Planet Money - Rooftop solar's dark side

Episode Date: July 12, 2024

4.5 million households in the U.S. have solar panels on their homes. Most of those customers are happy with it - their electricity bills have just about disappeared, and it's great for the planet. But thousands and thousands of people are really disappointed with what they've been sold. Their panels are more expensive than they should be, and they say it is hard to get someone to come fix them when they break. It turns out this sometimes crummy customer experience is no accident. It ties back to how big, national solar companies built their businesses in the first place. To entice people to install expensive solar panels, companies developed new financing models which cut upfront costs for customers. And they deployed lots and lots of salespeople to grow their businesses. But in the drive to get more households installing solar panels, consumer costs went up and the focus seemed to shift away from making sure those panels actually worked. All of this left some consumers feeling like they've been sold a lie.On today's episode, we look into how the residential solar business model has turned some people sour on solar. And we'll try to figure out where the industry could go from here. Help support Planet Money and hear our bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

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This is Planet Money from NPR. In 2012, Christine and John Scalera moved from New Jersey to Florida because of John's job. That move? Still a little bit of a sore subject for them. I came down kicking and screaming, do you want to be here? And, yeah, so.

Best decision I ever made. I haven't shoveled snow in 12 years. Nope. I might disagree. Florida, of course, a very sunny place, which at least partly explains how Christine and John came to sit down one day with this young salesman named Justin. This is about three years ago. Justin told Christine and John that what they needed, more than anything in this world,

were solar panels on top of their cute little ranch house. The sales pitch was very simple. Electricity is only going to get more expensive. So your 300 bill is going to become 400 and 500 with no end in sight. But you'll be able to get rid of your electric bill and become energy independent. And they'll pay you. Yeah, and not only that, but any excess,

they'll be paying you. I mean, it's a great sales pitch. You know, it's a great sales pitch. Justin walks them through how it will all work. No money down, just a monthly loan payment of around $200. The solar panels will replace about 75% of the energy they've been getting from their power company. If the panels happen to make energy they've been getting from their power company. If the panels happen to make more than what they use, the power company will pay them for that extra energy. Christine, she worked as a high school guidance counselor. John had just gotten laid off.

And cutting down their bills that much was pretty attractive. Even better, after 20 years, they would own the panels outright. How great would it be to start a retirement in a house where you're not paying an electric bill? They sign up that day. About a month later, they've got solar panels. It was great for a couple of months. We weren't covering all of our electric usage, but the bill was only like 60 bucks.

It went from $400 to $60 a month, which was great. And that lasted for a couple months. And then we got a bill that was like $120, and then $200. And then we were back to paying $307 a month. The panels ended up not generating anything close to 75% of the energy they used. And now, on top of their electric bills, they had to pay for their solar panels every month too. Also, the company that had installed Christine and John's panels,

they were not great at customer service. Like it was hard for them to even get anyone on the phone. We'll get back to you, and then no one gets back to you. And it's the same little dance you do over and over again with them. So they send emails, they file a complaint with the state of Florida. At one point, Christine even tracks down the address where the company is registered, gets in her car, and drives there.

I guess I wanted to make sure, like, is it really a place? Like I didn't even see it. It was actually a physical place. Like I don't understand. It was, it was magnifying. It really was. It was crazy. Turns out it was just some anonymous building.

No signs, no nothing. That company ends up going out of business. New company takes over their service contract. And soon there's a new shiny young salesman offering to make things right. This one's named Evan. And Evan's like, those panels you've got on your roof, they were actually outdated when you put them up. And they were never going to give you as much power as that first guy said

they would. But a set of newer solar panels will more than make up for it. The ones on your roof, I can't get rid of. I have to keep paying for them. So I'm already halfway there. It's like it's, you know, go big or go home at that point. Christine and John sign a 25-year lease for even more solar panels. And the same thing happened with the new panels as with the old ones. Their electricity bills were

still really high. Like maybe they came down a little, but nowhere near enough to offset what they were paying for their panels. Now I have $100,000 in debt that I've got to pay off for a house that was paid off. And one is a lease, not even like I'm not even buying anything. That's an 80,000 dollar lease. Like, I don't know what the hell we were even thinking. Because their electric bills stayed high, Christine and John started to think maybe their new panels weren't ever even connected right. So they refused to make their lease payments until they could get someone from the solar company

