, the government sets price subsidies to be paid to electricity producers for renewable electricity generated.
  • Several governments facilitate low interest loans for renewable energy systems.
  • The Energy Improvement and Extension Act of 2008 enables owners of biomass facilities in the US to receive federal tax credits; and authorizes $800 million of new clean renewable energy bonds to finance facilities that generate electricity from renewable energy sources.
  • Oregon enacted the Business Energy Tax Credit Program which provides companies that invest in renewable-energy capital projects in the state an income tax credit of up to 50% of the first $20.0 million of capital costs.
  • The adoption by governments of limits on carbon dioxide emissions and targets for renewable energy production has spurred a market for trading of surplus carbon credits and renewable energy certificates.

Many countries and other local jurisdictions have established limits on carbon dioxide emissions (i.e., the Kyoto Protocol). The country, locality or companies within the jurisdiction are given carbon emission allowances, or “carbon credits”, which represent the right to emit a specific amount of carbon dioxide. If these limits are exceeded, that entity must purchase unused carbon credits from another entity. Thus, this adoption has spurred a market for trading of surplus carbon credits – a profitable scenario for those entities with reduced emissions due to renewable energy utilization.