Rooftop solar panels, as the men who came knocking described them, seemed to Faye Moore like a good deal.
The solicitors who visited 75-year-old Moore’s Pomona home told her they could help finance solar panels that would slash her energy bill. So she signed on.
Her energy bills have indeed plummeted from the hundreds she was paying a month. But the thousands of additional dollars she’ll owe annually in property taxes to pay off her new $33,000 system far outstrips those savings.
“I think I’ve been had,” Moore said.
As surely as the sun rises in the East, Californians regularly encounter advertisements for the benefits and cost savings of home solar systems and energy efficiency upgrades. Their ubiquity reflects California’s policy goals. Solar power and energy-efficient homes are two blocks in the edifice of climate-friendly energy programs California has been building.
There is a lot more solar work being done, so you would expect you would have more problems with it.
Rick Lopes, Contractors State License Board
The state oversees a small galaxy of programs encouraging residential solar energy generation, which lawmakers regularly seek to bolster. Local governments have opted into programs like Property Assessed Clean Energy, or PACE, which allows consumers to upgrade their homes with loans repaid through their property taxes.
“Every time the sun comes up,” trumpets one online ad, “you could be making and saving money.”
“Ready to upgrade your home?” asks another, touting “a government-supported, low-cost financing solution that provides 100% upfront funding.”
Titan Solar Construction, the company that worked with Moore, boasts the motto “turn sunshine into profit.” A representative did not respond to a request for comment.
Industry officials tout its growth – at least $1.27 billion worth of California projects, in the case of PACE – as evidence that next-generation energy programs can both help customers and heal the environment. Under that system, cities and counties – typically contracting with private entities – allow residents to finance energy-efficient home improvements via their property tax bills.
“It’s a very popular program and a great option for consumers,” said Bernadette Del Chiaro, the executive director of the California Solar Energy Industries Association.
When consumers get treated like pawns in a game between one industry and another, that’s not a good place for consumers to be in.
Bernadette Del Chiaro, California Solar Energy Industries Association
But as clean energy programs have grown, so too have the consumer complaints. Some have reported their energy bills going up despite being led to believe the opposite would happen. Financing arrangements have made it harder to sell or refinance homes. Real estate and mortgage industry representatives have pushed Sacramento to rein it in.
“It’s simply green gone wild,” said Elizabeth Knight, president of PLM Lender Services. “I believe in clean air, I don’t like to see people throwing garbage out … (but) you can’t go crazy green. You can’t risk people’s homes and equity for green.”
The Contractors State License Board reported a nearly fivefold increase in solar-related complaints, from 59 in 2010 to 274 in 2015. While those criticisms represent a fraction of the roughly 20,000 complaints the board receives a year, the increase still illuminates the solar industry’s rapid growth.
“There is a lot more solar work being done, so you would expect you would have more problems with it because the number of jobs being done has just increased at an astronomical pace,” said Rick Lopes, a spokesman for the board.
It’s predatory lending.
Lacy Robertson, Realtor in Irvine
Del Chiaro argued that the growth in complaints lags behind the “vast overall increase in the number of people going solar,” suggesting that most of those new customers are satisfied. Relative to the number of solar systems installed, she said, from 17,610 in investor-owned utility areas in 2010 to 148,846 in 2015, the rate of complaints has decreased.
“We really need to put it into context of how this market is growing,” she said, warning of a political effort to undercut the solar industry.
Still, the bump raised red flags for regulators. Some customers faulted shady operators who took their money and then didn’t finish projects.
“This is likely the result of the industry growing at such a rapid rate that some contractors now in the marketplace are unscrupulous,” said licensing board enforcement chief David Fogt. “The vast majority of solar contractors are doing a good job, but there’s a small percentage taking advantage of consumers.”
Other complaints lodged with the state were specific to how the burgeoning solar industry is financed. They came from customers, often vexed by vague or complex contracts, who were upset that projects didn’t yield the savings they said they’d been promised. Elderly consumers are especially vulnerable to exploitation, Fogt said.
“These consumers are complaining that the savings they were told they would receive by installing solar was not realized,” Fogt said.
Detractors warn sales pitches can echo the type of irresponsible behavior that fueled the 2007 housing crash.
“You have contractors and sales representatives who are selling this product very, very aggressively,” said Irvine Realtor Lacy Robertson. “It’s predatory lending.”
In some cases, consumers sign contracts that lock them into higher energy rates than they had been paying, Fogt said.
“We do have some solar contractors that are telling their customer by installing this system they will save money based on what they are currently paying for a kilowatt-hour of power when in fact the agreement being negotiated provides for the solar company to receive more for power than they would be paying their public utility,” he said.
And people who sign up for PACE are not always expecting higher tax obligations.
“The county has received a few complaints from people who are surprised when their tax bill has increased,” said Robert Davison, chief of Sacramento County’s engineering division.
Consequences can go beyond a bigger tax bite. The PACE financing agreements typically place a lien on someone’s property, to be paid off over as much as 20 years. Because paying off that lien takes precedence over settling other types of home debt, carrying that obligation can make it harder to refinance a mortgage or sell a home. Fannie Mae and Freddie Mac will not buy or refinance mortgages with PACE liens.
A law just signed by Brown will furnish consumers with more information. Assembly Bill 2693 requires PACE agreements to come with a disclosure form detailing how much more customers would need to pay. It also extends a window to cancel new contracts.
In its initial form, the bill – pushed by the real estate agents and mortgage industries – would have altered the debt priority so that PACE projects would no longer be first in line to get paid back. It has been softened into a disclosure bill, though the mandatory disclosure form would still tell PACE customers that they might need to pay off the project to sell or refinance their home.
“This makes sure they understand what they’re getting into and gives them an opportunity to get out of it if they want,” said Alex Creel, a lobbyist for the California Association of Realtors.
Solar industry companies, including leading PACE providers like Renovate America and Renew Financial, opposed the bill at first but shifted to back it once the repayment priority language was removed and the bill focused on informing customers.
“We think it’s important consumers get clear disclosure,” said Renew Financial executive vice president Cliff Staton. “Once it shifted from a ‘kill PACE’ bill to a consumer disclosure bill, we supported it.”
Despite endorsing the disclosure requirements as “a good thing,” del Chiaro warned the bill came from groups who were “just trying to punch PACE financing in the gut and knock it down.”
“I have not seen it as a widespread problem at all,” del Chiaro said of confusion about financing terms. “When consumers get treated like pawns in a game between one industry and another, that’s not a good place for consumers to be in.”
Thinking of going solar?
Questions to consider before making the investment:
- What is the total cost of the solar system?
- What is the timeline for this investment? How much will I pay up front, and how much over time, for how long?
- Can I expect to save money with this system? If so, how much? Based on what assumptions?
- What is the system size (in kilowatts)? How much electricity will the system generate each year (in kilowatt-hours)?
- Are you, the installation company, licensed and insured? What is your California State License Board number?
- Can I sell or refinance my house with a PACE lien on it? Are there certain types of mortgage loans that don’t accept PACE liens, and if so, will that impact my ability to sell or refinance my house?You can read more about what to consider before going solar here.
Source: California Solar Energy Industries Association/Solar Energy Industries Association