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Renewable Energy Financial Structures and the Impact on Solar Projects

April 1, 2012

Title: Impact of Financial Structure on the Cost of Solar Energy
Authors: Michael Mendelsohn, Claire Kreycik, Lori Bird, Paul Schwabe, and Karlynn Cory, NREL

To stimulate investment in renewable energy generation projects, the federal government developed a series of support structures that reduce taxes for eligible investors—the investment tax credit, the production tax credit, and accelerated depreciation. The nature of these tax incentives often requires an outside investor and a complex financial arrangement to allocate risk and reward among the parties. These financial arrangements are generally categorized as "advanced financial structures." Among renewable energy technologies, advanced financial structures were first widely deployed by the wind industry and are now being explored by the solar industry to support significant scale-up in project development. This report describes four of the most prevalent financial structures used by the renewable sector and evaluates the impact of financial structure on energy costs for utility-scale solar projects that use photovoltaic and CSP technologies.

—Jim Leyshon