After reading “Solar leases can lighten utility costs at home” , my reaction is that this decision is highly complex and there is far more to it than meets the eye.
Recently, I investigated eight solar providers serving the Capital Region. I found the decision to go solar difficult and complicated.
Given my work as an engineer for New York regulating public utilities, I reasoned that if I found it complex and difficult to assess, most homeowners would, too.
One of many concerns: The solar industry is in its infancy; some, perhaps many, providers will fail, given multi-decade contract terms.
We have received dozens of calls from providers from across the country. After my research, I began asking each caller if they would send me a copy of their standard contract before setting up an appointment — every one immediately hung up. How confident are you in this new industry?
Homeowners face unprecedented cicumstances. Well-established federal and state policies now strongly favor renewable energy. Large tax benefits (i.e. subsidies) exist to sell or buy renewable energy. Fat referral bonuses abound. Solar energy requires citizens to risk capital on developing technologies to further governments’ ambitious renewable energy goals.
These policies enable and empower citizen participation in energy choice upon which they must rely — decisions formerly made by policymakers and public utilities.
Consumers now have much greater responsibility, and culpability, for determining their energy sources. They also will dictate environmental consequences — the extent to which renewable energy will displace, over time, other forms that pollute the air and create nuclear waste, where governments’ resolution of its disposal is to kick the can down the road. Policies favoring renewable energy can also change — after consumers already have signed contracts that run for decades.
Beyond policy issues, what recourse will consumers have with providers? Do contracts have mediation clauses, or must one hire an attorney? When performing due diligence on eight providers, Better Business Bureau ratings ranged from A+ to F. While BBB ratings are no guarantee, it is a neutral nonprofit that provides consumers valuable information.
Issues and questions
The following is a partial summary of issues and a few key questions:
At least four types of solar options were found:
a) Purchase Power Agreements (PPAs) (which are not addressed in the Gazette article);
c) Pre-paid Leases; and
d) Purchase options.
Some local providers offer PPAs; are they preferable to lease or purchase options? Some providers install minimum panels, others overdesign, which can vary based on economic (and sometimes perverse) incentives. Some use a single “string” inverter often with a 10-year life. Others favor “micro inverters” on each panel, some with 25 year warranties, allowing panel-by-panel monitoring. (Inverters convert the DC electricity to alternating current (AC) electricity, which is the type used by your home.)
For purchased systems, are panel and inverter warranties pro-rated by years or full replacement? Will the provider be in business to honor warranties? Are systems transferrable if the house is sold, if so, at what fees?
One purchased system, for a modest-sized residential, was $12,500 list with a best-case scenario of $8,000 in federal and state rebates, resulting in a $4,500 net cost. One simple PPA, with no upfront cost, locks in 10 cents per kilowatt hour for 20 years with 3 percent max escalation annually, reflected, at provider discretion. Does the contract allow makeup in future years, for years not escalated?
Consultation with legal and tax professionals is highly recommended before signing contracts.
Requesting a copy of the contract immediately is highly recommended to give consumers ample opportunity to examine the fine print before making commitments. Would reluctance to provide a contract be a red flag, indicating lack of transparency? Does the provider encourage, or fear, careful legal review that might reveal onerous consumer provisions? The providers’ interests are surely protected — are yours?
What equipment and labor warranties, and maintenance provisions apply? When the roof needs replacing, what will it cost to remove everything and subsequently re-install? By whom? Some contracts specify cost; others are unstated. On a purchase, what is the installed replacement cost of string inverter with only a 10-year warranty? If a lease or PPA, if the homeowner wants to sell, what are requirements and fees?
If prospective buyer is willing to take on lease or PPA payments, can providers credit check and block sale?
Pursuing solar opportunities is worthwhile. Yet, as always, “caveat emptor” applies — let the buyer beware because signing contracts, some with 20-year terms, involving thousands of dollars of costs; exposure to future rate design changes; changes in public policy; and the vagaries of unregulated businesses, solar providers and equipment manufacturers carries definite risks, some foreseeable and others not.
One conclusion of mine: It is not a decision to be rushed and the “siren song” of zero-down should be a warning that careful investigation is warranted.
Under any scenario, due diligence is needed which, as I discovered, is a challenging, time-consuming process, even for those versed in energy matters. And one should consider consulting legal and tax experts, as necessary, before final decisions are made.
Christopher Corbett is an engineer who from 1974-2006 was employed by the New York State Department of Public Service in the auditing and rate regulation of public utilities. He also is a member of the Adirondack Mountain Club.