The role of financial incentives in promoting renewable energy in Jordan

Abstract

In this research paper the effect of introducing financial incentives to promote green electricity generation, in Jordan, was studied. The incentives investigated include tax reduction, introduction of a grace period, provision of capital or reduced discount rate, reduced depreciation life of assets, and the usage of accelerated depreciation methods. The obtained results show that implementing such tools leads to positive financial improvements that serve in encouraging private sector to invest in renewable energy technologies. It is revealed that variations of both grace period and taxation rate lead to minor impacts on internal rate of return and net present value for such projects. On the other hand, the increase in depreciation period makes electricity generated from renewable sources more attractive, in terms of unit price of generated electricity, using the straight line depreciation method. In the contrary, the choice of accelerated depreciation method leads to better attractiveness as the depreciation period is reduced. The effect of discount rate variations is noticeable, and affects economics of such systems significantly. Finally, the results confirmed that wind energy is ranked first, followed by PV and concentrated solar power schemes are the last under the studied conditions in Jordan.