Subsidized Solar Lease Agreements Demand Greater Scrutiny

In Arizona, thanks to a slew of solar incentives and special tax breaks, the solar industry is bigger than ever. More astonishingly, the rooftop solar industry doesn’t even try to hide the fact that their entire business model is dependent on the staggering number of taxpayer handouts and loans being provided.  SolarCity’s own annual report filed with the SEC bluntly stated: “Our business currently depends on the availability of (government) rebates, tax credits and other financial incentives.” In other words, the viability of their entire business model hinges on these massive taxpayer handouts.

As if the subsidies weren’t bad enough, several companies have figured out how to securitize these taxpayer giveaways by leasing the solar panels over a 20 or 30 year period (not unlike a mortgage) rather than selling them.  Under this lease financing scheme, solar firms promise homeowners “free solar” and lower electric bills, seemingly guaranteeing a no risk investment. If this seems too good to be true, it means it probably is.

So what are solar companies not telling us about these lease agreements?  Things like if the homeowner decides to move in the next 30 years, they may have trouble selling their home, since the solar lease can potentially cloud the title (in some instances the rooftop solar company has to approve the buyer). Additionally, solar firms have been known to omit hidden fees embedded in the lease, exaggerate the long term cost and energy savings and fail to disclose that homeowners are likely responsible for any reductions in the subsidies being provided.

 

With millions in corporate welfare at stake, these lease agreements deserve additional transparency and disclosure. Unfortunately, solar firms have little incentive to provide more information, and there is almost no regulatory oversight for these long term leases. Unlike utilities, rooftop solar is exempt from review by the Arizona Corporation Commission.  They face little real scrutiny over their dubious marketing practices or what they are telling – and selling – unsuspecting homeowners.

It’s long past time that policymakers take a closer look at these heavily subsidized programs, which is why the Free Enterprise Club supports Sen. Debbie Lesko’s efforts to shine light on the rooftop solar leasing scheme. Sen. Lesko is proposing legislation that would implement minimum disclosure requirements for solar companies prior to leasing to prospective customers. In particular, they will be required to let homeowners know the amount of subsidies, credits, utility costs and projected savings that can be reasonably expected throughout the life of the lease. They will also have to disclose that any savings being promised is subject to change depending on future legislative or regulatory action.

Additional transparency of solar lease agreements will be good for consumers, taxpayers and ratepayers. If rooftop solar wants access to the subsidies that fuel their bottom line, then they should have no problem with minimum disclosure requirements to better inform prospective customers.