Subsidy programs, such as feed-in tariffs, designed to make renewable technologies cost competitive with fossil fuels in electricity generation, have been effective in a number of nations. However, these subsidies can become very costly and they raise questions whether there are fair conditions for competition for different energy sources. As a result even effective programs face an uncertain future, changes in political support following the financial crises in Europe and the United States have demonstrated. In the case of solar photovoltaic energy, cost declines resulting from market-expansion schemes and the overall reductions in the price of photovoltaic cells have been significant particularly over the past decade. Yet, they have still left solar power up to 50% more expensive than conventional options. As an alternative in this paper we describe a financing tool based on a pollution abatement methodology. In developing this levelized cost of electricity framework we build a methodology to examine, and then utilize, the social costs and impacts of energy generation technologies. We find that as a means to bridge the cost gap between current conventional energy process and retail solar energy, a program based on a Property Assessed Clean Energy (PACE) loan program would, in the short-term, be an effective tool to accelerate grid parity between solar and conventional energy generation and in the long-term provides a theoretically and financially sound alternative to subsidy-based incentives. © 2014 International Energy Initiative. Published by Elsevier Ltd.

Growing global awareness of climate change has ushered in a new era demanding policy, financial and behavioural innovations to accelerate the transition to a clean energy economy. Dramatic price decreases in solar photovoltaics (PV) and public policy have underwritten the expansion of solar power, now accounting for the largest share of renewable energy in California and rising fast in other countries, such as Germany and Italy. Governments' efforts to expand solar generation base and integrate it into municipal, regional, and national energy systems, have spawned several programs that require rigorous policy evaluations to assess their effectiveness, costs and contribution to Paris Agreement's goals. In this study, we exploit a natural experiment in northern California to test the capacity of Property Assessed Clean Energy (PACE) to promote PV investment. PACE has been highly cost effective by more than doubling residential PV installations.