2. Literature Review
2.1. Reviews of Geothermal Development
2.2. Government Support on Geothermal Industry
3. Utilization of Geothermal Resources in China
3.1. Geothermal Utilization of Geothermal Energy
3.2. Geothermal Power Generation
4. Research Methods
4.1. Characteristics of the Effects of Fiscal and Taxation on Geothermal Industry
4.2. Systematic Dynamic Model
- The mechanism of fiscal and taxation is a complex system which includes different kinds of variables such as subsidies for surface surveys, drilling evaluation, exploration, utilization, O&M and taxes including circulation tax, resources tax, income tax, etc. Different kinds of variables influence the development of the geothermal industry in various nonlinear relations and interconnect with each other.
- The mechanism is also a long term system and has a long term cause-and-effect relationship. If the activities of surface survey slows, the utilization of geothermal energy will have a feedback effects.
- Increase the fiscal support from surface survey of geothermal resources to start the geothermal industry;
- Approve the subsidy for surface survey, drilling evaluation, exploration and utilization to cut the costs of the geothermal industry, and a long term subsidy to stimulate the geothermal industry;
- Lower the circulation tax, resources tax, corporate income tax and other taxes and increase the carbon tax, to encourage technical research to promote the development of the geothermal industry;
- Provide carbon taxes to restrict the use of the traditional resources;
- Lower the costs of the geothermal industry to increase the profit to affect the demand for geothermal energy.
5.1. Fiscal Policies Affecting on Geothermal Industry
5.2. Tax Policies on Geothermal Industry
5.2.1. Circulation Tax
5.2.2. Resources Tax
5.2.3. Carbon Tax
5.2.4. Corporate Income Tax and Other Taxes
5.2.5. Profits Affecting on Geothermal Industry
5.2.6. Taxation in the Geothermal Industry
- Promoting the geothermal industry is a complex system involving exploration, evaluation, development and utilization. In China, every stage of the geothermal industry should be focused on. Even though China’s recent policies actions have broken the high-cost limitation and stimulated investment in the geothermal industry, utilization of geothermal heating and geothermal electricity are undoubtedly facing enormous development opportunities.
- From the results of a systematic study of the fiscal and tax dynamics in the geothermal energy sector, fiscal and taxation policies interact with each other in the development of the geothermal industry. Regarding China is in the pre-commercialization stage, the various subsidies should be put into the geothermal industry such as surface survey, drilling evaluation, exploration, utilization and O&M. The government should increase the the initial investment of survey and drilling to the manufacturers which plays an important role to start the geothermal industry and strengthen support for the innovation of geothermal technologies and grant feed-in tariffs to consumers. These provide fiscal support to convert small electricity consumers to producers. Before the geothermal industry comes to the commercialization stage, China should give various and long term subsidies and levy less tax while it should levy the tax when the market of the geothermal industry becomes mature.
- Geothermal enterprises pay various taxes in the different stages of the geothermal industry. The government should use taxation policies as a leverage to enhance the development of the geothermal industry before and after commercialization.
Conflicts of Interest
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|Country||Surface Survey||Drilling Evaluation||Plant Construction||Risk||Note|
|Peru||Private||Private||Private||High||Owner of responsibility in development risks might shift to the government|
|Kenya||Government||Government||Government; Private||Low||At Suswa, 300 MV project will be conducted by a private company|
|Japan||Up to 50%–100% of necessary funds (depends on terms and conditions)||Up to 50% of equity capital||Up to 80% of loan provided by financial institutions||Low||-|
|No.||Law or Regulation||Time||Contents|
|1||Notice of the Ministry of land and resources on Further Strengthening the geothermal mineral water resources management||December 2002||The geothermal resource is a valuable mineral resource as one of the important clean energy. Promotes the survey geothermal resources exploration; strengthen the development and utilization of geothermal resources and protection; develops geothermal projects and ground water recharge to realize the sustainable utilization of geothermal resources|
|2||Guidelines of Renewable energy industry development||November 2005||Lists geothermal power generation, geothermal heat pump as the key projects and geothermal drilling equipment as the recommended device|
|3||Renewable energy law||January 2006||Lists geothermal energy development and utilization into the scope of encouraged new energy development|
|4||National Long-term Scientific and Technological Development Plan (2006–2020)||December 2005||Promotes development and utilization of geothermal energy as a key field|
|5||Technical code for ground source heat pump systems||January 2006||Provides specification for the design, construction and acceptance of ground source heat pump system projects and ensuring safe and reliable system operation|
|6||Land and resources “eleven five year” plan||April 2006||Increases the intensity of mineral resources exploration, carries out geothermal hot dry rock resources potential evaluation, and designs the prospective development zone|
|7||The decision of the state council on energy saving||August 2006||Proposes to make great efforts in the development of renewable energy source, including wind, solar, biomass, geothermal and water energy|
