Capitalism: A Sun Story
In 1956 the first solar cells were available for sale. The problem was that no one wanted to purchase them due to their incredibly high prices. The last six decades would see cells get cheaper and cheaper, until some time in the 2000s, solar actually became a profitable undertaking. Now that we have reached a point where most people are realizing that it makes sense to put solar panels on their rooftops, a sun rush has commenced. And now is time for the industry to face its most intense period of competition. Love it or hate it, that’s capitalism, baby!
A closer look at how capitalism plays a role in the energy transition is worth a fresh look. At question are some of the negative consequences the quest for profits the solar industry may breed. Channeling my inner Michael Moore for just a moment, I’d like to examine whether solar leasing is not only a bad choice for the consumer, but also for society at large by way of becoming a barrier to the nascent grassroots ideology known as energy democracy.
Industry movement seems to point in [the direction of democratized energy] with the rise of the smart grid, time-of-day pricing, distributed solar, and the electric vehicle. Together these technologies offer a vision of a less centralized energy system, one where communities and households ‘vote in’ or shape the electric grid by how they decide to consume energy, a phenomenon also called the Energy Internet.
Disadvantages of Solar Leasing
The disadvantages of solar leasing are thoroughly outlined in the marketing content found at solarleasedisadvantage.com. Solar leasing will not save you much money, and could possibly leave you high and dry when you try to sell your house, according to the site.
Now, I’m all for any kind of renewable energy. Humanity can overcome temporary eras of class stratification, political strife, or even war (waged with conventional weapons), but carbon pollution continued at its current rate could spell the end, or a dystopian existence, for humanity. So, fair or unfair, solar leasing, which reduces carbon pollution, is better than nothing. But just because something is better than nothing doesn’t mean we should accept it and move on. We should always be looking for ways to improve.
Consolidation of the Solar Industry
As the solar market matures, consolidation is inevitable. Smaller companies will be forced into bankrupcty or swallowed up by the big dogs. Consolidation of the solar industry will likely help the industry become more efficient. But with solar leasing as the dominant sales tactic for residential solar, the consolidation of the industry may create a new monolithic structure in energy production. That’s what proponents of energy democracy would like to avoid.
Wall Street, always ready to pounce upon an opportunity, is now helping fund large solar companies. The deep pockets of investment firms are happy to contribute to solar these days. GE has just invested $15 million with leasing company Sungevity, as a more recent example. As they buy up more shares, these firms hold more sway in the boardroom. Companies such as Solar City, Sun Run, Sun Power, and Sun Edison, having achieved success by putting solar leasing at the forefront of their sales strategies, will perpetuate the leasing model to appease shareholders.
Wealthy homeowners, on the other hand, will not choose to lease. They’ll see the obvious profits that ownership entails. At the bottom of the pyramid are homeowners that are just making ends meet. These are people that can’t afford to easily purchase the solar installations, but want to pinch a few bucks off their electric bills through leasing. They are increasingly becoming the bread and butter for solar installation companies. On the surface, this seems like a good deal for all. If we dig deeper, however, inequalities become apparent.
The Rich Get Richer
After years of turning down offers from solar salesmen, the wealthy are finally jumping on the solar bandwagon, due largely to the drop in solar cell prices and the opportunity costs associated with not partaking in this space. They purchase the panels outright instead of leasing. In most cases they’ll have a payback period of about six years. After that, the free money rolls in for the next 20 to 25 years. That will add up to an extra $50,000 to $100,000 for the lifetime of the panels. A pretty savvy investment, to say the least. Good for them! But most people don’t get to live with these idyllic circumstances. Hardworking people across the nation are always facing new challenges as the man tries to keep them down. Let’s move on to a more common economic situation.
The Poor Get Marginally Less Poor
In California and a few other states, it’s become commonplace to see solar salesmen canvassing in low income neighborhoods. They offer no money down and a guarantee to save on your electric bill. You can save money and help prevent more climate change at the same time. What’s to lose? Well, as stated previously, you could end up not being able to sell your house because a potential buyer doesn’t want to assume the lease. But there’s more to it than that.
