UC Berkeley

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.