On October 16, 2021, Economist published a cover review article “The Energy Shock”, which points out the source of the current shortage of energy and power supply, including insufficient investment in the energy sector, geopolitical factors, and the flawed design of energy markets. It also proposes possible solutions, including the need to redesign the energy market, realize a more diverse supply, spend more capital on energy and introduce policies that are conducive to the energy transition.
As governments across the world continue to invest hundreds of billions in the energy system for economic recovery after the outbreak of the COVID-19 pandemic, the current increase in energy prices has prompted governments to put in place measures to shield economy and people from the direct impact of rising prices.
This passage put together the policies and measures used by some BRITACOM Council Members, Observers, and other stakeholders to mitigate the effect of the price spike for economy and people.
According to a report by the Daily Sun (Bangladesh) on November 15, the Sustainable and Renewable Energy Development Authority of Bangladesh has applied to the Bangladeshi government for a tax exemption of BDT 24 billion on the wholesale of electricity. The tax is paid annually by the Sustainable and Renewable Energy Development Authority to the Bangladeshi government at a rate of 6%. Each year, the Sustainable and Renewable Energy Development Authority pays approximately BDT24 billion to BDT30 billion for the tax.
The Sustainable and Renewable Energy Development Authority applies for the tax exemption to stabilize electricity prices and production costs. To be specific, the Sustainable and Renewable Energy Development Authority produces 78,525 gigawatts of electricity annually at a cost of BDT500 billion. The cost of power generation is approximately BDT6.61 per unit of electricity. The Bangladeshi government needs to pay a subsidy of BDT1.49 for each unit of electricity. In the 2020/2021 fiscal year, a loss of BDT119.69 billion was incurred as the Sustainable and Renewable Energy Development Authority supplied electricity at subsidized prices lower than the costs of generating and purchasing power. Affected by the rising prices of energy and natural gas in the international market, the Sustainable and Renewable Energy Development Authority’s burden of subsidizing electricity has become heavier, therefore, it applies for a tax exemption.
The Sustainable and Renewable Energy Development Authority has requested additional funds of BDT164.37 billion for the operation of a 5,500-megawatt furnace oil power station and a 1,200-megawatt diesel power station.
The State Taxation Administration has prepared and issued the Notice on Ensuring the Supply of Energy and Electric Power in this Winter and Next Spring, and Implementing Tax Measures to Support the Rescue and Relief of Coal-fired Power Enterprises, according to which, all taxes payable by coal-fired power and heat supply enterprises in the fourth quarter of this year will be deferred, the processing of VAT credit refund will be accelerated, and the efforts to implement relevant industry-specific and inclusive preferential tax and fee policies will be intensified.
(1)Djibouti approved the draft power budget resolution for 2022
At the 16th meeting of ministers held on 16 November, Prime Minister of Djibouti approved the draft 2022 Djibouti power budget resolution proposed by the Ministry of Energy and Natural Resources, which was formulated in the context of the recovery of economic activities after the COVID-19 epidemic. In 2022, Djibouti Electric Power Company has a total budget of 30 billion Djibouti francs, a total expenditure of 29 billion Djibouti francs, an estimated net profit of 1 billion Djibouti francs and a planned output of 643,053 megawatt hours. In order to expand its business scope and increase power output, Djibouti Electric Power Company will implement a major investment of about 13 billion Djibouti francs, such as the laying of Goubetto 230 KV wind farm, the feasibility study of the three boreholes of Fialé, the implementment of the solar power station projects in Tadjoura and Obock, the purchase of the two generator sets, G16 bis and G11, the development of state grid interconnection and industrial park project, and the construction of the second connected grid line. The adoption of the draft resolution aims to improve the capacity of Djibouti electric power company and further strengthen the infrastructure construction of Djibouti.
