When Going Green Means Profits

Regulatory rules and government subsidies are popping up across the country to encourage consumers to put solar panels on their rooftops. In addition, new financing arrangements have enabled some consumers to lease rooftop solar panels for very little or no initial investment.

On the upside, rooftop solar energy can enable a consumer to be environmentally friendly and has the potential to save consumers money; but on the downside, the “green” in solar panel leases may be more about solar leasing companies’ profitable scamming of consumers, taxpayers and other electricity users.

Fortunately, states are finally developing consumer protections and providing consumers with more information on these scams, including solar consumer guides (see Arizona, South Carolina and Iowa, and (just released) Louisiana,), as well as and proposed consumer protection legislation (see Arizona).

What problem are these consumer guides and laws seeking to correct? To encourage investment in solar power, state and federal governments have been offering tax credits and rebates for installing solar panels, including a 30% federal tax credit. These subsides have encouraged many rooftop solar companies to pursue these subsidies and rebates, and in some case deceiving consumers with over-promised benefits.

Here is how it is done.  Most rooftop solar companies have found that by leasing solar panels to consumers, rather than selling them, the company can retain ownership of the various subsidies that would traditionally go to the consumer. Using this scheme, its estimated rooftop solar companies have received $1.5 billion alone from California taxpayers through this arrangement.

SolarCity, a leader in the solar panel industry, recently said they’ve received over $400 million in taxpayer dollars just in the past few years. As economist Veronique de Rugy notes, that number is actually much higher when you accumulate the total number of state, local and federal grants and subsidies SolarCity has received.

The leasing scheme mentioned above has become so problematic that even Democratic members of Congress, mostly champions of solar energy, have been asking questions about the setup, going so far as to ask the Federal Trade Commission (FTC) to look into the matter. Some in Congress are apparently worried about deceptive sales tactics used to overstate the savings that solar panels bring, which we’ve previously detailed.

Just recently, Stealth Solar admitted to fraud after telling Arizona customers they their solar system would save a lot of money and not cost them anything. The company’s owners will now pay restitution consumers and civil penalties to the state, thanks to action by the state’s Attorney General.

Another problematic issue that ACI has previously written about is a program where solar panel consumers can sell their electricity back to the electric utility – called net metering. While this may sound like a good deal for consumers, in theory, it forces electric utilities to purchase electricity it may not need at prices that do not make sound business or economic sense – increasing costs overall for consumers across the board.

In addition, due to the way many net metering programs are structured, it allows a solar panel consumer to shift the costs of paying for the electric power grid onto other electricity consumers. This ends up being a regressive tax on the poorest consumers who pick up the tab for the generally more wealthy solar consumers. In fact, one report conducted by the California Public Utilities Commission showed that the average consumer with solar panels had a higher income than 68% of households. Passing these higher electricity costs to those less off would definitely be considered anti-consumer.

Although it may seem worthwhile that public policies encourage homeowners to put solar panels on their roofs, net metering produces a regressive and negative impact on everyone who uses electricity but who is unable to purchase or lease solar panels. In addition, because of the numerous subsidies available at the state and federal level, solar leasing companies are actively misleading consumers on the benefits of leasing solar panels in order to cash in on these subsidies.

Luckily, states are beginning to take steps to protect consumers against solar leasing company fraud and reform net metering to eliminate or limit the regressive nature of these programs. While Congress is right to call on the FTC to investigate the consumer scams, state governments are also well positioned to fix the public policy problem itself.

More needs to be done to take the “green” out of these solar scams.

Zack Christenson and Steve Pociask write for the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization.  For more information, visit www.theamericanconsumer.org

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