Tax Incentive Policy for Geothermal Development: A Comparative Analysis in ASEAN

*Mohammad Zainul Abidin  -  Fiscal Policy Agency, Ministry of Finance, Indonesia
Haula Rosdiana  -  Faculty of Administrative Science, Universitas Indonesia, Indonesia
Roy Valiant Salomo  -  Faculty of Administrative Science, Universitas Indonesia, Indonesia
Received: 13 Jun 2019; Revised: 24 Nov 2019; Accepted: 23 Jan 2020; Published: 18 Feb 2020; Available online: 15 Feb 2020.
Open Access Copyright (c) 2020 International Journal of Renewable Energy Development

Citation Format:
Article Info
Section: Original Research Article
Language: EN
Full Text:
Statistics: 403 211
Abstract

This paper examines tax incentive policies in geothermal industries in ASEAN to better understand the development of geothermal industry investment in the ASEAN Member States (AMS) using a qualitative method. The results indicate that tax incentive policies have supported the investment climate and the development of geothermal industries in the AMS. Geothermal investments and production capacities in AMS have increased significantly. AMS that provide geothermal tax incentives include Indonesia, Lao PDR, the Philippines, Thailand and Vietnam. The performance of geothermal tax incentive policies is reflected in the level of utilization of geothermal potential, which is higher in states that provide greater tax incentives. The results also indicate that geothermal power plants in AMS use dry steam, flash and binary cycle technologies with flash plants being the most common. Results suggest that the future development of geothermal energy in AMS will be related to the tax incentive policy and investment climate in those states. Furthermore, the granting of various types of tax incentives should be focused on the initial investment in geothermal development. ©2020. CBIORE-IJRED. All rights reserved

Keywords
policy analysis; tax incentive; geothermal industry; energy development; investment.

Article Metrics:

