Using Gloom and Doom to Sell Solar

This article originally appeared in the Sierra Vista Herald on March 28, 2015

Can gloom and doom be used to sell something as seemingly perky and positive as solar energy? Of course it can be, and it frequently is in Arizona, as solar companies try to scare potential customers into making hasty decisions on a rooftop solar purchase, lease or loan. At last, Arizona’s leaders are beginning to awaken to the dark side of Big Sun.

If your friendly solar salesman promises to lock-in future electric bill increases at a fixed annual rate of 2.9 percent, for the duration of a 20-year rooftop solar lease, that might seem tempting, as compared to the 4.8 percent annual increases non-solar customers are likely to see in that same period. That nearly 2 percent difference represents a lot of potential savings over time. It’s one of the industry’s biggest selling points.

But what if the salesman’s 4.8 percent prediction is way too high, based on historical trends? What if, confounding those predictions, future rate increases are significantly lower than the solar company estimates? That dramatically changes the equation. That makes the promised savings from such a system much harder to achieve.

Until very recently, the nation’s largest rooftop solar leasing company, SolarCity, was using the 4.8 percent prediction in its sales pitches. Extra small print indicated that this was an “estimate.” But this was still one key assumption on which the long-term benefits of systems were sold.

Just lately, SolarCity’s sales materials began using a lower, 3.9 percent estimate—a revision that might come as unwelcome news to the tens of thousands of customers who committed to a long-term lease based on the earlier estimate. The new number still lends some curb appeal to the company’s 2.9 percent rate cap promise. The downward revision might also make some current lease-holders wonder whether they signed the dotted line based on inaccurate or misleading numbers. Problem is, SolarCity’s new 3.9 percent prediction also remains suspiciously high, based on past trends and the most credible future projections.

Between 1985 and 2000 average residential electric prices increased in the U.S. by just 1.1 percent per year, which was well below the 2.4 percent annual inflation rate during those years. Since 2000, electricity prices have risen at 2.5 percent, but the per-kilowatt-hour price of electricity has increased by just 27 percent percent overall since 1985-which averages out to less than 1 percent per year.

Residential retail prices jumped 3.1 percent between 2013 and 2014, but that was somewhat skewed by a nearly 11 percent price spike in New England states. The Energy Information Administration, in its most recent report, projects an average annual residential price increase of 1.1 percent in 2015 and 1.8 percent in 2016 (with some regional variations, as noted).

In Arizona, where thousands have been signing leasing deals based on the promise of locking-in a 2.9 percent annual increase, residential rates have increased by less than 1.5 percent per annum over the past 23 years, according to the Residential Utility Consumer Office. And a quick review shows that this tendency to exaggerate isn’t isolated to one company.

While it’s impossible to precisely predict where residential power prices will go in the next 20 years, it’s clear that the 3.9 percent estimate remains suspiciously high. That means the 4.9 percent number the company used until recently was even more misleading — which might help explain why it’s walking it back now.

Proof that such deceptive practices aren’t imaginary can be found in the recent crackdown by Arizona’s attorney general on the fittingly-named Stealth Solar. The Arizona Corporation Commission also is investigating allegedly-sketchy business practices in the industry. A bipartisan group of members of Congress from Arizona recently wrote U.S. Federal Trade Commission Chairwoman Edith Ramirez asking her to probe “potentially deceptive sales tactics” by rooftop solar companies. Arizona Sen. Jeff Flake at a recent hearing asked Energy Secretary Earnest Moniz if he was aware of any such problems in this taxpayer-supported industry. He wasn’t — elevating the issue to an even higher level.

Outside Arizona, public awareness of solar energy’s potentially darker side seems low, perhaps because the rooftop solar boom currently is concentrated in relatively few states. But if Big Sun’s generous subsidies keep flowing, and the boom keeps going, industry business practices may finally get the kind of national scrutiny and oversight they deserve.