Sunburned
Never let the truth get in the way of a good story. - Mark Twain
From the Outer Banks of North Carolina to the Florida Keys, and along the Gulf Coast from Marco Island, FL to the Texas/Mexico border, long-time homeowners know that right behind each major Atlantic basin hurricane a different kind of storm surge is approaching. Speeding rapidly toward the scene is a wave of roofing contractors, commonly from out of state. The local contractors will be overwhelmed in a large-scale event, and the traveling road show of “storm chasers” looking for a quick buck won’t be far behind.
Exploitation is an unfortunate reality of capitalism. In discussions with clients and friends for years, we have commonly referred to these and similar phenomena as the Ass End of Capitalism™ (a system we love dearly).
To one extent or another, grift is a cost, feature, and bug of all economic systems. Unfortunately, environmental, energy and economic policies of 21st century advanced nations invite it.
Solar energy has received hundreds of billions of dollars in taxpayer funded support in these nations. Solyndra’s bankruptcy and torching of $528 million in U.S. government loans in under two years has long stood as a textbook example of taxpayer exploitation. Lesser known are the stories of homeowners and investors who were taken in by the bright promises but got sunburned instead.
How much energy are we actually getting for all this “investment”? Who are the direct victims of this grift in the U.S.? And how have solar “investors” fared over the last year? Grab your sunglasses. The truth is glaring.
“Sunburn” is too generous a term in the case of wealthy nations in Europe, America and Japan. (Even most bad cases of sunburn only last a few days.)
The “alternative energy transition” could have only been fueled by the West’s 21st century deficit spending and Central Bank money printing orgy, combined with unwarranted panic over “climate change.” Solar energy is one of the limited permissible technological tools in that transition. (*For now.)
Despite lavish subsidies globally, the portion of energy provided by solar is vanishingly small. Solar accounted for a whopping 1.85% of U.S. primary energy consumption in 2022 according to the U.S. Energy Information Administration (EIA). Globally, the figure is around 1%. In terms of electricity generation, EIA data show utility-scale solar accounted for only 3.4% of 2022 U.S. generation. Adding in small-scale solar systems (including rooftop residential systems) brings the total to ~5%.
The bonfire of hundreds of billions of dollars was money Europe, America, Japan, and other wealthy nations could not afford. Worse, there is no shortage of environmental, energy and economic projects that would have been far better uses of these proceeds, domestically as well as globally.
Every dollar printed into existence attempting to replace fossil fuel and nuclear energy with “alternative energy” is now an embedded component of inflation that isn’t ending any time soon. Ironically, that same inflation is now a top threat to wind and solar projects worldwide.
For some unfortunate homeowners in these wealthy nations, the hit from solar energy is more direct and visceral. In the U.S., perverse economic incentives have allowed grifters to exploit the green altruism of homeowners across the country. As the old economic adage goes, “government is terrible at choosing winners, but losers are excellent at choosing government.”
A Time Magazine article from late September titled Rooftop Solar Power Has a Dark Side provides an excellent birds-eye view of the promised savings never delivered, nonfunctional panels, misrepresentation about tax incentives and other nightmares. Author Alana Semuels gives a first-hand account of her experience purchasing a home in upstate New York this spring with a leased photovoltaic (PV) solar system. Her account opens (emphasis added):
This year, during the heat of summer, when temperatures in New York surpassed 90°F, the 22 solar panels on the roof of my house were doing absolutely nothing.
This is not something I learned until September, four months after my husband and I bought this house with a purportedly functional leased solar system in upstate New York, months after logging into a website that inaccurately told us that the panels were working, months after we forked over $6,000 to prepay the remainder of the 20-year lease to the company supposed to be maintaining the solar panels, Spruce Power.”
Semuels describes the tragicomedy of Spruce Power and its third-party technicians blaming squirrels (chewing wiring) and the prior owners for delinquent lease payments. The company failed to explain why they accepted Semuels’ prepayment for the balance of the lease knowing the panels had been disconnected. She reports that the panels are still not working to full capacity. More broadly, she states (emphasis added):
We are not alone. Obscured by the recent rush to sign up households for rooftop solar and speed up the electrification of America are those who already have solar panels on their roof that do not work. Many were early adopters who did the “right” thing for the planet, installing solar before the expanded financial incentives that came out of the Inflation Reduction Act (IRA). Because solar was more expensive in the 2010s, many entered into leases with solar companies to defray upfront costs, and many were left in the lurch when those companies went out of business. Often, their solar leases were packaged and sold, alongside thousands of others, to private equity companies and other investors who were not incentivized to ensure, years into the leases, that service was good or that panels even worked.