(2)Since the beginning of this year, Djibouti has built a new port in Tadjoura, the second largest city, and has started construction on roads connecting the Ethiopia border. In addition, the 60 MW wind farm, 30 MW solar power farm, demonstration hospital, commercial and residential complex, exhibition center and other projects will be delivered in the next few months, and the renovation project of the old port business district will be completed within a few years.
The government usually receives assistance or loans from multilateral channels such as the World Bank, the Islamic Development Bank and the African Development Bank, and bilateral channels such as China and India. Gambian government signed a $93 million financing agreement with the Saudi government in June 2019 to go for infrastructure upgrades in the areas around the summit. $32.5 million of the financing was nonreimbursable assistance to upgrade hydropower facilities. Gambia Electricity Restoration and Modernization Project (GERMP) is funded by World Bank assistance and European Investment Bank preferential loans. The project includes two parts. The first part is power transmission and transformation infrastructure upgrading and construction in the capital Banjul region with the amount of $41 million, the fund of which has been implemented and is currently under bidding. The second part is Jambur Solar Energy Storage Power Station Project with the amount of $28 million and the fund has been implemented.
The "Renewable Energy Production and Use Support Scheme (Hydroelectric Power Plants)" released in 2020 defines measures to facilitate the construction and operation of a hydroelectric power plant (HPP) with a private initiator of more than 5 MW. The support scheme includes:
- a support period of ten years from the issuance of the HPP commissioning and production license, within 8 months per year;
- a premium tariff of USD 0.015/kWh paid as a supplement to the wholesale price fixed for the relevant hour. If the difference between the wholesale price and USD 0.055 is less than USD 0.015, then the premium tariff will be calculated by the above difference.
Hong Kong China
The Exemption from Profits Tax (Feed-in Tariff Scheme) Order and the Business Registration (Amendment) Regulation 2019 came into force on 1th March , 2020.
The measure exempts individuals installing renewable energy systems at their residential premises from the relevant taxation obligations and business registration requirements.
The Government is committed to creating favourable conditions for the public to participate in the development of renewable energy. The Feed-in Tariff Scheme (FiT) introduced in 2018 allows investors in renewable energy systems to receive payments of $3 to $5 for each unit of electricity they generate, shortening the payback period to about 10 years.
To simplify the relevant procedures and facilitate participation as far as practicable, the Government pursued legislative amendments through the Exemption Order and Amendment Regulation to exempt individuals installing renewable energy systems at their residential premises from paying profits tax through participation in the FiT Scheme and also exempt them from the requirement to apply for a business registration.
Secretary for the Environment KS Wong said: "As at end 2019, the two power companies have received over 7,000 FiT applications, of which about 6,000 have been approved. The solar panels used in these approved applications can cover about 70 standard football pitches, while the annual electricity generated can power the residential units of two Tai Koo Shings.
"In comparison, only some 200 private renewable energy systems were connected to the power companies' grids in the decade prior to introduction of the FiT Scheme. This proves that the FiT Scheme and the related facilitation measures have been effective."
Since the beginning of the COVID19 pandemic in early 2020, Indonesia has committed at least USD 6.78 billion to supporting different energy types through new or amended policies.These public money commitments include:
At least USD 6.54 billion for unconditional fossil fuels through 5 policies (4 quantified and 1 unquantified);No public money commitments identified for conditional fossil fuels;Some public money committed for unconditional clean energy (4 policies with the value of public money unquantified); At least USD 240.02 million for conditional clean energy through 1 policy (1 quantified); Some public money committed for other energy (5 policies with the value of public money unquantified); By energy type, Indonesia committed at least USD 3.18 billion to oil and gas (at least USD 3.18 billion to unconditional oil and gas).In addition, no public money commitments identified for coal.
Further, no public money commitments identified for hydrogen based on fossil fuels.Finally, Indonesia committed at least USD 3.12 billion to multiple fossil fuels (at least USD 3.12 billion to unconditional multiple fossil fuels).
