The Brazilian state of Minas Gerais will see its large-scale solar photovoltaic (PV) sector aided by a new extended tax exemption for companies dealing in the generation, transmission, and distribution of electricity, according to recent reports.
It’s expected that this new tax exemption — which provides the aforementioned industries with protection from ICMS taxation (a tax on goods + services) for the first 20 years of production — will allow for a faster-than-previously expected deployment of large-scale solar PV projects. The exemption enters into effect in 2018, and is an increase over a previous 10-year exemption.
The government of Minas Gerais has reportedly committed to providing BRL25 million ($8 million) for the exemption plan. As the tax exemption will effectively lower operating costs for utility and development companies via the increase in the tax-free period to 20 years, the expectation is that developers will be able to keep their bids lower during tenders.
Given that the state of São Paulo also offers such an incentive, and the two states are at the top in Brazil in terms of total contracted projects obtained via the 2014 solar energy auction, the approach seems to working in that regard. The states that have incentives allowing for lower bids, unsurprising, can generally undercut those in the states without access to such support.
Presumably, this means that a wider embrace of the strategy would allow for a more evened out playing field.
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