Whenever something really good or really bad happens in the “alternative energy” space, you can be sure there will be a Wood McKenzie consultant to help us make sense of it. Cue Daniel Liu, the firm’s head of “Asset Commercial Performance.” He helpfully noted:
“Bad operators have left many people with broken systems and a bitter taste in their mouth. It costs a lot to actually service these panels, and a lot of people have fallen through the cracks.”
“Fallen through the cracks.” (“Fried,” “shocked”, or “roasted” seem more appropriate.)
Ass End of Capitalism™, meet your new best friend, Green Grift.
Fortunately for our purposes, through a Time FOIA request, Mrs. Semuels compiled data on the number of complaints to reportfraud.ftc.gov containing the words “solar panels” since 2018, the first year the FTC began collecting such data. We have recreated her useful findings below (note: 2023 data is only through September 19):
The Time article notes homeowner problems with many of the largest U.S. residential solar power companies, including Spruce Power (now part of XL Fleet), Sunnova, SunRun, SunPower and even Tesla. Semuel’s customer interviews provide highly relevant anecdotes and “what to watch for” tips for those considering installing solar panels on their homes.
Post 2009, tens of billions of taxpayer dollars shoveled toward solar energy in the American Recovery and Reinvestment Act (ARRA) created the preconditions for fraud and misrepresentation. Due to the high up-front cost of most systems, long-term leases accounted for up to 70% of U.S. residential rooftop installations until around 2014. After a decade of the shenanigans Semuels depicts, reductions in systems costs, and additional tax(payer funded) subsidies in the IRA, the percentages have generally reversed.
Selling and leasing these systems turns out to be the easy part. Installing them correctly, using quality panels, inverters, the right electrical connections, and mounting systems - and then maintaining the systems over the life of the lease is the hard part. We return to the Time article to summarize (emphasis added):
As early businesses ran out of money and went kaput, solar lease portfolios were sold from one company to the next, sometimes acquired in bankruptcy proceedings for pennies on the dollar. “These companies went out of business, bankers bought the portfolio and are still collecting fees, but they’re not set up to provide support,” says Vikram Aggarwal, the CEO of EnergySage, a solar services marketplace. He estimates that over half of all solar installations have been orphaned, meaning that the company that originally installed the panels or pledged to maintain them has gone out of business.
An attorney who represents consumers in cases against solar companies, Kevin Kneupper, provided a sense of the magnitude of the problem (emphasis added):
“I get so many calls about solar I could never take every case—I would be working forever. You could occupy every state attorney general, full-time, just doing solar.”
The situation got bad enough that in California (America’s EcoStatist laboratory), the Contractors State Licensing Board (CSLB) began tracking complaints against solar firms separately. Between July 1, 2022 and June 30, 2023, CSLB received 2,263 solar complaints. At the time of this post, they had investigated 1,625 of those complaints and determined that 96% involved either “workmanship/abandonment” (76%) or “misrepresentation/fraud” (20%).
In 2021, with complaints across the state growing, the California legislature actually created the Solar Energy System Restitution Program for consumers scammed by residential solar firms. The scale of the problem is evident in the fact the $5 million fund was quickly depleted and is no longer accepting claims.
Similar situations have played out all across America in residential solar leasing and sales. Class-action lawsuits have been filed against some of the worst alleged offenders. The level of grift has become so widespread that multiple state Attorney Generals have filed suits against some of the biggest publicly traded firms in the industry. The irony in regressive “progressive” state Attorney Generals taking legal action against solar energy providers compelled by their own citizen’s mandates is thick. A June article in Utility Dive provides several noteworthy examples.
All of this is not to suggest that all PV solar sales, leasing, installation, and panel companies are crooks. But with the IRA increasing the tax credit for rooftop solar to 30% of project costs in 2023, it is hard to see a decline in the number of Americans being taken advantage of by misrepresentation, fraud, faulty workmanship, or abandonment of projects any time soon.
Residents of North Dakota can take some comfort inasmuch as they are only funding U.S. solar largesse through their taxes and feeling its indirect effects through inflation. While generating the nation’s lowest annual amount of solar power, the state’s residential electricity rate as of last month was 12.30 cents/kilowatt hour. (The U.S. average according to last month’s EIA data was 16.11 cents.)
California, by contrast, is the nation’s solar powerhouse, generating over 31,000 times North Dakota’s annual total. California residents are paying three additional costs for their love affair with solar the folks in North Dakota thankfully avoid:
Unscrupulous solar firms; and
Compulsory installation of solar panels on new houses; and
Higher costs for residential electricity. According to EIA’s latest data, California residential electricity rates were 31.22 cents/kilowatt hour, more than 2.5 times higher than North Dakota, and almost double the national average.