The government has allocated 123 trillion rupiah (US$8.3 billion) in tax incentives for more industries.This includes reducing the corporate income tax (CIT) rate from 25 percent to 22 percent for the 2020-2021 tax year. This will be further reduced to 20 percent for the 2022 tax year.Employees earning below 200 million rupiah (US$13,000) working in certain sectors will be exempted from paying income tax, Mining and quarrying, Electricity, gas, steam, and cold air suppliers are included.
i. Kazakhstan's Ban on the Export of Gasoline and Diesel Officially Comes into Effect
Starting from May 9, 2021, Kazakhstan has imposed a six-month export ban on gasoline, diesel and some petroleum products (including light petroleum products) to prevent a shortage of refined oil in the domestic market.
ii. The Kazakh Government Takes Steps to Counter Rising Fuel and Coal Prices
According to Minister Atamkulov of Industry and Infrastructure Development of the Republic of Kazakhstan, the Ministry of Industry and Infrastructure Development of Kazakhstan has taken a range of steps to prevent coal prices from rising sharply, including signing price agreements (KZT5,200–KZT5,700/ton) with large coal suppliers.
iii. Kazakhstan Will Restrict the Supply of Electricity to Illegal “Mining”
President Tokayev of Kazakhstan has instructed the government to speed up the crackdown on “gray miners” and introduce emergency legislation to regulate “digital mining”.
Rwanda subsidizes oil prices to ease the impact of soaring international oil prices
The New Times of Rwanda reported on May 21 that the government said it would subsidize oil products to ease the impact of soaring international oil prices on Rwanda. The oil prices after subsidies will not have much impact on the work and lives of Rwandan people from May to June. Global oil prices have risen sharply by about 17% due to the recent economic recovery after the COVID-19 epidemic in some countries, and local oil prices of Rwanda are expected to rise by about 7% correspondingly, according to the latest Rwandan Utilities Regulatory Authority (RURA) announcement. The subsidy will keep local gasoline and diesel prices relatively stable at 1,088 Rwanda francs and 1,054 Rwanda francs per liter, respectively. The Infrastructure Minister of Rwanda Claver Gatete said the subsidy was added after the government invested about 29.3 billion Rwanda francs ($2.93 million) in public transport. Meanwhile, global inflation rate will reach 3.5% in 2021 according to the estimates of the Central Bank, the subsidy is for the Rwandan government to further curb the impact of inflation and to stabilize prices. Without measures to stabilize oil prices, the cost of work and living, including food, transportation and production, may rise significantly, affecting the welfare and quality of life of the Rwandan people. In addition, the Rwanda franc is expected to depreciate by 6.5% by 2021 according to the estimates of the Central Bank.
The government has decided to exempt an 18% VAT from 22 renewable energy devices for the production and use of solar, wind and biogas energy in 2020. Materials involved in solar VAT-free include photovoltaic solar panels, solar collectors or panels, solar cells and solar water heater kits, etc. Equipment involving wind energy will include towers, blades, rotors, and hubs. Equipment involved in biogas energy includes biogas furnace, biogas flow analysis and prefabricated biogas digester, etc.
Issuing Departments: Ministry of Petroleum and Energy, Ministry of Finance and Budgets
In response to the rapid rise in the prices of daily necessities caused by the COVID-19 epidemic, Senegalese government has continued to study measures to reduce the import tariffs on crude oil and granulated sugar, and to reduce and exempt the VAT on flour.
Uruguay Provides One-year Tax Exemptions for Mirco Small and Medium Enterprises in Border Areas
According to a report by The Observer (Uruguay) on September 29, 2021, Secretary-General Delgado of the Uruguayan Presidential Office announced on September 28 that the government would exempt from taxation for one year Mirco Small and Medium Enterprises within 60 kilometers to the country’s border points with Argentina or Brazil, which have an annual turnover of not more than UYU20 million, and whose main business activities are retail sales. The measure covers approximately 85% of such enterprises in border areas, according to Secretary-General Delgado. In addition to the tax exemptions, such enterprises will also enjoy preferential policies such as discounts on landline, broadband network and electricity bills. This measure aims to reduce the costs of Mirco Small and Medium Enterprises, thereby lowering the selling prices of retail products and enhancing the competitiveness of Uruguay’s border enterprises.