Rock solid contracts are signed and must be adhered to. Leasers never get to reach that magic, end of the rainbow, break even moment. While the wealthy end up turning their solar investment into a cash cow, the leasers are stuck paying monthly bills for the solar system for up to 20 years. In the end, a larger share of the pie is occupied by fewer and fewer people. Wealthy people outright purchase the panels, and within a few years, reap rich rewards. As the rightful owners, they get all of the government incentives attached to a leasing contract. The same is true for the leasing companies.
There’s nothing new about this situation. Since the dawn of capitalism these worries have existed. Home appliance stores like Rent-A-Center have been preying upon the financially challenged for years. And we’ve all seen what predatory lending can do to the economy. Solar leasing is a different beast in that it actually does save you money in most cases. But it denies opportunity. The issue is whether there is not a better way to build a world with more renewable energy that also helps level the playing field, or at the very least, doesn’t help to create more uneven distribution of wealth.
Energy Democracy Revisited
Leasing puts the power (both kinds) in the hands of big organizations. Solar leasing will lead to the trade of one monopoly, the utilities, for another, big solar. Energy democracy will be unreachable under the leasing model.
We can produce both clean energy and great wealth with solar, according to Toby Seba of Stanford University. Comparing the growth of solar PV to the sudden and rapid growth in automobiles and cell phones in recent history, Seba points out that this is “the largest (legal) wealth creation opportunity in history.” The key to achieving this growth is financing, claims Seba. Along with crowd sourcing projects like Mosaic, and Tesla’s free fuel model, he includes leasing as one of the more creative innovations in the solar industry. And he was correct. Solar leasing, along with cheaper cell prices, helped spark tremendous growth. But what are the costs?
Here’s the rub. Individuals and communities want to participate in the this new wealth generation opportunity. John Farrell, in an article written to address distributed solar back in 2011, wrote:
. . . opponents to new wind and solar power have two key desires: “people want to avoid environmental and personal harm” and they also want to “share in the economic benefits of their local renewable energy resources.” It’s not that people are made physically ill by new renewable energy projects. Rather, they are sick and tired of seeing the economic benefits of their local wind and sun leaving their community.
Farell proclaims that there are both political and economical advantages to localized distribution of energy. His argument is that less resistance to renewable energy will result from democratizing the electrical grid through distributed renewable energy generation. In short, using the utilities to transition to renewable energy is not conducive to the so called energy revolution or energy democracy. With solar leasing, energy is produced locally, however, ownership is, once again, centralized within the leasing organizations and their backers.
Solutions to Solar Leasing
The government could step in to help. Financing options including guaranteed loans with fixed low interest rates for middle and low income families would help more families go solar. It would also help get some people off other forms of government assistance. Wouldn’t it be better to provide more financial assistance to those in need by way of clean energy with net-metered solar panels than by issuing food stamps?
Businesses could change their policies. This is highly unlikely given the profits these companies have seen from leasing. But with some creativity in financing, a better company image and more profits could result for these bold companies. Solar Home is already on the case, offering zero down financing and a low pricing strategy. Getting rid of the leasing model immediately would be a blow to solar businesses like Solar City, who’ve become dependent on this sales strategy. Instead, they should gradually reduce their leasing offers, while at the same time offer refinancing for existing leasers as a pathway towards ownership. California utility PG&E and a few other organizations are making efforts to help low income households go solar.
Solar City offers a Power Purchase Agreement, a contract to pay a locked-in kilowatt per hour rate. It also offers more flexibility in financing. These PPA agreements allow for leasers to purchase, upgrade, or uninstall the panels after the fifth year. If a purchase agreement is made, however, the tax incentives have long been claimed by Solar City and passed along to its investors. To their credit, Solar City does seem to be working toward a sweet spot. But they’ve not reached it yet.
In the end, however, the onus must be put on the consumer. Homeowners should just say no to leasing. Instead, they should seek the plan that gives them ownership and 100% of the local, state, and federal incentives. If the market demands an end to leasing, then it’s game over for the strategy.