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The role of financial incentives in promoting renewable energy in Jordan

Author

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  • El-Karmi, Fawwaz Z.
  • Abu-Shikhah, Nazih M.

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.

Suggested Citation

  • El-Karmi, Fawwaz Z. & Abu-Shikhah, Nazih M., 2013. "The role of financial incentives in promoting renewable energy in Jordan," Renewable Energy, Elsevier, vol. 57(C), pages 620-625.
  • Handle: RePEc:eee:renene:v:57:y:2013:i:c:p:620-625
    DOI: 10.1016/j.renene.2013.02.034
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    References listed on IDEAS

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    1. Chen, Falin & Lu, Shyi-Min & Chi-Chuan, Wang & Chang, Yi-Lin, 2008. "Promotion strategies for renewable energy in Taiwan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 12(6), pages 1681-1691, August.
    2. Nielsen, Lene & Jeppesen, Tim, 2003. "Tradable Green Certificates in selected European countries--overview and assessment," Energy Policy, Elsevier, vol. 31(1), pages 3-14, January.
    3. Mitchell, C. & Bauknecht, D. & Connor, P.M., 2006. "Effectiveness through risk reduction: a comparison of the renewable obligation in England and Wales and the feed-in system in Germany," Energy Policy, Elsevier, vol. 34(3), pages 297-305, February.
    4. Thiam, Djiby Racine, 2011. "An energy pricing scheme for the diffusion of decentralized renewable technology investment in developing countries," Energy Policy, Elsevier, vol. 39(7), pages 4284-4297, July.
    5. AfDB AfDB, . "AfDB Group Annual Report 2011 (Arabic)," Annual Report, African Development Bank, number 394.
    6. Singh, Anoop, 2009. "A market for renewable energy credits in the Indian power sector," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(3), pages 643-652, April.
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    Cited by:

    1. Reddy, B. Sudhakara, 2016. "India's energy system transition—Survival of the greenest," Renewable Energy, Elsevier, vol. 92(C), pages 293-302.
    2. repec:eee:renene:v:130:y:2019:i:c:p:867-880 is not listed on IDEAS
    3. Shafiullah, Md & Rahman, Syed Masiur & Mortoja, Md. Golam & Al-Ramadan, Baqer, 2016. "Role of spatial analysis technology in power system industry: An overview," Renewable and Sustainable Energy Reviews, Elsevier, vol. 66(C), pages 584-595.
    4. repec:eee:renene:v:129:y:2018:i:pa:p:214-224 is not listed on IDEAS
    5. Jaber, Jamal O. & Awad, Wael & Rahmeh, Taieseer Abu & Alawin, Aiman A. & Al-Lubani, Suleiman & Dalu, Sameh Abu & Dalabih, Ali & Al-Bashir, Adnan, 2017. "Renewable energy education in faculties of engineering in Jordan: Relationship between demographics and level of knowledge of senior students’," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 452-459.

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