Geothermal handbook: PlanninG and Financing power Generation t e c h n I c a L r e p o r t 2 / 2

Source of 
 concessional
 
capital or Subsidy
investment vs. 
 
operating Phase
type of incentive
example of 
 instrument
F I g u r E 3 . 4
Policy and Regulatory Instruments Supporting Deployment of Renewable Electricity
Mostly Investment Phase
Source | Authors.
Government Budget or End-Users
Government Budget or Donors
Quantity-Based
Instruments
Price-Based
Instruments
Investment
Grants or Soft
Loans
Quota
Obligation
(RPS)
Feed-In Tariffs
(FITs)
Tax Breaks, etc.
Capital Subsidy
Fiscal Incentives
Operating Phase

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C h a p t e r 3
to be absorbed either by the rate-payers or the government/tax-payers. The payoff comes in the form 
of increased capital inflow to the country’s renewable energy sector. For renewable energy projects 
in which the main barrier is one of incremental cost, investors tend to find FIT-supported projects 
particularly attractive, since the tariff levels are usually set with the objective of guaranteeing attractive 
returns on investor’s equity. Theoretical advantages of RPS and TGC schemes include the introduction 
of fewer pricing distortions than with FIT schemes.
Geothermal power stands out as a special case among renewable energy sources, and the scope of 
application of the policy instruments discussed here needs to be carefully considered in the specific 
context of the country at hand. There are only a few examples of FIT schemes successfully catalyzing 
the start of geothermal exploitation in a country, with most of the examples found in continental Europe. 
Outside of Europe, Africa and Asia have seen budding interest in using feed-in tariffs for geothermal 
power (Gipe 2011). The noteworthy example of Kenya is considered below. Quota obligation systems 
or RPS combined with TGC have been applied to geothermal power in the USA, Italy, and Japan 
(IEA 2008). In the developing world, the Philippines has recently introduced provisions for RPS in its 
legislation covering geothermal, among other forms of renewable energy.