to confirm that the panels were working right, which they say the company never did. Christine and John's solar panel experience has not been great. It hasn't provided us any kind of financial relief. It's done exactly the opposite. It's made our finances very difficult. Get them off my house before I pull them off myself. Look, I'm ready to go up there and pull them off myself. I'm not even kidding. Give me a hammer. I'm done. I don't care. Hello and welcome to Planet Money. I'm Keith Romer. And for this episode, I will be joined by Time Magazine's Senior Economics Correspondent, Alana Samuels. Hi, Alana.

Hello. Alana, we brought you in because you have been writing a lot about folks like Christine and John. I have. So let's start with a sense of scale. 4.5 million households in the country have rooftop solar and plenty of them are happy with it. They say their electricity bills have just about disappeared

and that's great for the planet, which will, you know, burn up and or flood if we don't hurry up and transition off fossil fuels. But the details of that transition matter. And your reporting suggests that at least with solar panels, we may not be totally nailing it. Right. There is this corner of the residential solar market where tens or maybe even hundreds of thousands of people are really disappointed by what they've been sold. It's more expensive than it should be and customers say they can't get anyone

to fix their panels when they break. So Alana, you are going to help us try to figure out how we got here. How this series of decisions made by policymakers and residential solar companies over the last 20 years has led to the mess Christine and John and all those other people are in. So today on the show, why this seemingly obvious good idea,

putting solar panels on people's homes sometimes turns out so badly. OK. So it is easy to look at what happened to Christine and John in Florida and say, you know, they just got a bad deal. It happens. But Alana, your reporting suggests it didn't just happen by accident. No, exactly.

Kind of everything about how it went down for them, the way they financed and leased their solar panels, the aggressiveness of the salesmen who sign them up, even how bad their customer service experience has been. All of that actually ties back to how the residential solar business was built in the first place. One of the big companies that helped shape the industry in those early days was called Sunrun.

We got in touch with one of its founders. My name is Nat Kramer. I've been a clean energy entrepreneur for nearly two decades. Nat, we should say, does not work at Sunrun today, but let's just start with how customers tend to pay for rooftop solar. Nat says the model for that was developed in the early 2000s when people in the business were trying to solve this pretty fundamental problem. So people get excited about the idea of solar. they get excited about the idea of clean energy, early adopters, that was definitely true.

But you then say to them, you've got to go invest 50, 40, whatever number, thousands of dollars. In other words, pay cash for a solar system. It's like saying pay cash for a car. And there just weren't that many customers ready to pay that kind of money for solar. Right. You see like saying pay cash for a car. And there just weren't that many customers ready to pay that kind of money for solar.

Right, you see this with a lot of new technologies. You have your early adopters, and then you have to figure out how to pull in everyone else. NAT solution, instead of asking homeowners to pay $50,000, his company would come to your house and put panels on your roof. You never had to buy anything. NAT's company would own the panels

All you had to do was agree to buy the electricity those panels generated at some agreed upon price Which was likely to be lower than what you were paying your utility This is called a PPA a power purchase agreement Sun Run signed its first PPA in California in 2007 and actually that got featured in a story in US a ta has the picture of the homeowners standing at the roof and there are these redwood trees around and you're up by Skyline Drive in California. So as Sunrun was selling PPAs, another company, SolarCity, which was founded by Elon Musk's cousins, by the way, they were selling solar panel leases.

The idea here was similar to Nat's. Consumers would get solar panels on their homes without paying all this money upfront. Both PPAs and leases made it possible for a lot more people to make the switch. And as solar panels got cheaper and more efficient, a lot of people signed on to use solar to try to lower their electricity bills.

You end up in the next 10 years with over a million homes going solar versus 40,000 in the previous 40 years. We changed the solar industry. Christian and John in Florida, they financed their first set of panels, and they got their second set with a 25-year lease. But while residential solar companies had solved one problem, how to grow their customer base, they had also kind of created the second one. All these people putting $50,000 solar systems on their roofs, they weren't shelling out a lot of cash up front, which meant that the sun runs in solar cities of the world needed

a lot of capital to pay for all this. And so the industry made a big pivot. The companies started treating solar panels less like a consumer product and more like a financial one. We innovated a bunch around financing and this may all sound really esoteric, but why were we doing it? Is because we wanted to make solar the cheapest form of energy. And there were a couple other ways solar companies like Nats could make money besides, you know, just installing solar panels.

