Comparative analysis of natural gas cogeneration incentives on electricity production in Latin America

Alejandro Rivera-Alvarez, Julian D. Osorio, Laura Montoya-Duque, Jose Fontalvo, Edgar Botero and Ana Escudero-Atehortua

Energy Policy, 2020, vol. 142, issue C

Abstract: An analysis to assess the influence of country-dependent variables and incentives on the feasibility of natural gas cogeneration projects in Latin America is presented in this work. The analysis is performed using a hypothetical industrial plant, where the cogeneration solution consists in the recovery of waste heat from the power generation for steam production. The feasibility is evaluated by calculating the Return of Investment (ROI) and the Internal Rate of Return (IRR) of the project. Eight Latin American countries are studied considering their specific natural gas markets, regulation, and macroeconomic variables. Two scenarios, electricity production for self-consumption and electricity production with power surplus sale, are independently analyzed considering the effects of available incentives. In the countries where the project is feasible, the application of incentives leads to a significant reduction in the ROI and, consequently, to an increment in the IRR. The effect of the interest rate and environmental impact were also analyzed. In general terms, along the region, the regulation for cogeneration is incipient while incentives are very standard and similar respect to lowering of import, Value-Added Tax (VAT), and income taxes, which seems to be designed purely to promote capital investment. Following the results from this study, it is of paramount importance to create new policy instruments in the future to advance the regulatory framework for cogeneration in Latin America.

Keywords: Natural gas cogeneration; Self-consumption; Power surplus sale; Comparative analysis; Financial evaluation; Incentives (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301421520302172
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:142:y:2020:i:c:s0301421520302172

DOI: 10.1016/j.enpol.2020.111466

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().