On November 4, the cabinet approved a reduction of VAT from 19% to 5% on electricity bills for vulnerable groups for six months. The Minister of Finance Petrides said that the government would also augment the disbursement of cost-of-living allowances.
On 23 September 2021, Reuters reported that “a spokesperson for the economy ministry said on 22 September that Germany does not see a need for government intervention to counter rising gas prices”. However this position was then reconsidered a few weeks later, when the government announced a reduction on the Erneuerbare-Energien-Gesetz (EEG) surcharge – a levy on the price of electricity – from 6.5 to 3.72 cents on the wholesale price per kilowatt-hour of electricity. The measure will become effective from 1 January 2022 and it will be financed by the federal budget and higher CO2 pricing.
On 27 September, Italy approved short-term measures worth short of €3 billion to offset the expected rise in retail power prices until the end of 2021.
The funding is split into €2 billion to eliminate general system charges in the electricity sector and €480 million to reduce general charges on gas bills. The system charges on electricity bills will be offset with €700 million from the proceeds of CO2 auctions and €1.3 billion from the National Fund of Energy and Environmental Services.
VAT on the use of natural gas will drop to 5% on supplies for “civil and industrial uses”. The measure applies from the last quarter of 2021 (October to December). VAT on gas bills is now at 10% and 22% depending on consumption. Italy is also set to strengthen the ‘social bonus’ on bills for families in economic difficulty and with serious illnesses, for which €450 million will be allocated. The facilities will be redetermined by the energy authority for the last quarter of 2021 to “minimise increases in supply costs”.
For around 6 million small businesses (with low-voltage users up to 16.5kW) and around 29 million domestic customers, the rates relating to general system charges are set at zero for the last quarter of 2021.
New measures will likely be introduced early next year, bringing the total cost of containing energy prices for the government to around €5 billion.
Prices for households are regulated below cost and on 11 November the government announced that it will also put a price-ceiling of €1.30 per litre on petrol and diesel. The cap will last for three months.
On 2 October 2021, Federal Energy Minister Tinne Van der Straeten proposed extending the social energy tariff introduced during the pandemic to enable vulnerable people to better cope with the health crisis. Ten days later, the measure was introduced in the federal budget and is set to last until the end of March 2022, costing €208 million and targeting nearly 500,000 households.
Moreover, the Minister of Economy and Employment Dermagne has announced that from October 2021 the most vulnerable citizens will also benefit from an €80 energy check to be deduced from their bill. The budget for this energy check will amount to €72 million.
On 12 October, a €16 million Fund for Gas and Electricity was established to support households in need that are not eligible to receive the social tariff.
Certain taxes such as the federal contribution for gas and electricity and green power certificates are being replaced by excise duties which can easily be adjusted by the government to compensate for energy price variations. The point is to keep revenues at a constant level, rather than increasing along with energy prices.
The government has also forbidden unilateral changes in energy contracts, by which energy suppliers could independently increase the down payment invoice of consumers also in fix-price agreements.
Several other measures are being implemented at the regional level.
Electricity prices for Irish households were the fourth-highest in the EU in the first half of 2021, rising to number one when taxes are stripped out. Presenting the Irish budget for 2022 on 12 October, Finance Minister, Paschal Donohoe, introduced a 30% tax rebate on vouched expenses for heat and electricity. Other measures include spending for €202 million from carbon tax revenue in residential and community retrofit schemes (over 22,000 home energy upgrades in total). More than half of the funding will be for free upgrades for low-income households at risk of energy poverty. A new low-cost loan scheme for residential retrofitting will also be introduced.