A variety of funding mechanisms have been used to stimulate growth in the solar photovoltaic (PV) market, extend electricity generation in remote rural areas and support research, development and technology demonstration.

Market stimulation has been driven by the need either to reduce the higher cost of PV generated electricity relative to power from conventional hydrocarbon sources, or to minimize the high initial cost of PV systems, even where they may provide cost effective long term solutions. This policy is set against recognition that growth of the PV market has been constrained by poor awareness of the capability of PV, and that current costs will continue to steadily decline through a combination of technological advance and manufacturing economies of scale. The underlying driving force is environmental, but in developing countries there has also been a desire to promote PV as a clean power source to improve basic living standards. This has attracted developmental funding from international bodies.

Another factor behind market stimulation is to capture the jobs that can be created by the development of such a major new industry, whether in manufacturing or marketing of PV products and services. Funding has therefore sought to break the "chicken and egg" situation of an industry with an emerging technology that needs a big enough market to generate the commercial returns necessary to provide the investment that will make it cost competitive in the long term.

Financial assistance is available in many countries/states from federal and/or local government. It may range from a tax credit on the purchase of a PV system to a rebate (grant) towards the initial purchase of the system.

It may provide for a high (subsidized) rate for the purchase of electricity exported from the PV system to the grid (a rate-based subsidy). Such rebate and rate-based subsidy approaches have been extremely successful in growing the PV market in Germany and Japan.

However, their long-term impact, as the level of subsidy diminishes or disappears has yet to be established. Separately, or in combination with the above measures, banks may offer low interest loans to finance the system purchase. In doing so, the banks will probably be working in partnership with governments and utilities.

Local government may also offer financial support especially where there are local environmental concerns or where job creation is being sought. In some countries, free-market mechanisms (solar power exchanges) have emerged to encourage purchase of solar generated electricity at commercial rates and match it to PV power generation projects.

Developmental aid funding from multi-lateral and bi-lateral aid agencies includes loans for infrastructure development, loans and grants for the provision of technical services, equity funding for new ventures, and export credit guarantees. Several agencies have programmes that specifically include solar activities.

Major projects of tens of $M have installed PV systems in remote villages in countries such as Indonesia and the Philippines. An increasing trend is the funding of sustainable, locally-based enterprises that can provide PV systems in an affordable way through micro-finance, for example using revolving funds.

Utilities are increasingly responding to the demand for green electricity by looking at mechanisms by which they can finance growth in their renewable generating capacity. This has been especially effective in the USA.

Utilities may raise funds by voluntary levies on customers or by charging a premium green electricity tariff and match the revenue generated with investment in plant. Alternatively, they may choose to invest in systems sited on the customers' premises and lease them to the consumer. Overall, this provides a route to market growth that is relatively free of government intervention.

Solarbuzz offers a comprehensive guide to the funding sources available in all the above areas as part of its Reports service for the Solar Energy Industry and other Professionals.

The Solarbuzz funding database contains the most comprehensive list anywhere of programs that offer funding for solar activities. These programs provide the major driving force for the development of the solar PV market in grid-connected and off-grid rural applications. They span a wide range of different approaches to stimulate the PV market: some more successful than others.

This information provides, on one hand, the basis of gaining a full understanding of how to fund PV market development, and on the other, direct guidance on where to obtain funding to promote the efforts of companies and organizations seeking to grow their share of the PV market.

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