Evaluation of wind park tax incentives in Colombia by means of real options

Abstract

<p>The objective of this study is to assess tax incentives in Colombia to foster investment in wind parks. Fiscal incentives seek to diversify energy consumption with non-conventional renewable energy sources, since power is mostly generated by hydraulic force and since its price is impacted during dry seasons. The price of energy is modeled according to a regression toward the mean. This stochastic process was chosen because during droughts in Colombia there are price increases, which then return to their average value. This is an upward and downward spike behavior, as well as a regression toward the mean. Given price uncertainty and its impact on cashflow, wind parks were valued with real options to flatten the reversal for five years. The real option of flattening as an American call option was considered. Results show that, according to traditional valuation methods, wind parks in Colombia are not profitable even with tax incentives. However, according to the real options method, tax incentives do make these projects economically viable.</p>

The Energy-Saving Effect of Tax Rebates: The Impact of Tax Refunds on Corporate Total Factor Energy Productivity

“…First, tax refunds can boost enterprise profits, provide a secure environment for technological innovation, and incentivize enterprises to enhance their overall energy efficiency. A bulk of literature demonstrates that tax intervention policies effectively compensate for the positive externalities resulting from enterprise R&D investments, leading to Pareto improvements [18,20,23,42]. In contrast to indirect incentives such as tax reductions, direct government subsidies can also encourage enterprises to increase their R&D investments by raising marginal income following successful R&D or reducing marginal costs after failed attempts.…”

“…They observed that each euro increase in carbon taxes corresponded to a reduction of 11.58 kg of per capita annual emissions. Jiménez-Gómez and Acevedo-Prins [23] evaluated tax incentives for wind power plant investments in Colombia and noted that such measures promote investment in wind power plants while diversifying energy consumption through unconventional renewable sources. Sun, Zhan, and Du [18] compared value-added tax preferences for different types of new energy companies and empirically studied their impact on listed new energy companies using the difference-in-differences (DIDs) method.…”

Assessment of off-shore wind turbines for application in Saudi Arabia

“…Statistical analysis for wind turbines to overcome real time implementation challenges are provided in [29]. The price of wind energy is modeled as a regression model and an evaluation analysis of wind parks in Colombia is available in [30]. The evaluation of wind power for power production in Palestine to alleviate shortage of electricity is available in [31,32].…”