Monday, December 1, 2014

Solar Consumer Protections: Necessary Regulation or Needless Cost?

By Nick Lawton, Staff Attorney

The solar industry in the United States has grown dramatically in recent years, but complaints from consumers are driving regulators to consider imposing new—and potentially costly—consumer protection measures. The industry should band together to guarantee integrity in solar business practices in order to keep costs down and business booming.

Solar Power’s Dramatic Growth

Solar power is increasingly mainstream. Costs have fallen dramatically, and the U.S. solar industry has set new records for development for each of the last several years. The pace of solar development is even faster in other countries, such as China, and in other less developed nations as well. Tom Werner, the President and CEO of SunPower, predicts that by 2035 solar power will be a $5 trillion industry. Despite the remarkable recent deployment rates for solar power, Mr. Werner argues that “[w]e’ve just scratched the surface of this opportunity.” And Mr. Werner is not alone. The International Energy Association projects that solar power could satisfy 16% of the world’s energy needs by 2050. And closer to home, Environment America recently released a report revealing that each U.S. state has the technical potential to generate more solar power than it consumes.

Some investor-owned utilities, which just last year decried solar power as a disruptive challenge to their business models, are participating more in the solar market as well. For example, Georgia Power and Duke Energy recently contracted to buy a total of more than 500 MW of solar power. On the other side of the country, Southern California Edison , recently announced plans to develop an integrated system of distributed solar and energy storage in order to reduce peak demand for energy in the Los Angeles area. Of course, investor-owned utilities in other parts of the country, such as Arizona and Wisconsin, are also spearheading challenges to the distributed solar business model by lobbying for greater charges for solar-powered homes. The different solar strategies of investor-owned utilities illustrate the fact that while solar power’s business case is increasingly robust, the policy framework for solar power is still a work in progress.

Customer Protection Concerns

An important recent solar policy debate revolves around the need for increased consumer protections for the solar industry’s customers. Recently, some in Arizona, Washington, and the U.S. House of Representatives have expressed concerns about the level of solar consumer protections. For example, one ratepayer advocacy organization in Arizona argued that some installers, including the prominent third-party installer Solar City, have offered consumers misleading information about the amount of money they could save through solar power.

Meanwhile, the Washington Utilities and Transportation Commission recently issued a report noting potentially significant consumer protection issues and describing the Commission’s limited jurisdiction over organizations like Solar City that offer third-party leasing of solar power systems. The report notes a “common consumer complaint” about fraudulent contracting practices in which homeowners are asked to sign what a salesperson says is an agreement to evaluate their home for solar, but which actually turns out to be a 20-year lease of solar panels. The report notes another “recurring accusation of deceit” about the amount of power solar panels produce and about likely utility rate increases. Additionally, the report identifies concerns about the quality of installed systems, inadequate disclosure of contract terms, and potential limitations on the sales of solar-powered homes.

Four Democrats from Arizona and Texas in the U.S. House of Representatives recently raised these important concerns with the U.S. Consumer Protection Financial Bureau. These representatives share Washington’s concerns that consumers may face deceptive or misleading claims about the financial viability of solar power systems leased from third parties.

Solar City has responded to the concerns raised in Washington state. Eric Weingarten, the general counsel for Solar City, acknowledged that there may be a need for some consumer protection regulations, but also warned against over-regulation and the development of a confusing patchwork of state regulations. Moreover, Mr. Weingarten noted that the solar industry is currently developing some standard business practices that could avert the need for government intervention.

Protecting Consumers or Raising Costs?

These concerns about consumer protection, though important, come at an awkward time for the solar industry. Solar power is just now becoming cost-competitive with other forms of energy in some jurisdictions. While falling costs have driven dramatic market growth, solar power has definitely not yet reached the U.S. Department of Energy’s goals for the industry under the SunShot Initiative. That initiative aims to reduce the cost of solar power to $0.06/kWh by 2020, which would make solar competitive with every other type of energy in all U.S. jurisdictions. The industry is not there yet, and the major remaining hurdle is the non-hardware, or “soft,” costs of solar power. If regulators decide that solar customers require additional protections, the resulting regulations are likely to impose another cost on the solar industry just when it is trying to streamline regulatory compliance and keep costs down.

The solar industry should do everything in its power to ensure that additional consumer protections are not necessary. The best way to achieve this goal is to actually make sure that consumers are getting fair deals that are fairly and adequately explained. For example, claims about solar energy production rates or likely increases in utility billing rates should be substantiated and easily verifiable. One good way to do this would be for the solar industry to have a website that hosts current, robust information about utility rates and solar productivity. Fraudulent practices should stop; no consumers should have cause to complain that they were misled into signing a long-term solar lease. Taking these common-sense steps could avert the need for costly consumer protection regulations. Failing to take these steps risks governments stepping in to impose new regulations, which would add to the costs of solar power just as the industry is becoming cost competitive. 


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