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.
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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