A Review of Emerging State Finance Tools to Advance Solar Generation

March 1, 2010

by Charles Kubert and Mark Sinclair, CESA

This report provides an overview and specific examples of three creative finance tools that any state can use to support solar PV in the context of an existing RPS: solar set-asides, feed-in tariffs, and reverse auction mechanisms. These tools are primarily targeted at commercial- and utility-scale projects, and use of any of them can reduce the need for states to provide direct rebates and incentives to PV projects. These tools, if smartly designed, can allow states to build sustainable solar markets with programs that are economically efficient, reward PV system performance, allow for program continuity, advance market transformation and avoid rebate dependency. The authors contend that providing special treatment to PV projects in the context of an RPS is important if states are to build and maintain public support for their RPS programs, particularly in cases where solar is the most widely accessible in-state renewable energy resource.