This article is not about defective solar panels.
That’s a bad enough problem that threatens to tarnish the reputation of the whole solar industry.
This piece is about a deeper and more dangerous situation for the solar industry than equipment failure.
The situation is when solar panels work great but solar marketing fails miserably.
Specifically, when a solar installer makes false or confusing claims about providing clean power to residential customers though the installer is already planning to sell the credit for producing the same power to somebody else.
That’s like selling energy twice. And it’s not just unethical, but it’s also illegal.
Confusing Marketing and Plain Old Fraud
When a homeowner gets solar panels on his roof, he probably thinks that his family will now be using solar power.
And that may be true if the homeowner paid to buy the solar array outright, the old-fashioned (and expensive) way.
But as solar financing becomes better, these days it’s more likely that the homeowner got a solar array at no-money down through an equipment lease or a power-purchase agreement.
And in that case, the homeowner may not deserve credit for producing and using renewable energy.
Many times, solar companies make lease or PPA financing viable through tapping into a second source of revenue on a solar project: selling solar renewable energy certificates, known as SRECs or solar RECs. The buyers are usually electric utilities required to produce a certain amount of renewable energy.
But if solar installers don’t explain that well enough to customers, then they can be guilty of deceptive solar marketing.
Solar RECs and Double Dipping
Here’s how it works.
First, a “community solar” customer pays the solar installer a monthly fee either to lease the solar panels from the company or to buy the power that they produce. Then, behind the scenes, the company gets more money by selling the solar RECs to electric utilities who need RECs.
Selling RECs has allowed solar companies to make residential solar more affordable.
But it’s got one big problem. If a company sells solar RECs for a project to a utility, then only that utility gets credit for producing solar power. The homeowner does not. He just becomes a guy who hosts solar panels on his property but still gets dirty power from the grid.
Unfortunately, that’s pretty hard for the average homeowner to understand. Even in an eco-topia like Vermont.
“Kevin Jones, deputy director at the Institute for Energy and the Environment at Vermont Law School, said most Vermonters don’t understand that when a solar panel’s renewable energy credits (RECs) are sold, the owner of that solar panel no longer draws renewable energy from it for their own use. Unscrupulous marketers capitalize on this ignorance, Jones said,” according to the Brattleboro Reformer.
And if an installer that sells solar RECs doesn’t explain clearly that even though the homeowner may have solar panels, his family really isn’t using solar power, then the company may be making false claims.
“If you go to [offenders’] websites, and look at their marketing material, it’s very clear to me that they’re trying to imply that they’re selling solar, when they’re not,” Jones said. “It’s not sufficient to bury something in the frequently asked questions, or in a provision of the contract when across your website and marketing materials, you’re selling something else.”
The Vermont Attorney General agrees that such marketing violates federal fraud laws, because it seems to sell the same solar energy to two different customers — both the utility that buys the RECs and the customer with the solar panels on his roof.
The AG’s office says these businesses cannot claim that their Vermont customers are buying solar power. Companies that do so violate federal consumer fraud laws, according to the letter from Assistant Attorney General Justin Kolber.
Kolber’s letter does not name any offenders, but he cites examples of deceptive marketing claims from SunCommon and NRG representatives.
Kolber said the state will seek civil penalties against renewable energy producers that falsely claim to sell “renewable,” or “solar” or even “clean” energy to Vermonters.
Vermont utilities won’t be required to produce renewable energy until 2017. So, up till now, much of Vermont’s solar power has gone to utilities in Massachusetts, where ambitious solar mandates have created a lucrative market for solar RECs.
But Vermont’s solar installers and developers have taken different approaches to talking about RECs and even to selling RECs at all.
In response to advice from the Federal Trade Commission, the state’s largest electric utility, Green Mountain Power, clarified its language about who gets credit for producing renewable energy. The company now notifies its solar customers when it sells RECs from their projects.
Meanwhile, installer SunCommon says that the letter quoted above from the state’s attorney general spurred the company to edit some of its marketing claims.
Since it does sell RECs, the company tries to make clear that community solar customers aren’t getting solar power.
At the same time, the company wants customers to know that they are still helping to build the region’s solar infrastructure.
As SunCommon President Duane Peterson explained to the Brattleboro Reformer:
SunCommon marketing parlance does use the term “solar credit” to refer to earnings toward their energy bill that community solar members receive from electricity their arrays produce. This is not the same as a renewable energy credit, Peterson said. His company’s use of the term “solar credit” in this sense could lead to some confusion, Peterson said.
Peterson contacted me directly and said that “SunCommon is committed to getting this right and is doing so.” He explained that “On the terminology ‘solar credits,’ that’s how our utilities describe the line on their bills indicating output from a community solar array. We didn’t invent that term.”
By contrast, for ethical reasons, Solaflect doesn’t sell RECs from its Vermont projects. To capitalize on this, the company advertises its offering as “true community solar”:
Solaflect’s Community Solar Parks guarantee that you get the real thing. When you go with Solaflect, you honestly and truly go solar.
But sticking to principles can be expensive. In this case, it puts the company at a disadvantage to competitors who do sell solar RECs.
“What the accounting says, is, it doesn’t matter if you have a solar panel on your roof, you haven’t gone solar if you’ve sold the RECs,” according to company spokesperson Jonathan Teller-Elsberg. “But 97% of people say, ‘I have a solar panel on my roof you pointy-headed academic, leave me alone.'”
Finally, Green Mountain Community Solar also sells RECs and is “happy to tell customers they’re not getting solar energy, because most of them invest in solar panels not to purchase renewable energy, but to save money.”
The company is so loud-and-proud about selling solar RECs, that its marketing language has earned praise from the Vermont Attorney General. Just check out the frank disclosure right on Green Mountain Community Solar’s homepage:
To the extent that our subscribers have not asked us to retire them, we retain all the renewable energy credits (RECs) associated with our solar farms. We sell these and use proceeds from them to keep the price per panel as low as possible. The sale of RECs is a market-based incentive, that brings more cost-effective solar online. If you would like us to retire any RECs associated with your purchase, we’ll do so, but to offset their lost contribution to our business plan’s revenue source, we have to increase your initial panel price by 20%.
Here is a primer on RECs that we follow. Remember, unless you pay us to retire your RECs, technically, according to the FTC, you are not buying solar power, nor are you buying renewable energy, you are simply buying solar panels and lowering your utility bills through emissions-free solar generation. We believe, however, that for every solar panel up and operating, some other generation source is offset – think about the spectrum of other generation energy sources: coal, natural gas, diesel, hydro, wind, nuclear.
Other states also want solar companies to be clear and honest with customers about whether they’re really getting solar power or just getting panels on their roof.
So it won’t hurt for solar companies everywhere to use language that’s as clear as possible about whether they sell solar RECs and what that means for the customers of their solar installations.
— Erik Curren, Curren Media Group