Homeowners are not the only ones who have taken a financial hit from the hype around solar energy. Over the last twelve months, publicly traded solar firms have been a weapon of mass destruction of capital.
The graph below shows the one-year stock price performance of five U.S.-based solar companies, First Solar (FSLR), SunRun (RUN), SunPower (SPWR), Sunnova (NOVA), and Enphase (ENPH). With the exception of First Solar, all are badly underwater:
Are international solar names performing much better? The following graph shows the one-year stock performance for some of the biggest solar firms based outside the U.S., Canadian Solar (CSIQ), Jinko Solar (JKS), Solaredge Technologies (SEDG), and Maxeon Solar Technologies (MXN):
U.S. based First Solar is the only one of the 9 companies in our analysis with any stock price appreciation over the last 12 months. However, even its stock price is down >35% in the last five months. (We ignore Chinese solar companies for the same reasons we ignored state-owned oil companies in our last post’s analysis).
How about much-hyped pure play solar Exchange Traded Funds? The below graph shows one year returns for Global X Solar ETF (down 34%):
The next graph shows one year returns for Invesco Solar ETF (down 27%), which Reuters noted in an article last week saw record outflows of over $300 million in the first 9 months of 2023:
Unfortunate homeowners and green Rube Goldberg machine investors should take some solace in the fact that one of modern history’s most successful investors wasn’t beyond getting fleeced by a solar scam himself. A May 2023 article in The Atlantic (appropriately) titled The Billion Dollar Ponzi Scheme That Hooked Warren Buffett and the U.S. Treasury tells in the incredible story of Jeff Carpoff, a high-school educated mechanic who had failed in several businesses, filed for bankruptcy and lost his house to foreclosure in the early 2000s.
In 2007, he fabricated a rudimentary mobile, rechargeable solar-powered light system he named “Solar Eclipse” on a car trailer fitted with solar panels attached to traditional batteries. Carpoff himself commented that the invention was “crazy, harebrained” but intrinsically understood how the magnetic attraction of all things “green” led to a form of cognitive dissonance. And he smelled opportunity.
His firm, DC Solar, would go on to ink deals with well-known businesses like Sherwin-Williams, U.S. Bank, Progressive Insurance and, yes, even Warren Buffett’s GEICO. As The Atlantic piece notes:
“Inc. magazine would call his company, DC Solar, a “renewable energy powerhouse” with a product “people clearly needed.” The Obama administration would make DC Solar a partner—alongside Amazon, Alphabet, and AT&T—in a national program to enlist tech in the fight against climate change.”
Sales eventually topped $2.5 billion and Carpoff lived the big life, buying private jets, a baseball team and more than a dozen houses. When it all unraveled in 2020, with Carpoff and his wife pleading guilty to money laundering, conspiracy to commit wire fraud, and an “offense against the United States”, DC Solar had defrauded >$1 billion from over a dozen corporate customers and the U.S. government. (Sorry, but that’s also included in your tab, America).
What does all this mean for solar energy in the short term? The U.S., Europe, Canada, and Australia will continue to commit taxpayer dollars to more solar bonfires. More homeowners who install residential rooftop solar systems will get burned by a perverse incentive system that invites green grift. Lots of solar investors will take a bath even as a few (many on Wall Street) succeed wildly.
In the final analysis, residential rooftop solar will not a) make any serious dent in the portion of global primary energy provided by fossil fuels (~80%), or b) make any significant difference to earth’s future average surface temperature. In the advanced nations forcing the “alternative energy transition”, it will, however, be a relentless and growing problem for electric grid reliability while making electricity more expensive.
Eventually, the limits of physics and economic reality will put a cap on solar’s proliferation and render it a marginal provider of electricity across most of the world. Hurricane Reality has recently exposed the overinvestment/malinvestment in wind. Similarly, the overpromises and hype around solar stayed out in the sun too long with too little protection. The sunburn is now clearly evident.
“Like” this post if you’ll remain diligent - but kind! - when the next door-to-door solar system salesperson visits you!
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"Every dollar printed into existence attempting to replace fossil fuel and nuclear energy with “alternative energy” is now an embedded component of inflation that isn’t ending any time soon." This is well said, and more people should understand it.
This might be the ass-end of capitalism, but the dirty-hands end of capitalism is too easy to overlook. Every one of these PVCs required digging many massive holes in the Earth using huge mining machines (mostly running on diesel fuel), to extract low grade ores for giant mills, refineries, and manufacturing plants. Although this cost is somewhat reflected in the cost to the end-user, it is also represented by the billions in taxpayer subsidies. It would be interesting to see how these combined funds are expended in the distribution of services and profit starting from that giant hole in the ground to the final product installed on the roof.