Assessment of the Impact of Financial and Fiscal Incentives for the Development of Utility-scale Solar Energy Projects in Northern Chile

AbstractSolar resource in northern Chile is among the highest in the world, and economy pivots around mining industries [1], which have an intensive consumption of heat, electricity and water. Electricity supply is strongly based on coal and the common source for heat is diesel [2]. While PV can provide electricity at a near competitive price in most markets, CSP is seen as more suitable for utility-scale projects, so both technologies are considered for electricity supply. A base case has been defined for each technology, with investment, operation, fiscal and financial costs as close as possible to the reality of the solar sector in Chile. Five different taxes have been detected to apply to Non-Conventional Renewable Energy (ERNC) projects, such as Customs Duty, Value-Added Tax (VAT), Corporate Tax, Municipal Tax and Additional Tax for Expatriated Revenues. The effect of these taxes on the final price of electricity required to make the project economically feasible has been determined. Sensitivity to exemptions and incentives, both existing and proposed, has been studied, and the efficiency of such measures, in terms of price reduction vs. taxes not collected, has been estimated. The Chilean state and/or Multilateral Development Banks can channel aids from Clean Technology Funds or Official Development Assistances to incentive solar projects through different products such as Soft Loans and Partial Credit Guaranties. The effect of these aids on the final price of electricity required to make the project economically feasible has been determined, and sensitivities have been studied