The purpose of the law is to establish incentives to promote hydroelectric generation systems and other non conventional renewable energies. The law provides incentives for renewables, with specific laws to promote electricity from biomass (Law 42 of 2011), wind power (Law 44 of 2011) and solar power (Law 37 of 2013).
Fiscal incentives are also provided by the 2004 law and the various technology-specific promotion laws (law 42, law 44 and law 37). Law 45 of 2004 provides tax exemption for imported equipment and 25% investment tax credits, deductible over 10 years. Plants smaller than 10MW can obtain a 100% deductible, while those between 10-20MW can only obtain 50% deductible. An additional 5% investment tax credit is provided for investment in project civil works that subsequently becomes public infrastructure (e.g. roads).
The law defines mini hydro as <10MW and allowes for direct contract with distribution companies for them, up to 15% of distribution company maximum demand. In addition, it established that renewables under 10MW are exempted from transmission or distribution fees for direct or occasional sales. Renewable energy generators between 10MW and 20MW pay no transmission or distribution fees for the first 10MW for 10 years.
For energy access, the law 45 establishes that renewable energy power plants with high-voltage connections must enable a mid-voltage output for rural electrification purposes.