The first one was tax credits. Right. For almost two decades now, the US government has offered a 30% investment tax credit for some clean energy projects. So say a homeowner puts a $50,000 system on their roof, they could deduct $15,000 from their taxes. But remember, Nat's company, Sunrun, they were the ones who owned the solar panels, not the homeowner. So Nat was like, can we get that tax credit? We spent a half million

dollars or more with tax lawyers and accountants effectively figuring it out. The answer it turned out was yes, Sunrun could claim that credit, but these solar tax credits only really helped if you had taxable income, and Sunrun was not turning a profit. But what Nat figured out from all those lawyers is that you were allowed to partner with another company that did have a big tax bill to pay

and could use those tax credits, like say Google, who was making a lot of money and who wanted to do something good for the environment. And so that's what Nass Company did. Google we should say is a sponsor of NPR, but this is kind of wild to me, how these tax incentives that were initially designed to get regular homeowners to put solar panels

on their houses ended up lowering tax bills for Google. Yeah, welcome to America, Keith. Thank you. Okay, so tax credits. That's one additional way for these solar companies to make money. Another one is asset-backed securities. Good old asset-backed securities. Yeah, we all learned about those during the financial crisis. And the way they worked is that banks bundled together the income streams from lots of mortgages and then sold them as securities. So now, solar

companies did a version of the same thing. They bundled up the income streams from these solar panel leases, PPAs, and loans, and they sold them to investors as securities. And that helped the big solar companies get some of the cash they needed up front instead of having to watch it dribble in over 20 or 30 years. Now, we have no way of knowing whether the companies that Christine and John from Florida worked with passed along the tax credits that would have come with their panel installation to another company or bundled their payments into an asset-backed security. But when you look at how little help they've gotten in terms of customer service over years of trying,

it's not hard to get the sense that they are being treated less like valued customers and more like an income stream on some giant spreadsheet somewhere. And this is something I've heard from customers across the country. Big solar companies pay them a lot of attention until they sign on the dotted line, and then they don't do a great job with customer service after that. Now there's another piece to this puzzle because all the tax credits and asset-backed securities, they didn't get these solar companies all the money they needed to stay afloat. This whole time, they'd also been trying to raise money in more traditional ways.

They issued stock, they took on debt, and to be attractive to investors, they had to make themselves into these fast growing companies. And Nat says this growth imperative might have led some folks in the industry to cut a few corners. You did have some corporate leaders who wanted to look the other way and it was all about volume for them. Volume, as in doing everything they could to convince as many people as possible to buy solar which meant deploying salespeople Lots and lots of salespeople. Yeah. My name is Waleed Halti Waleed was not one of the salesmen who came to Christine and John's house But his story really captures how the sales part of all this contributes to the problems some people are having

So Waleed gets into solar about a decade ago. Back then, he's going to college in Massachusetts. He has a minimum wage job busing tables, and he hears about one of his friends who is making way more money than he is. Someone I knew was making like $20,000, $30,000 a month selling solar. And I'm like, if this dude can make that much money

selling solar, there's no way I can also do that. If not double triple that. So while lead signs up, and he goes to this bootcamp, where all the secrets of solar sales are revealed to him. When you go knock a door, there's a certain distance you want to stay away. So you don't come off as invasive to the homeowner. You want to stand sideways, it's less confrontational. You want to ask questions that are going to be sort of yes answers too. The more they say yes, the more likely they are to keep saying it. These little tactical things that do truly work. Office culture features a lot of young dudes, a lot of big talk.

Everyone's going to be a millionaire, everyone's going to make six figures, we're saving the world at the same time. This is it. This is what I've been waiting my whole life for. Do you know how well other people are doing? Yeah, there's a public leaderboard. You know, you're almost like an athlete that's competing against others. Waleed it turns out is good at that competition.

