Surprise. Not the noun, not the verb, but the place Surprise, Arizona.
That was where Michael Allen Fricker set up the PV installation company Salt River Solar & Wind (SRSW) during the start of the wild west solar days of 2010 in the southwest state. In this mid-sized town, about 90 km northwest of Phoenix, Fricker was now ready to dig up some easy money by prospecting for the gold of green environmentalism. In the next five years, before Frickers trickery would get him a five year jail sentence for fraud, courtesy of the states attorney generals office, many homeowners, especially the elderly, would succumb to his conning charm without realizing their solar dreams had been scammed into a costly nightmare until too late. A nasty surprise in Surprise, Arizona.
But surprises by definition are unexpected. This was not. In a country with its enticing 30% renewable energy Investment Tax Credit (ITC) write-off and various states with their own delectable top-off subsidies, greed is a predictable surprise.
But how predictable?
Was Fricker an outlier in the world of PV residential business? A bad apple on the solar tree? A bad actor in a solar play? A bad egg that any newfangled, financially lucrative business occasionally lays? Or was he albeit an extreme example endemic of a PV epidemic that both spawns fly-by-night startups and infects established fly-by-the-rules operators?
The selling of solar may be good for both profits and the good Earth, but unchecked and unpoliced, it can also be good for the bad kinds of headlines that a young industry can ill afford. And its public image will almost certainly suffer more bad press as companies race to beat out the sunsetting of the ITC at the end of 2016 and net metering challenges from politicians and utilities. Scratch the surface in the residential solar world too hard, and solar starts to lose some of its shine.
Especially in the leading U.S. solar state of California. The highest deal I sold was $16 a watt on a 6 kW system, recalls a former solar salesman in Los Angeles back in 2013, who requested neither his name nor his employers be used.
States of complaints
And the ethics or more precisely, lack of ethics in the business of residential solar has not gone unnoticed. In Nevada, such practices have started to come under scrutiny. The Nevada State Contractors Board warned in August it had begun seeing an increase in the number of complaints and violations related to solar construction activities, largely in solar leasing, as well as bait and switch tactics related to promised interest rates thatturned into balloon payments within a few months.
A random sampling of the records reveals that the biggest U.S. installer, SolarCity, which almost exclusively sells solar leases, received a citation fine and disciplinary action on June 30, including a charge of misrepresentation. Another large seller/installer, Sunrun Home Solar Lease and Installation Company, was hit with a citation fine in May. And Las Vegas-based Solar E Click had its license revoked for multiple violations, including for a fraudulent or deceitful act. But piecing together the extent of the problems in Nevada is difficult.
Not so in California. In an information request, the California State Licensing Board (CSLB), part of the California Department of Consumer Affairs, supplied detailed numbers of complaints lodged against solar contractors and their sales representatives. Last year, 222 were registered, nearly four times greater than in 2010 (see Table 1 below). Projections for 2015, based on complaints counted through late August, point to more than 250 by the end of the year.
The CSLB says the number of solar contractor licenses had mushroomed by nearly two and a half times to 1,019 by the end of 2014. The result was that the number of complaints involving solar contractors was three times as high as any other type of licensed contracting. Its probably no coincidence that the CSLB carried out its first sting operation against a solar contractor at the beginning of the summer.
In contrast, the California Solar Energy Industries Association (CALSEIA), which has an ethics committee that meets as needed, only reported four complaints in 2013, another four in 2014 and just two in 2015 as of August. According to Executive Director Bernadette Del Chiaro, the reports primarily involve non-member companies. Currently with just over 300 members, Del Chiaro says CALSEIA has revoked the membership of one company due to unethical behavior back in the 1990s. This shows that we take this issue seriously. And when a company is truly acting unethically in an egregious manner, she adds, we will kick them out of the association. One installer, a former board member at the national Solar Energy Industries Association (SEIA) with 14 years in the business of selling solar, who asked that his name not be used, claims the 1,000-member group is heavily influenced by the third party ownership (TPO) companies SolarCity, Sunrun and SunEdison Inc. All are currently board members, a status he describes as pay to play positions. SEIA benefits greatly from the lobbying money these companies provide, he contends. To a certain extent, SEIA is unwilling to be critical of some of its biggest contributors. While SEIA may have the interests of the solar industry at heart, he says, at times they look the other way, allowing what he calls the gravy train to continue. A search of SEIAs tax records from the most recent years available did not reveal any specific funding from third-party solar companies.
