India, Italy to cut renewable energy subsidies

Subsidies for renewable energy only distort the market and are counter-productive. The game in renewable energy (wind and solar) has become the extraction of subsidies rather than the production of electricity. The sooner they are dismantled the better.

Two developments in Italy (which is virtually bankrupt) and in India (where growth is slowing) – both driven by economic considerations – are indicators that that some of the artificial gloss around renewable energy may be peeling off. Exorbitant feed-in tariffs for renewable energy are to be curtailed in Italy while very attractive tax-breaks for wind-power in India are to be reduced.

Italy to cut renewable energy subsidies

Italy will move to reduce taxpayer subsidies to its renewable energy sector after last year’s boom in solar power, Industry Minister Corrado Passera says. The official said Saturday in Cernobbio, Italy, that taxpayer subsidies doled out to the wind and solar power industries had generated “excessive” investments in the sector, The Wall Street Journal reported. “Italy has important goals to meet and even surpass,” he said, but added, “we need to do so without over-reliance on taxpayer resources.”

The government, Passera said, will in the coming years “realign” the level of its incentives to those of other European countries. ….

The Hindu Business Line reports on the new budget measures in India. Windmill developers to lose tax breaks

Windmill developers will no longer enjoy lower tax outgo in the first year, for investing in windmills.

Effective April 1, accelerated depreciation – which allows the investing company to fast track the write-off of certain assets for tax purposes – will not be allowed to wind energy developers. The Income Tax department has amended the rules regarding this, through a notification.

Until FY-12, a deduction of up to 80 per cent was allowed if the wind project was commissioned before September of a fiscal. Projects commissioned in the next half of the fiscal got a 40 per cent deduction. Now developers will only be allowed 15 per cent depreciation.

But wind equipments will still enjoy the 20 per cent additional depreciation prescribed for power equipments in the recent Budget. That would make for an effective 35 per cent depreciation. …….

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