Like really good. So good that he drops out of school. And according to him he makes a lot of money, fast. Third month in, I did like 14 installations and it was like 20 to 25 thousand dollars. In one month? Yeah in one month. I'm like holy smokes there's no way. And it's not just one Waleed out there knocking on doors and using these tactics, it's thousands of Walids. Because these solar companies need to grow and grow and grow. They are willing to do

whatever it takes to keep their best salespeople cranking. I remember a leadership conference that SolarCity hosted and they sent us all to Vegas. All expenses included and you know, you were with other top performers that were like, yeah, like them crushing and making all this money. You know, picture some motivational speaker stocking back and forth, firing everyone up, getting them to chant in unison. So you everyone's I'm alive and alert and I feel great. I'm alive and alert.

And everyone would scream and chant that. And can we all do the, I'm alive, I'm alert and I feel great chant. Yeah. Make sure we all do the I'm alive, I'm alert, and I feel great chant? Yeah, make sure you feel it though. Make sure you don't just say it to say it. Get your body, get your body in it. Let's go. One, two, three. I'm alive, I'm alert, and I feel great.

I'm alive, I'm alert, and I feel great. I'm alive, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great.

I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I'm alert, I'm alert, and I feel great. I did it too many times. It is easy to understand why the sales bros felt so great because they got a lot of latitude from the companies they worked for. While Leed says on each sale, a salesperson would get a floor for how much they have to charge a new customer, you know, maybe $3,000 per kilowatt the solar panels could generate. But if the salesperson could get a new customer to pay 4,000 or 5,000 or $8,000 per kilowatt,

they got to pocket the difference. You could sell it for as high as you'd like. As high as the homeowner would say yes to. And you would just get more and more money the higher the price you charge them? That's right. It's almost as if you got a $20,000 car and the dealership can sell it at $40,000 if they want.

What this means is that people like Walid can earn huge commissions, but homeowners like Christine and John end up paying more than they should. So in addition to the customer service problem, there's also this middleman problem. Is it a good system?

Definitely not. No. Well, he makes a lot of money selling solar panels and managing people who sell solar panels. But as he hears more stories about customers who feel stuck in bad deals, he's like the industry cannot keep going like this. You didn't have to be a genius to figure out like there's no way this is going to continue. You can't be making this much money, you know, and selling it at this high of a price and have this much of an unhappy customer experience. So he quits but he doesn't

get out of solar altogether. These days, Waleed runs a tech company called MonaLee. It's designed to let homeowners get solar with no salespeople. After the break, we try to figure out exactly how viable the residential solar business is for the businesses themselves. And what that means for all the customers, like Christine and John, who are locked into a long-term relationship with that industry. Alana, you have been reporting on the problems in the solar industry for Time magazine for the last year or so.

You got into this because you had your own problems with solar panels, right? Yeah. So I bought a house with solar panels already installed. And when they didn't work, I also ran into customer service problems trying to get them fixed. So I started looking into why so many companies seem to be so bad at dealing with customers' problems. Right. And that is what we are going to turn to next.

Kind of whether the residential solar industry is even going to be able to survive using the business model we've been talking about. So for that, we are going to Paul Lethgano. I'm a senior analyst at Bloomberg and Yef, the clean energy research division. When Paul started there in 2020, his predecessor left him everything he had written about residential solar. He labeled the US residential solar industry as I believe it was called

the residential solar death spiral. And then as I read those reports, basically day one in the office, I realized how broken the system is and how broken the industry is. Paul says the basic problem is that imperative to grow we talked about before. That has not gone away. Running a national solar business still requires bringing a lot of capital in the door. And to keep attracting investor money, the solar companies have to keep expanding their customer base. As you scale that business, as you try to get the additional customer, you're essentially spending more money in getting that new customer

than the profits that you're making overall as a company. And Paul says these companies have ended up really far away from the nuts and bolts of installing solar systems. Your company is not installing solar systems. Your company is not a solar company. Your company is essentially a sales and a financial engineering company that just happens to install solar panels. And like we mentioned before, that can have a huge impact on how much customers end up paying. So am I correct in understanding if there wasn't so much sales and marketing,

