Rooftop Solar Companies Cash In on Government Handouts

David Williams

August 4, 2014

This article originally appeared on on July 24, 2014

You can’t help but hand it to them – rooftop solar companies have quite cleverly found their way onto the government’s gravy train.

For years Washington has subsidized rooftop solar installations for customersin the form of the Solar Investment Tax Credit, which allows homeowners who install rooftop solar panels to receive a tax credit of up to 30 percent of the cost.

The subsidy has been one of the many ongoing ways in which the feds insert themselves into the energy marketplace. And while it has hampered efforts to achieve real energy independence in the U.S., and has therefore caused real harm to our economy, it nevertheless has met a legitimate need for homeowners desperate for some relief from high energy costs.

But rooftop solar companies – most of which, like SolarCity, Corp., are political connected and favored – have created a scheme to claim the tax credit for themselves. These companies discovered that if they lease the rooftop solar systems to homeowners, the companies themselves can claim the federal tax credit as well as all state and local incentives.

Evidence is now pouring in that this scheme enriches these companies and their Wall Street investors at the expense of homeowners and taxpayers. Worse still, customers who are persuaded to sign onto these leasing programs are finding they reduce the value of their homes.

To the homeowner, the initial deal looks like a good one. SolarCity waives upfront fees and secures outside financing for customers to lease their units. Standard leases last twenty years. Because the customers don’t own the solar units, they are not entitled to the federal tax credit – SolarCity is. A tax credit is essentially a creative way for the government to give someone money – in this case, Wall Street-backed companies – without the dyspeptic display of actually handing over a wad of cash. The arrangement gives SolarCity 20 years of tax credits per customer.

And, in typical Washington crony capitalist fashion, SolarCity was founded and is run by a friend and major donor to President Barack Obama, Elon Musk.

But some may not see the harm. The customer is still getting a deal, right? Not necessarily. Most of the promised annual cost saving from rooftop solar systems are associated with owning, not leasing the system. What’s more, as Bloomberghas reported, “[f]or people who own rooftop power systems, solar adds value to the home … Leased systems are another story because they’re considered personal property rather than part of a house. For many potential buyers, a solar lease is a liability rather than an asset.”

Saving $50 per month on your electricity bill would be nice, but not if doing so devalues your house by $10,000 – $15,000. A homeowner would have to realize 200 months or more of those kinds of savings to make out on the deal. But SolarCity starts collecting on day one.

It’s become an all too familiar story: politically favored companies work the system to enrich themselves and their wealthy investors at the expense of taxpayers and consumers. If Washington has any genuine interest in protecting consumers, they’d blow the roof off this scheme.