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

by Kate Gordon, via Center for the Next Generation

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.

This piece was cross-posted from the AB32 Digest, the Center for the Next Generation’s weekly roundup of news on California’s landmark climate change law.  To read the AB32 Digest or subscribe, visit

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

  1. Leif says:

    I believe California is exploring a general investment, GREEN? “public retirement Fund” similar to the state employers retirement fund. That would be a good program to throw some starting capital into as well. There it could draw some interest while stimulating a much needed capital investment source from small investors with no place to put their meager savings without Wall Street Sharks biting hither and yon.

  2. Omega Centauri says:

    Can the state start a program to serious reduce what are termed in the industry “soft costs”. These are not hardware related, but are the costs of filing for permits, obtaining inspections, and so forth. These vary from state to county to city, as well as utility, and can be more than a dollar a watt for a typical residential system. The Germans are reportedly doing rooftop solar at $2.24 per watt, and we are above $5!

  3. Mulga Mumblebrain says:

    The Germans, you see, had their period of fascistic madness so recently that the memory is still strong. No doubt, if humanity, by some miracle, survives the next fifty years, future generations of Americans will look back in angst at the current madness of the Right.