How These Green Companies Are Gouging Consumers With the Government’s Help
Stephen Moore / Joel Griffith /
Solar panels are being installed on the roofs of homes and businesses all across America at a record pace. The fad is the latest way for families to “go green” — the energy equivalent of blue recycling bins.
The Solar Energy Industries Association likes to tout the industry’s “amazing success” — but it’s holding a “Shout Out For Solar” social media event Friday as it sees an “uncertain future.”
That’s because its continued success depends on a cascade of government subsidies, including a 30 percent federal investment credit that expires at the end of 2016.
Guess what? Taxpayers are paying for it — and through the metaphorical roof.
Thanks to the slew of solar industry subsidies, homeowners can effectively contract with solar leasing firms that will install those panels for free. But they often get gouged later, as do taxpayers in one of the great corporate welfare scams of modern times.
Shady Solar Leasing Firms?
Congress is investigating if the industry is ensnaring homeowners in green energy “teaser” loans.
Rep. Paul Gosar, R-Ariz., a member of the Committee on Oversight and Government Reform, plus 11 House colleagues fired off a letter last month to the Federal Trade Commission asking if the booming solar leasing market — a “new industry with a limited track record and little regulatory oversight — poses a “considerable risk” to homeowners.
Some leasing companies “sold large numbers of subprime mortgages to unsuspecting homeowners in the runup to the subprime mortgage crisis,” the investigators have found.
California and Louisiana homeowners have filed class-action lawsuits vs. solar leasing companies alleging fraudulent marketing campaigns that don’t warn customers of true costs and risks.
Meanwhile, utilities such as Edison International complain that regulators require them to buy solar power at inflated, money-losing rates. Ultimately they must pass the costs on to other ratepayers.
Net Metering Hits Utilities
Under this “net metering” scheme, utilities have to give a credit off their utility bills to solar homes, and this is subtracted from the cost of the electricity they do use from the electric grid system.
According to E&E News, a leading energy policy newsletter: “43 states, the District of Columbia and four U.S. territories have net metering policies in place, with differing capacity limits. Under the Energy Policy Act of 2005, all public utilities are required to offer net metering to customers upon request.”
None of these “renewable energy” subsidies to harvest the sun’s rays will have more than a tiny impact on greenhouse gas emissions. But when green homeowners can pass the costs on to their neighbors, then schemes like this can look attractive.
The solar subsidy comes on top of federal and state government- financed low-cost loans to solar companies such as Solyndra — many of which have gone bust, an analysis by the Institute for Energy Research shows.
Then there are “renewable energy standards” in about half the states that require utilities to buy a set percentage of their electric power from wind and solar energy. This hikes utility bills by forcing the power plants to buy power from higher-cost sources vs. more-affordable coal and natural gas.
The solar installation subsidy leader is SolarCity. Its advertisements romance customers with slogans like: “Go Solar, Install is Free” and “We … cover maintenance, repairs and insurance at no added cost…”
Homeowners buy the solar power system at an ultralow long-term interest rate while immediately receiving the prized 30% tax credit. Or they install the equipment with a long-term, no-money-down lease option.
SolarCity offers customers loans with financing with major banks including Bank of America and Citigroup.
According to SolarCity’s 2014 annual report, 93 percent of new customers enter into the second option. In a typical lease, SolarCity owns the equipment and pockets the tax credits. The homeowner pays SolarCity monthly for the energy individually consumed from the panels. The electric utility credits net metering proceeds to the homeowner.
These solar panels are installed regardless of whether the savings from the electric power generated covers the cost of materials, installation and upkeep. Often, they don’t come close.
For example, these handouts for small-scale home systems are so generous solar is frequently installed in areas with intermittent sunlight. None other than Google — which touts its green initiatives — recognized this problem with on-site energy production, rejecting such proposals as “not feasible.”
In Google’s own words, “At best the difference is one of appearance (Google would “look greener”), and at worst it reduces the impact of our investment because a project built in a less favorable location would generate less energy over its life.”
Google’s conclusion: What’s the point?
Rooftop solar’s largest subsidy is net metering, because it forces the local power company to purchase any excess energy generated by these home systems, regardless whether demand exists for the energy.
A sunny day with below-normal energy demand may lead to a surplus of electric power. The homeowners can sell this unneeded solar power at a tidy profit to an unwilling buyer at full retail cost — a level often four times the wholesale rate.
Solar panel users are guaranteed access to the electric grid when they need it — on stormy or cloudy days, for example. But they fail to pay their fair share for construction and upkeep of the grid, making them free riders.
With power generation plants, fixed costs can make up 20 percent to 50 percent of electricity’s retail price.
So solar users don’t have to pay for the fixed cost of the grid system, but get to charge for its cost imbedded in the retail price of electricity when they sell to the grid.
Each solar panel home enjoys a $1,000 subsidy paid for by their neighbors and other grid users, according to Greg Bernosky of the Arizona Public Service Co.
A few years ago, the Institute for Energy Research found solar energy receives more than $700 in total subsidies per megawatt-hour produced. The per-megawatt subsidies to oil and gas — which President Obama rails against — were less than one-one hundredth as large.
It’s highly doubtful the solar industry could survive without these corporate welfare handouts. SolarCity admitted as much in its annual report:
“Our business currently depends on the availability of rebates, tax credits and other financial incentives. The expiration, elimination or reduction of these rebates, credits and incentives would adversely impact our business.”
Rep. Gosar isn’t worried just about the taxpayers, but the families that have been lured by “deceptive marketing strategies” into sucker deals. His investigation has found that “homeowners who signed these zero-money-down leases are struggling to sell their homes” and may not have been “fully aware of the terms of their 20- (to)30-year leases.”
In some cases these pay-me-later long-term leases exceed the life of the roof or the homeowner’s intention to live in the home.
The class actions in Louisiana and California allege solar panel companies overstated potential savings. The California lawsuit vs. SunRun complains that its website claimed “nationwide, electricity rates have been increasing 6 percent per year over the last thirty years … and there’s no evidence that this trend will reverse anytime soon.”
These claims stand in stark contrast to U.S. Energy Information Administration data showing that residential electricity prices have leveled off in recent years.
SolarCity claims “you can watch your savings grow over time” by locking in “low, predictable” solar energy rates. Yet, the fine print indicates solar power costs on home systems will increase by up to 2.9 percent annually for 20 to 30 years. Hardly a bargain if long-term electricity trends have reversed due to the natural gas boom.
SolarCity has not responded to our request for comment.
Meanwhile, the handouts keep coming as the Obama administration continues to tout renewable energy as the power source of the future. The solar industry boasts it plans on issuing one million new long-term leases by 2018. All of this at a time when solar’s economics have been crushed by the 50 percent fall in oil and gas prices since last summer.
Don’t be surprised if all of this means massive taxpayer losses that could make Solyndra look like a picnic by comparison.
Originally appeared in Investors Business Daily.