  1. ASEAN Centre for Energy (2018) Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in The ASEAN Member States II. Jakarta: ASEAN Centre for Energy (ACE) & Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.
  2. ASEAN Centre for Energy Team (2016) ASEAN Renewable Energy Sub-Sector Network. Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) GmbH & ASEAN Centre for Energy (under the Renewable Energy Support Programme for ASEAN).
  3. ASEAN Secretariat (2018) ASEAN Statistical Highlights 2018. Community Relations Division-The ASEAN Secretariat, Jakarta.
  4. Asian Development Bank & Asian Development Bank Institute (2016) Viet Nam: Energy Sector Assessment, Strategy, and Road Map. Mandaluyong City, Philippines, Asian Development Bank.
  5. Asian Development Bank (2015) Renewable Energy Developments and Potential in The Greater Mekong Subregion. Mandaluyong, Manila, Philippines.
  6. Asian Development Bank (2016) Myanmar Energy Sector Assessment, Strategy, and Road Map, Mandaluyong, Manila, Philippines.
  7. Brodzka A. (2013) Tax Incentives in Emerging Economies. Business Systems and Economics, 3(1), 26-36.
  8. Chalk N. A. (2001) Tax Incentives in The Philippines: A Regional Perspective. IMF Working Paper, WP/01/181.
  9. Directorate of Geothermal (2018) Doing Business in Geothermal. Jakarta: Kementerian Energi dan Sumber Daya Mineral.
  10. Energy and Environment Partnership Mekong (2011). Renewable Energy Development Strategy in Lao PDR. Article at http://www.eepmekong.org/index.php/resources/country-reports/laos/57-laos-06/file. Accessed on 5 April 2019.
  11. Fletcher K (2002) Tax Incentives in Cambodia, Lao PDR and Vietnam. The Paper Prepared for the IMF Conference on Foreign Direct Investment: Opportunities and Challenges for Cambodia, Lao PDR and Vietnam Hanoi, Vietnam, August 16-17, 2002.
  12. Fronda A.D., Marasigan M.C. and Lazaro V.S. (2015) Geothermal Development in The Philippines: The Country Update, Proceedings World Geothermal Congress Melbourne, Australia.
  13. Hasibuan S. & Nazir N. (2017) The Development Strategy of Sustainable Bioethanol Industry on Iconic Sumba Island, Eastern Indonesia. International Journal on Advanced Science Engineering Information Technology, 7(1), 276-283.
  14. Holland D. & Vann R.J. (1998) Income Tax Incentives for Investment in Victor Thuronyi, Ed., Tax Law Design and Drafting Volume 2, Washington DC: International Monetary Fund.
  15. Moon H. & Zarrouk S.J. (2012) Efficiency of Geothermal Power Plants: A Worldwide Review. Proceedings of New Zealand Geothermal Workshop 2012 Auckland, New Zealand, 19-21 November 2015, 1-13.
  16. Intelligent Energy Systems and Mekong Economics Ltd (2016) Alternatives for Power Generation in the Greater Mekong Subregion. Power Sector Vision for the Greater Mekong Subregion, Volume 1.
  17. International Monetary Fund (2018) IMD Data Mapper: World Economic Outlook. https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/WEOWORLD/SEQ. Accessed on 5 April 2019.
  18. James S. (2014) Effectiveness of Tax and Non-Tax Incentives and Investments: Evidence and Policy Implications. Investment Climate Advisory Services, World Bank Group. Available at SSRN: http://dx.doi.org/10.2139/ssrn.2401905. Accessed on 27 februari 2018.
  19. Kitz K. (2016) Geothermal Power Generation, 2nd ed., D. Yogi Goswami and Frank Kreith, Ed. Florida, USA: Taylor and Francis Group.
  20. Klemm A. (2010) Causes, Benefits, and Risks of Business Tax Incentives. International Tax and Public Finance, 17, 315-336.
  21. Ministry of National Development Planning (2014) Geothermal Handbook for Indonesia. Jakarta, Ministry of National Development Planning.
  22. Muharti A. (2017). Tantangan Kembangkan 7.000 MW Energi Panas Bumi. Article at http://www.migasreview.com/post/1468291875/tantangan-kembangkan-7-000-mw-energi-panasbumi.html. Accessed on 1 March 2019.
  23. Nazari, N. and Porkhial, S. (2016). Energetic and Exergetic Improvement of Geothermal Single Flash Cycle. Int. Journal of Renewable Energy Development, 5(2),129-138. http://dx.doi.org/10.14710/ijred.5.2.129-138. Accessed on 15 October 2018.
  24. OECD (2017) Investment framework for green growth in Lao PDR in OECD Investment Policy Reviews: Lao PDR, OECD Publishing, Paris, 237-264.
  25. Pambudi N. A. (2018) Geothermal Power Generation in Indonesia, a Country within the Ring of Fire: Current Status, Future Development and Policy Renewable and Sustainable Energy Reviews, 81, p2893–2901.
  26. PwC (2018) Alternating Currents: Indonesian Power Industry Survey 2018. The Report 2nd Edition. Asosiasi Produsen Listrik Swasta Indonesia, Jakarta.
  27. Raksaskulwong M. (2015) Update on Geothermal Utilizations in Thailand. Proceedings of World Geothermal Congress 2015 Melbourne, Australia, 19-25 April 2015, 1-8.
  28. Richter A. (2019) Report Highlights Competitiveness of Geothermal Energy in The ASEAN Region, http://www.thinkgeoenergy.com/report-highlights-competitiveness-of-geothermal-energy-in-the-ASEAN-region/. Accessed on 1 April 2019.
  29. Rosdiana H. (2008) Rekonstruksi Konsepsi Supply Side Tax Policy. Jurnal Ilmu Administrasi dan Organisasi, Bisnis & Birokrasi, vol. 15, no. 1, 202-205.
  30. Senderov S. & Vorobev S. (2018) Ensuring Energy Security in ASEAN Countries: Current Trends and Major Challenges. ASEAN Economic Community (AEC); Proceedings of 10th International Conference on Asian Energy Cooperation (AEC 2017).
  31. Setiawan H. (2014) Geothermal Energy Development in Indonesia: Progress, Challenges and Prospect. International Journal on Advanced Science Engineering Information Technology, 4(4), 20-25.
  32. Setyawan, A., Triahadini, A., Yuliananto, Y., Aribowo, Y., and Widiarso, D.A. (2016) Subsurface Structure and Fluid Flow Analyses Using Geophysical Methods in Geothermal Manifestation Area of Paguyangan, Brebes, Central Java. Int. Journal of Renewable Energy Development, 5(3), 171-177. http://dx.doi.org/10.14710/ijred.5.3.171-177. Accessed on 14 October 2018.
  33. Tapparan E.M.D. (2017) Indonesian Renewable Energy Policy and Investment Opportunities. Asia Clean Energy Forum 2017, The Transformative Role of Renewables in Southeast Asia, International Renewable Energy Agency and ASEAN Centre for Energy Manila, 6th June 2017.
  34. Tun M. M. (2019) An Overview of Renewable Energy Sources and Their Energy Potential for Sustainable Development in Myanmar. European Journal of Sustainable Development Research, 3(1), 1-13.
  35. UNCTAD (2000) Tax Incentives and Foreign Direct Investment: A Global Survey. ASIT Advisory Studies No. 16, Geneva, United Nations.
  36. Wahjosoedibjo A.S. & Hasan M. (2018) Indonesia’s Geothermal Development: Where Is It Going? Proceedings of 43rd Workshop on Geothermal Reservoir Engineering Stanford University, Stanford, California, February 12-14, 1-12.
  37. Wardani R. (2017) Energi Panas Bumi Ramah Terhadap Lingkungan Sekitar. Article at http://ebtke.esdm.go.id/post/2017/08/22/1733/energi.panas.bumi.ramah.terhadap.lingkungan.sekitar. Accessed on 3 November 2017.
  38. Wood S.H. & Singharajwarapan F.S. (2014) Geothermal Systems of Northern Thailand and Their Association with Faults Active During the Quaternary. GRC Transactions, 38, 607-616.
  39. World Bank (2019) Doing Business 2019. The Report 16th Edition, Washington D.C.: The World Bank Group.
  40. World Energy Council (2010) 2010 Survey of Energy Resources. London, United Kingdom, World Energy Council