Overstating for growths sake?
SolarCity, which did not respond to questions for this article, has been under scrutiny by the U.S. government for more than a year. As with all solar leasing companies, it claims the subsidies, including the 30% Investment Tax Credit that would normally go to the consumer for a purchased system. But ongoing investigations of the publicly traded company by the U.S. Treasury Department, which oversees the grants, allege that SolarCitys claim of fair market value for those solar systems has been overstated. In its annual report for 2014 to investors, the company noted that a hypothetical 5% downward adjustment would obligate us to repay approximately $25.1 million to our fund investors. But that is nothing compared to SolarCitys reported losses since 2010 of more than $1 billion. While it has since switched strategy to grow more slowly with a focus on lowering cost and improving profitability, in just the first half of this year, the SolarCity reported losses of $302.7 million or 80% of the $375.2 million it lost for all of 2014. It doesnt take a PhD with a degree in economics, says the head of a PV company, who requested his name not be used, to see that SolarCity will need to attract more money or otherwise collapse. And what lawmakers in Arizona described as overly aggressive and deceptive marketing practices by SolarCity and other companies pushing third-party owned PV systems helped lead to
|SOLAR COMPLAINTS BY YEAR, CALIFORNIA STATE LICENSING BOARD|
|Year||Licensee||Non-licensee||Totalcomplaints||Unlicensedcriminalreferral||Unlicensedadmin citation||Licensedcriminalreferral||Licensed admin citation||Licensed admin accusation||License already revoked||Total legalactions||Legal actions (percentage of total)|
|2015 (to 9/2015)||157||10||167||0||0||0||1||2||0||3||2%**|
|* 94 of these complaints remain open (still under investigation), particularly in 2015 ** not included in total due to open investigations|
|At a glance|
the unanimous passage of a law in March that has made it harder for solar to do business in the state by adding more disclosure language to contracts.
At a Senate Energy and Water Committee hearing in February, Sen. Debbie Lesko, one of SB 1465s sponsors, charged that these companies were grossly overstating rises in annual utility bills of the prospective clients, tying consumers often retirees into 20 year contracts with monthly payments much higher than if they had not agreed to allow third parties to lease their roofs. In a rebuttal, a SolarCity lawyer put the blame of deceptive marketing on bad actors and little fly-by-night companies that were giving the solar industry a black eye. Sen. Lesko disagreed, pointing to SolarCitys own promotion. I think saying the rates are going to go up 4.8% [annually] is deceptive. EnergySage uses a 3.5% escalator for Arizona. But the emotional clincher was a YouTube video showing an elderly couple from Leskos district that had signed a 20 year leasing contract with an unnamed company, which left them using up their savings to pay higher monthly bills rather than saving money. If I had a chance to talk to the CEO of this solar company, said Faye Latham, I would be pretty straight and ask him if he would sell this particular plan he sold to us to his grandparents, and I have a feeling the answer would be he would not. Was the introduction and eventual passage of the bill a response to deceptive solar marketing, as the lawmakers believed, or a ploy by the states utilities to stop the spread of a growing competitor? This is the accusation made by TUSK (Tell Utilities Solar wont be Killed), a lobby group which operates in 11 U.S. states, including Arizona, and claims that monopoly utilities want to protect their socialist control on electricity generation.
Dont worry, be kind of happy
Is there the danger of such self-inflicted pain in PVs near future, due to a lack of self-policing? Tom Kimbis, SEIAs General Counsel and Vice President of Executive Affairs, doesnt think so. Most concerns, he says, are covered by SEIAs code of ethics (with plans for an update by the end of the year) that every SEIA member has to abide by, detailed for the public in the associations Residential Consumer Guide to Solar Power.
