Income tax incentives on renewable energy industry: Case of geothermal industry in USA and Indonesia

Renewable energy is derived from natural processes that are replenished constantly. In its various forms, it derives directly from the sun or from heat generated deep within the earth. Included in the definition is electricity and heat generated from solar, wind, ocean, hydropower, biomass, geothermal resources and biofuels, and hydrogen derived from renewable resources. USA is a market leader in terms of geothermal power, while Indonesia also has huge potential in geothermal industry. Tax incentives are also given in favor to develop this renewable energy industry. Due to the large capital investment required to install some of these systems, the tax incentives could prove to be the deciding factor when determining whether to pursue projects of this type. Indonesia as a developing country could learn and review incentives given by USA specifically in geothermal industry. Our study show that Indonesia might consider to give an indirect income tax incentives as tax credit for personal and corporate taxpayer who install a renewable energy system in their office or residence. This tax credit will indirectly boost sales of renewable energy industry and increase the attractiveness of Indonesia as a place of investment. This option can be considered as Indonesia has a huge potential for investment in renewable energy industry.