geothermal power plant projects in central america - Orkustofnun

6.6 Impact of tax on geothermal developmentTax incentives enhance the financial returns of geothermal projects by offsetting tax liabilities.Important elements of tax related incentives for geothermal projects in Central American countries areincluded in Table 14.TABLE 14: Impact of taxation on IRR of Equity for geothermal developmentCountryPower PlantCapacity[MW]TaxExemption[Years]SF DF ORCΔIRR of Equity[%]ΔIRR of Equity[%]ΔIRR of Equity[%]El SalvadorGuatemala10 0.9 0.9 1.0Honduras0 -10Nicaragua 7 0.5 0.5 0.5El Salvador 5 0.8 0.8 1.3GuatemalaHonduras10-2010 1.6 1.6 2.2Nicaragua 7 1.1 1.1 1.7GuatemalaHonduras 20-5010 2.4 2.5 2.4Nicaragua 7 1.9 2.1 1.9Guatemala 10 3.1 3.350-100Nicaragua 7 2.6 2.8Figure 46 shows the impact of taxation on the IRR of Equity for the development of geothermalresources. Incentive laws of tax exemption for the development of renewable energy projects are notlarge enough to enhance the internal rate of returns required by investors, when small size power plantprojects are conducted: for flash technologies, power plant sizes smaller than or equal to 20 MW; andfor ORC technology, power plant sizes smaller than or equal to 10 MW.30No Incentives El Salvador GuatemalaHondurasNicaragua30No Incentives El Salvador GuatemalaHondurasNicaragua2525IRR of Equity [%]201510IRR of Equity [%]2015105500-10 10-20 20-50 50-100SINGLE FLASH POWER PLANT CAPACITY [MW]00-10 10-20 20-50 50-100ORC POWER PLANT CAPACITY [MW]FIGURE 46: Impact of taxation on IRR of Equity for geothermal development6.7 Impact of Clean Development Mechanism on geothermal developmentThe input model assumptions were described previously in Section 2.5. Therefore, for geothermalprojects that reduce emissions from lower emission sources, the potential impact on IRR of equity for54