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Abstract
Renewable energy generation, and distributed solar generation in particular, has made considerable progress over the last few years. The sector has benefited from a flexible tax policy and incentives regime, which have helped develop the sector to be an important part of the energy portfolio mix for utilities and distributed generation. The sector faces considerable hurdles going forward as policy schemes are set to expire that could affect capital availability from traditional sources, as tax and other incentives expire. A need for alternative capital sources is key to the long-term growth of the sector. Solar-structured transactions, within a capital markets securitization approach, can help increase the penetration of solar energy. In this article, the author provides an introduction to solar finance, explains the components in a solar power purchase agreement (PPA), develops an investment thesis for solar transactions, discusses the challenges in developing a new market, outlines key risk issues of concern to rating agencies, discusses new solar-financing models, and explains the basics of solar securitization, including the rationale, the credit process, and the structures. A liquid, transparent, and standardized process for solar PPA securitization (and solar leases) will benefit all stakeholders by providing transparency, broader appeal to investors, lower costs, and wider access to capital, resulting in broader adoption of solar energy by consumers and commercial customers.
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