Sunday, November 25, 2012

Can California Cap And Trade Program Help Bridge Solar Financing Gap?

61.2 million greenhouse gas allowances go on sale November 14, in the first auction under California’s cap and trade program. That means it’s about time to decide how we’re going to spend the revenues, which are projected to be somewhere between $660 million to $3 billion. A billion of those dollars are already earmarked for General Fund relief and existing programs, but that still leaves a lot to work with. We know the funds must be spent to meet the goals of AB32—making California less carbon-intensive—but we don’t know exactly what that will mean in practice.

Which brings me to a new report about the vast potential for new rooftop solar projects in California. According to the research, conducted by Energy and Environmental Economics for the California Public Utility Commission (CPUC), the state could add 15 GW of new local solar – we’re talking about rooftops, not utility-scale installations—to the grid by 2020, making the state’s electricity system more diverse and saving utilities the cost of transmission infrastructure and maintenance to boot. You can find a great synopsis of the report here.

So how do the auction and these solar projects relate to one another? Well, ideally, if we have all this solar potential in California, one great use for auction revenues would be to somehow use them to dramatically scale up distributed solar across the state.

There are a number of ways to do this, but one I’ve been noodling on ever since the cleantech CEO retreat I went to 2 weeks ago is to give solar project developers the upfront capital they need to overcome what’s been the most major barrier to solar development: inability to find tax equity partners. The Federal Investment Tax Credit could be a great solar financing tool, but many of these developers are small and scrappy, and don’t have high enough taxes that a tax credit is meaningful to them. What they need is up front capital to do their projects, which they can they pay back through consumer energy savings once the solar system is up. For them, a state revolving loan fund might be a great use of AB32 revenues – a fund that, because it would be constantly replenished, would be a smart use of government resources to boot.

These are the kinds of issues that my team at The Center for the Next Generation will be thinking about over the coming months. We’d love your thoughts, as always.


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