20 T. WAKIYAMA ET AL.
2.4.2 Commercial SectorIn the case of commercial sector solar power generation, the cash flow
analysis is constructed differently from that employs for the household
sector. We assume that a company creates an electricity generation enter-
prise as a sole business and that there are thus no profits from other forms
of business within a company. Investment decisions made in a company are
determined by considering various factors (e.g., based on the benefits that
may result from investment and on the amounts and durations of returns
from investment on the installation of solar power generation facilities).
For our NPV calculations, we estimate the yearly investment depre-
ciation on 50 kW of solar generation. Solar insolation is also estimated
for up to 20 years using the same mean-reverting process used for the
household data. Future cash flows are calculated for 2013 until 2032. In
case of the commercial sector (more than 10 kW capacity of solar PV),
the FIT time period is 20 years. For the FIT calculations, as in the same
setting with households, we assume that FIT was registered in FY 2012
and that investments began in April 2013. We also calculate NPV and
IRR values for a fixed rate of 40 JPY/kWh for more than 10 kW capacity
in 2012 using a 20-year base period. In the analysis, the risks and returns
for different FIT rates (40 JPY/kWh in 2012 and 36 JPY/kWh in 2013)
are compared.
Moreover, This paper estimates the impact of tax exemptions with/
without green tax cuts. For cash flow calculations involving solar PV in
private companies, we first construct a balance sheet for solar PV generation
businesses. With regard to tax policies promoting renewable energy, FY
2012 tax system revisions are designed to promote environmentally related
investments and to create a system that allows for the immediate deprecia-
tion of PV and wind power generation systems that have been approved
(MOF 2012 ). On a national level, green investment tax cuts allow a com-
pany to claim either special depreciation (common depreciation plus 30 %
depreciation) or immediate depreciation of the acquisition cost of renew-
able energy facilities (100 %). In the case of small- and medium-sized enter-
prises, tax reductions equivalent to 7 % of the acquisition cost of solar power
generation equipment can be applied up to a limit of 30 % of corporate tax^10
(CAS 2010 ). In this case study, this paper compares normal depreciation
and immediate depreciation to examine the effect of tax policy.
Generally speaking, tax policies are designed to offset future surplus tax-
able income with net operating loss carry forwards from previous periods