When I started writing about residential solar, one thing came up again and again—that there were lots of elderly and low-income people who had been convinced to sign up for solar and misled about the terms of their loans. Today I wrote about how this, along with some other financial shenanigans, may end up toppling the residential solar industry.
The Rooftop Solar Industry Could Be On the Verge of Collapse
This is a slightly complicated story, but it basically goes like this: Rooftop solar is expensive. Few homeowners wanted to spend the money to pay for it upfront. So big companies came up with a way to get people to sign up for no money down by selling solar leases to consumers. This was expensive, so to raise money to pay for these leases, they did two things: they sold the tax credits they could get because they, not the consumer, owned the panels, and they packaged the solar loans and sold them to investors as asset-backed securities.
This helped companies win over lots of consumers but it also put a lot of pressure on them to grow fast. To get a lot of tax credits, and to bundle and sell loans, you have to have a lot of systems to bundle together. You also have to grow quickly so you can spread the cost of all those expensive bankers and accountants over lots of people.
If you’ve heard of the Silicon Valley mantra of “move fast and break things,” you know that rapid growth sometimes works out for companies but it also often doesn’t work out for the rest of us. And that appears to be what has happened in a lot of rooftop solar companies. The cost of financialization significantly raised what consumers had to pay for rooftop solar, so it wasn’t as good a deal as it could be, and many people who get financing or loans don’t save that much on their energy bills.
The companies were also so focused on rapid growth that they looked the other way when door-to-door salesmen, who I wrote about here, lied to grannies and homeowners and sometimes even forged signatures and took out loans on behalf of people who didn’t even want solar systems. This is happening even as loans, rather than leases, become more prevalent in the solar industry. New companies pop up to offer loans and then give out TERRIBLE terms that they hide in the weeds, so that consumers think they’re getting a low interest rate but are actually paying 30% of the cost of the loan in fees.
This isn’t the only problem facing the residential solar industry. Some Wall Street analysts are accusing them of inflating the value of the tax credits they sold to investors, and “bamboozling,” in the words of one investor, the IRS. If they should have to pay back these tax credits, they’re going to be in trouble—they’re already incinerating money. And then there’s the problem of interest rates rising, homeowners losing appetite for rooftop solar, and states like California making residential solar more equitable but less profitable for homeowners.
What’s so frustrating about this whole situation is that if companies had just focused on selling solar, they might be fine. Some small, local installers who weren’t big enough to engage in financialization are doing okay, and one analyst told me that he expects all the big national ones to go away and only the small ones to survive. That could actually be better for consumers in the long run. Financialization has significantly driven up the cost of rooftop solar, even for the people who sign up for it without being misled. In Germany, where the market is dominated by local companies, solar costs about 50% less.
Some people have asked me if I hate solar as I’ve written about the problems in the industry. Not at all! I know we have to transition to more renewables to cut our reliance on fossil fuels. But I also think three things:
Relying on residential solar for the transition to renewables isn’t going to work, it represents a tiny, tiny percentage of renewable energy. Utility-scale and community scale solar can do a lot more. That’s not to say residential solar can’t work, but pushing it so much incentivizes companies to target homeowners for financial products that don’t benefit them, with the promise of saving the world.
There’s no reason to have giant, national solar companies. We don’t have giant, national roofing companies or carpenters or boiler repair companies. If you want to get solar, I think it makes a lot more sense to go with a trusted, local installer that neighbors or friends have used. It will likely be a lot less expensive, and at least you know you’re not paying for all those financial products they’re trying to make money off of.
Don’t buy anything from anyone knocking on your door. I know there’s a group of people (okay men) trying to revive the door-to-door sales industry, but it’s important to do a lot of research before making such a big investment. And the people knocking on your door are incentivized to close a sale, fast, so they can make money. Closing a deal fast is the opposite of what will help you save money and do research.
To put them all in one place, here are my three big stories on the residential solar industry:
Rooftop Solar Power Has a Dark Side
The Rooftop Solar Industry Could Be On the Verge of Collapse
Lastly, in case you don’t follow media twitter, there were a whole bunch of layoffs this week at TIME and at my former employer, the Los Angeles Times. I’m safe this time, but journalism increasingly feels like a game of musical chairs, and eventually, I, too, am going to lose my seat. Some really good people got laid off in these rounds, and it’s frustrating and demoralizing, especially because both companies are owned by billionaires. I’ve never seen a publication cut its way to success, but if you have, let me know!
What can you do? Not much. Subscribe to journalism, and not just the New York Times. Keep reading stuff that’s unique and well-written, and that AI couldn’t write. If you’re a billionaire, buy a news organization and turn it into a non-profit publication. That seems to be the only model that sort-of works, unless you want to be a puzzle or meme company that also happens to cover news.
Books to Fall Asleep To (BFAT)
This one was random, but I really enjoyed Precious Objects but Alicia Oltuski. The author’s father and grandfather were (are?) dealers in New York City’s diamond district along 47th street, where 90% of diamonds entering the U.S. pass through on their way to somewhere else. The industry is very insular, male, and orthodox Jewish, and the book is a fascinating window into the world of diamond dealers, brokers, cutters, and detectives. It also gives some history of diamonds and of her family’s involvement with the industry, which including bartering in a refugee camp.