Is there overly aggressive telemarketing by some players? Every industry has a few bad performers. Should SEIA police unscrupulous door-to-door salesmen? States like California and Arizona already have consumer protection laws that defend against deceptive sales practices. Is there a need to control companies that secure solar leads to sell to installers? Theres nothing wrong with the [competitive] practice itself, but it must be done respecting all privacy laws. Is the future of the PV industry endangered by unethical practices? SEIA is acting through its consumer protection efforts to help ensure that this ongoing progress is not derailed or even delayed by a handful of bad actors.
Enter the marketplace
But whether or not the solar industry is effective at self-policing, there is another mechanism that may enforce a higher degree of ethics in solar sales practices the emergence of third-party online solar marketplaces.
Chris Blevins had also been a salesmen in an LA solar company, just one of what he claims are many scamming operations around the state. The weekly Monday morning sales meetings were the kind of thing you would see in The Wolf of Wall Street, Blevins recalls, a reference to the 2013 movie, where a stockbroker played by Leonardo DiCaprio leads a share-trading team of scammers and shammers to cocaine-fueled heights.
The salesmen are telling these absolutely mind-blowing stories of how they convinced someone to buy a system for $12 a watt or whatever, ripping people off and getting excited because theyre making hand-over-foot money on it. He witnessed one hotshot earn $80,000 in commissions in his first two months.
Ethically challenged, Blevins left in late 2013, thinking there must be another way of promoting solar other than cold calling people repeatedly or through blanketing neighborhoods with door-to-door salesmen. With a partner, he started up Pick My Solar (PMS), a novel business model which fills the gap of uncertainty between both the customer and the installer.
Projects, designed for interested customers remotely on computers using satellite imagery, are put out for blind bids with up to 12 vetted installers with no knowledge of the homeowners address or name. The top three bids, complete with price, are discussed via phone with the customer, who then picks a company to move forward with. Then the installer and homeowner e-sign a contract, at which point the installer makes first contact with the homeowner. PMSs payment is a per-watt service fee from the installer due when the contract is signed.
Peter Coye, who before learning of the PMS service, says he had been approached by several companies, including by an installer he describes as a so-called friend. The specious quote for a 13.2kW system was $58,000. I had no idea if this was the market price. It wasnt. The quote was nearly 42% more than the $41,000 he eventually paid via PMS.
Blevins says he knew first-hand how such rip-off artists operated. I wanted to do whatever I could to put these unethical companies out of business. (See box to the right).
PMS is not the only service offering an online marketplace. EnergySage is arguably the largest of these, with an online portal that helped over 10,000 customers choose between solar installers in the last 12 months. EnergySage CEO Vikram Aggarwal says that while there are a few bad apples, the rapid growth of the distributed solar industry in the U.S. has created inherent problems.Because the solar industry has grown very fast, they have hired salespersons from other industries who they do not have time to train, notes Aggarwal. There is a very high turnover, they get paid on commission, and there is a lot of pressure on the salespeople. EnergySage offers customers standardized apples-to-apples quotes from a variety of installers, which it says gives customers the opportunity to comparatively evaluate claims. EnergySage, like PMS, also puts potential installers through a comprehensive vetting process including Better Business Bureau verification, allows customers to review their installers, and monitors the installers it features.
They know there is someone watching, says Aggarwal. He says that the rise of online marketplaces like EnergySage allows customers to become more savvy consumers and is part of a move from the push marketing that dominated early days of the industry to a pull market where customers are actively looking for solar.
Mechanisms to inform consumers may not gain traction and overcome the damage done to the industry by unethical sales practices. And if the sullying of solars good name turns out to be due to more than a handful of bad actors, then the industry is in for a nasty surprise worse than the surprise in Surprise, Arizona.
Cold calls, hot leads and tricky tactics
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