Determining optimal state support for the development of renewable energy investments by entropy method

Abstract

Renewable energies contribute to the social and economic development of countries in many ways. Primarily, no carbon gas is released into the atmosphere as a result of the use of renewable energy. Thanks to the reduction of air pollution, the number of sick people in the country will decrease. This stated situation will both reduce health costs and minimize the loss of labor force in the country. In addition to the mentioned issue, countries will be able to produce their own energy thanks to the use of renewable energy. This will reduce countries’ dependence on foreign energy. This will reduce the economic fragility of the country. However, there are some disadvantages in using renewable energy. The biggest problem in this process is that the initial installation costs of renewable energy investments are very high. This problem reduces the motivation of investors to invest in this area. Therefore, the support that the state will provide to investors is of vital importance in increasing renewable energy investments. In this study, it is aimed to determine the most important government incentive that will contribute to the increase of renewable energy investments. In this framework, a detailed literature review has been made on the subject and 5 different state supports have been determined. Then, an analysis has been carried out with the Entropy method in order to determine which of these support types are more effective. In this process, the views of 3 different academicians who have detailed knowledge on the subject are consulted. The findings indicate that tax incentive is the most important state support to improve renewable energy investments. In addition to this issue, it is also concluded that location support and fixed-price application are other significant factors to reach this objective. Nevertheless, financial incentives and funding for research and development studies are on the last ranks. In this framework, the government should focus primarily on tax incentives in order to increase renewable energy investments. In this context, it would be appropriate to reduce the income tax from investors and the taxes on the wage income of workers employed in this sector. In this way, companies will gain a serious cost advantage, and this will contribute to the orientation of investors to this field.