solar could be a lot less expensive in the US? Yeah, that's exactly right. In a country like Germany, where energy costs are really high and people are motivated to get solar panels without being pestered by salespeople, customers pay half or a third of what they do here. Another thing about Germany, most of the installers are local. They don't spend a lot on marketing. Instead, they get customers based on their reputations. So better customer service and because of fewer middlemen, better prices. We should say that the same thing is true in the US. There are plenty of successful smaller local companies who haven't run into these problems of trying to scale. But when Paul looks at the landscape for

big national residential solar companies in the US, he's not super optimistic. What happens to the big companies that have scaled like Sunrun and Sunova? Where do you see them going? Well, I got to be careful with how I answer that question because as an analyst, I cannot say anything that makes any inference in public key and whether I think a company is going to fail or not. What I can say is that the big national listed solar installers have barely made any profit

if anything since their existence. Blink twice if you think Sunova is going to go bankrupt. You don't have to say anything. I have never seen someone go so still as when I asked Paul that question. Not a muscle on his face moved, which to be clear means officially no comment. But we can say this, the share prices of Sunova and Sunrun, two of the biggest residential solar companies in the US, they are down about 85% from their peak. And a lot of other solar companies have gone bankrupt. Paul says all this dysfunction kind of can't help trickling down to customers. The way residential solar systems are being sold in the U.S. today is fundamentally broken.

And it's really easy for many of those sales to result in, let's not call it a scam, but not meeting expectations. Pollock estimates that 5% of customers could be getting a bad deal. That's more than 200,000 households who are either not saving as much money as they were promised or who are stuck with systems that don't work. And lots of other folks are paying more than they would have if the industry was set up better. Two of those unhappy customers are Christine and John,

the couple from Florida. They are still paying off their first set of pretty worthless solar panels, but they are taking a different approach with Sunova, the company that leased them the second set. I paid the first people, because, you know, whatever, that's 200 and something dollars a month,

but I haven't paid Sunova a dime. I think the last, I was trying to find the last invoice was like $1,700 or $1,800. And I've given them nothing. A spokesman from Sunova told me this morning that actually the panels were turned on for four months. And then Sunova switched them off because Christine and John were not making their payments, which came as a surprise to Christine and John who say they hadn't known whether the panels were ever switched on in the first place. And when I looked over their old

electric bills you could see that yes, for the four months the panels were on they had used about half as much electricity from their power company as the previous year. But they had been promised these new panels would replace all of their power. And if nothing else, not sharing this information about turning them on, turning them off, until some reporter from NPR asks you is probably not a sign of great customer service. In a written statement, Sanova told us, quote,

our current customer complaint rate stands at just 2% and that they have made many customer service investments to better serve our growing customer base. Christine is clearly done with all of this, but John, there's still this part of him that can imagine this all working out. The panel's getting fixed, their electricity bill's dropping to basically zero. Look, the idea is still sound.

I believe in renewable energy. I think that at some point, every house is gonna have solar panels. They're gonna have to. They're all a bunch of crugs. I'm sorry. They're all a bunch of crugs. Those are not mutually exclusive statements.

According to the lease agreement they signed with Sanova, their only recourse is to file for arbitration and hope they get a ruling that goes their way. Christine and John just got their latest bill from the power company. for arbitration and hope they get a ruling that goes their way. Kristine and John just got their latest bill from the power company. It was for $382. Pretty much the exact same thing they were paying before they ever got solar panels in the first place.

Once again, if you are willing to take our survey, we would really appreciate it. It is short, anonymous. You can find it at npr.org.pmsurvey. All one word. It'll take you less than 10 minutes and you'll be doing all of us at Planet Money a huge favor by filling it out. Again, if you are somebody who has not taken one of our surveys before or you are a new listener, we especially want to hear from you. That is npr.org.pm survey. Thanks. If you want to

hear more about all of this residential solar stuff, check out Alana's series on residential solar in time magazine. Today's episode was produced by Emma Peasley. It was edited by Jenny Lawton, who was fact-checked by Sierra Juarez and engineered by Valentina Rodriguez Sanchez. Alex Goldmark is our executive producer. I'm Keith Romer. I'm Alana Semuels. This is NPR.

Thanks for listening.