geothermal power plant projects in central america - Orkustofnun

income taxes for a period of 10 years from the date of commencement of commercial operation, forprojects with an installed capacity of up 50 MW.2.4.4 NicaraguaThe Law for the Promotion of Energy Generation with Renewable Sources (Normas Jurídicas deNicaragua, 2005) provides tax incentives such as an exemption on import duties and Value Added Taxfor the work of pre-investment and construction, on machinery, equipment, materials and supplies,including sub-transmission lines. There is also an exemption on income tax for a period of 7 yearsfrom the project’s start of operations. During that same period, there shall be an exemption on incometax derived from revenues from the sale of carbon bonds.2.4.5 Costa RicaUnder the current Costa Rican legal framework, the use of the geothermal resource can only be doneby ICE; therefore, this is the only renewable source of energy that cannot be tapped for powergeneration by a private developer.2.4.6 PanamaThe incentives granted to the generators of energy from renewable sources were established by Law45 (Ley No. 45, 2004). There are exemptions in taxes and duties associated with the importation ofequipment and materials needed for construction, operation and maintenance. There is a fiscalincentive (as cited in Giardinella et al., 2011 for new and renewable energy projects of over 10 MWinstalled capacity, equivalent up to twenty five percent (25%) of direct investment, based onequivalent tonnes of CO 2 emission reductions per year calculated for the term of the license orconcession, which can only be used for payment of up to fifty percent (50%) of the revenue tax duringthe first 10 years of commercial operation, as long as the project is not benefitting from otherincentives.2.5 Clean Development MechanismThe Clean Development Mechanism (CDM) is one of the three flexibility mechanisms of the KyotoProtocol under the United Nations Framework Convention on Climate Change (UNFCCC). Accordingto the UNFCCC (2011), the CDM allows emission reduction projects in developing countries bydeveloped countries to earn Certified Emission Reduction (CER) credits, each equivalent to one tonneof CO 2 reduced. These CERs can be traded and sold, and used by industrialized countries which haveratified the Kyoto protocol to meet part of their emission reduction targets under the Protocol. Thecrediting period for a CDM project has two options: fixed for a maximum period of 10 years or;renewable for a single crediting period of a maximum of 7 years and may be renewed at most 2 times.Central American countries are candidates for applying this mechanism for development ofgeothermal prospects. As shown in Table 1, there are already four geothermal projects in CentralAmerica that are register as CDM. Most of the geothermal projects in Central America, with theexception of Costa Rica, could replace electricity from relatively carbon intensive grids. Thecombined margin emission factor (CM) for Central American countries is in the range 0.152 to 0.771tCO 2 -eq/MWh for a grid with a mix of thermal and non thermal power plants. It is important to notethat these emission factors vary in each country according to the baseline year in the PDD, data andthe number of the clean energy sources commissioned. According to Quinlivan et al. (2006), thebaseline emissions are calculated as Project MWh x CM, and project CERs as: = − − ( ) (1)According to Delivand et al. (2011) the revenue from CER can be estimated by multiplying the carbonemission reduction (Equation 1) by the price of carbon credit. There is not a fixed carbon trade price,and the price changes daily (see http://www.bluenext.eu/). This recent study (Delivand et al., 2011)9