|8||Interim Measures for the administration of special funds for the development of renewable energy||August 2006||Strengthens the management of special funds for renewable energy development, focuses on supporting the development and utilization of fuel ethanol, biomass, solar energy, wind energy and geothermal energy; focus on the application of solar energy, geothermal energy in buildings|
|9||Notice of the ministry of construction and the ministry of finance on the implementation comments for application of renewable energy in building||August 2006||Lists ground source heat pump application among key technological fields|
|10||Comprehensive working program on energy saving and emission reduction||June 2007||States that the energy structure adjustment and the scientific research development and construction of building integrated with geothermal energy shall be actively promoted, and the resource investigation and assessment shall be enhanced|
|11||Chinese National Climate Change Program||June 2007||Points out that the promotion and protection of water resources to meet the environmental requirements of the geothermal heating and ground source heat pump technology|
|12||National Renewable Energy Long-Term Planning||September 2007||Puts forward to promote large-scale application of solar energy and geothermal energy in buildings|
|13||Ordinance on civil-building energy conservation||August 2008||States that China encourages and supports geothermal energy application|
|14||Notice on the promotion of shallow geothermal energy development and utilization||December 2008||Makes deployment for the promotion of survey assessment, development and utilization planning and monitoring of shallow geothermal resources|
|15||Scheme of "Twelfth Five Year" comprehensive energy-saving emission reduction work||August 2011||Adjusts energy structure to develop wind energy, solar energy, geothermal energy and other renewable energy|
|15||“Twelfth Five-Year Plan” in renewable energy development||August 2012||Promotes the reasonable development and utilization of geothermal energy, and points out to construct the key geothermal projects for electricity and direct use|
|16||National “Twelve Five-Year” energy plan||January 2013||Increase proportion of geothermal energy use in buildings|
|17||Guidelines on promoting of geothermal energy development and utilization||January 2013||Sets a goal for geothermal energy development and utilization in 2015 and 2020, refers to the key tasks and subsidy policies|
|Year||Power Generation Energy Development/MWe||Direct Use/MWt|
|High Temperature||Low-Medium Temperature||EGS||Low-Medium Temperature||Shallow Geothermal|
|Installed Capacity (MWt)||Annual Energy Use (TJ/Year)||Installed Capacity (MWt)||Annual Energy Use (TJ/Year)|
|Individual Space Heating||-||-||-||-|
|Air Conditioning (Cooling)||-||-||-||-|
|Industrial Process Heat||145||2733||169||3304|
|Bathing and Swimming||1826||23886||2508||31,637|
|Other Uses (Specify)||-||-||-||-|
|Geothermal Heat Pumps||8898||75,348||11,781||100,311|
|Type||U.S. Capacity-Weighted Average LCOE (2015 $/MWh) for Plants Entering Service in 2022||Payback (Years)||Construction (Years)|
|Capacity Factor (%)||Levelized Capital Cost||Fixed O&M||Variable O&M (including Fuel)||Transmission Investment||Total System LCOE|
|Natural gas-fired||Conventional combined cycle||87||12.8||1.4||41.2||1.0||56.4||-||-|
|Advanced combined cycle||87||15.4||1.3||38.1||1.1||55.8||-||-|
|Conventional combustion turbine||30||37.1||6.5||58.9||2.9||105.4||-||-|
|Advanced combustion turbine||30||25.9||2.5||61.9||3.3||93.6||-||-|
|Stages||Surface Survey and Evaluation||Research and Development||Utilization and O&M||Beginning of Commercialization||Commercialization (Market)|
|Tax policies||Free||Free||Tax preference||Supplement||Normal|
|Risk||The higher||high||Medium||low||The lower|
|If X increase (decrease), Y increase (decrease) above (below) the amount of the original data.|
|If X increase (decrease), Y decrease (increase) below (above) the amount of the original data.|
|Period||Research and Development; Surface Exploration and Drilling||Field Development Including Production Drilling and Surface Equipment||Direct Use||Electrical Use||Funding Type|
|106 USD||106 USD||106 USD||106 USD||%||%|
|Resources Tax (RT)||Tax on profits generated from the drilling exploration of geothermal resources and it adjusts the interests of the relationship between the various economic agents of a fiscal and taxation system||Exploration fee: 100 RMB/km2·year from 1–3 years and an increase of 100 RMB/km2·year from the 4th year; the highest fee is no more than 500 RMB/km2·year; |
Mining royalties: 1000 RMB/km2·year; Resources ecological compensation fee: mineral sales revenue×compensation rate (2%–4%) × Ratio of Mining Recovery
|Corporate Income Tax (CIT)||Tax imposed on individuals or entities that varies with the income or profits||25%||15%||17%|
|Value-Added Tax (VAT)||Tax levied on the production of geothermal energy||17%||6%||13%|
|Business Tax (BT)||Tax payable against turnover by all enterprises and individuals undertaking the following business activities: providing taxable services, including communication, transport, heating or electricity power construction, finance and insurance, and service industries; transferring the provision of intangible assets; and selling immovable properties||6%||Free||6%|
|Tariff||Tax on imports or exports||3%||Free||3%|
|Urban Maintenance and Construction Tax (UMCT) and EDUCATION Surcharge (ES)||Taxes based on value add tax, business tax and consumer tax||UMCT = (VAT + BT) × 7%|
ES = (VAT + BT) × 3%
|Carbon Tax||Tax levied on the carbon content of fuels||-||Free||10 RMB/ton|
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