The Dark Side of Rooftop Solar

0:00So, the good thing about my neighborhood is it's an older neighborhood. It's not one of those like HOA neighborhoods. Ain't no HOA. Like my house was built like 1950 and all the houses look different. But I've noticed that some of the houses in my neighborhood are now getting solar panels. And I have always been curious about it. And sometimes you have people come around to your door like, do you want to get solar panels? And it's a very working class neighborhood that I live in. And I was always curious about how it actually works. I don't want to be the first to get the solar panels in the neighborhood, right?

0:44I want to see other people do it or have my friends do it and see how it works for them. And then I will do it. So that's why I have not done it yet. But rooftop solar panels are really a thing across America. It's estimated 4.5 million households have panels on their roofs. And many of them got there because of these aggressive sales tactics favored by solar companies. Some customers say they were lured into contracts that made hefty promises, but left them with broken panels and big debt. On today's show, we feature an episode from our friends over at Planet Money about the darker side of residential solar power.

1:33Here's Alana Samuels and Keith Romer. In 2012, Christine and John Scalera moved from New Jersey to Florida because of John's job. That move? Still a little bit of a sore subject for them. I came down kicking and screaming, didn't want to be here. And yeah, so. Best decision I ever made. I haven't shoveled snow in 12 years. Nope. I might disagree. Florida, of course, a very sunny place, which at least partly explains how Christine and John came to sit down one day with this young salesman named Justin. This is about three years ago. Justin told Christine and John that what they needed, more than anything in this world, were solar panels on top of their cute little ranch house.

2:23The sales pitch was very simple. Electricity is only going to get more expensive. So your 300 bill is going to become 400 and 500 with no end in sight. But you'll be able to get rid of your electric bill and become energy independent. And they'll pay you. Yeah. And not only that, but any excess, they'll be paying you. I mean, it's a great sales pitch. It's a great sales pitch. Justin walks them through how it will all work. No money down, just a monthly loan payment of around$200. The solar panels will replace about 75 % of the energy they've been getting from their power company. If the panels happen to make more than what they use, the power company will pay them for that extra energy.

3:09Christine, she worked as a high school guidance counselor. John had just gotten laid off, and cutting down their bills that much was pretty attractive. Even better, after 20 years, they would own the panels outright. How great would it be to start a retirement in a house where you're not paying an electric bill? They sign up that day. About a month later, they've got solar panels. It was great for a couple of months. We weren't covering all of our electric usage, but the bill was only like$60. It went from$400 to$60 a month, which was great. And that lasted for a couple months. And then we got a bill that was like$120 and then$200.

3:52And then we were back to paying$300 and something a month. The panels ended up not generating anything close to 75 % of the energy they used. And now, on top of their electric bills, they had to pay for their solar panels every month, too. Also, the company that had installed, Christine and John's panels, they were not great at customer service. Like, it was hard for them to even get anyone on the phone. We'll get back to you. And then no one gets back to you. And it's the same little dance you do over and over again with them. So they send emails. They file a complaint with the state of Florida.

4:26At one point, Christine even tracks down the address where the company is registered, gets in her car, and drives there. I guess I wanted to make, like, is it really a place? Like, I need to see if it was actually a physical place. Like, I don't understand. It was, it was maddening. It really was. It was crazy. Turns out it was just some anonymous building. No signs, no nothing. That company ends up going out of business. New company takes over their service contract. And soon there's a new shiny young salesman offering to make things right. This one's named Evan. And Evan's like, those panels you've got on your roof, they were actually outdated when you put them up.

5:03And they were never going to give you as much power as that first guy said they would. But a set of newer solar panels will more than make up for it. The ones on your roof I can't get rid of. I have to keep paying for them. So I'm already halfway there. It's like, you know, go big or go home at that point. Christine and John sign a 25-year lease for even more solar panels. And the same thing happened with the new panels as with the old ones. Their electricity bills were still really high. Like, maybe they came down a little, but nowhere near enough to offset what they were paying for their panels.

5:39Now I have$100 ,000 in debt that I've got to pay off for a house that was paid off. And one is a lease, not even like I'm not even buying anything. That's an$80 ,000 lease. Like, I don't know what the hell we were even thinking. Because their electric bills stayed high, Christine and John started to think maybe their new panels weren't ever even connected right. So they refused to make their lease payments until they could get someone from the solar company to confirm that the panels were working right, which they say the company never did. Christine and John's solar panel experience has not been great.

6:16It hasn't provided us any kind of financial relief. It's done exactly the opposite. It's made our finances very difficult. Get them off my house before I pull them off myself. Look, I'm ready to go up there and pull them off myself. I'm not even kidding. Give me a hammer. I'm done. I don't care. Hello, and welcome to Planet Money. I'm Keith Romer. And for this episode, I will be joined by Time Magazine's senior economics correspondent, Alana Samuels. Hi, Alana. Hello. Alana, we brought you in because you have been writing a lot about folks like Christine and John. I have. So let's start with a sense of scale.

6:524.5 million households in the country have rooftop solar, and plenty of them are happy with it. They say their electricity bills have just about disappeared. And that's great for the planet, which will, you know, burn up and or flood if we don't hurry up and transition off fossil fuels. But the details of that transition matter. And your reporting suggests that, at least with solar panels, we may not be totally nailing it. Right. There is this corner of the residential solar market where tens or maybe even hundreds of thousands of people are really disappointed by what they've been sold. It's more expensive than it should be, and customers say they can't get anyone to fix their panels when they break.

7:29So, Alana, you are going to help us try to figure out how we got here, how this series of decisions made by policymakers and residential solar companies over the last 20 years has led to the mess Christine and John and all those other people are in. So today on the show, why this seemingly obvious good idea, putting solar panels on people's homes sometimes turns out so badly.

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8:50So you have the energy you need today while being ready for what's ahead. Learn more at TomorrowIsOn.com. This message comes from the NPR Wine Club, a place to explore the exciting world of wine, including wines inspired by popular NPR shows, like all things considered Cabernet. Whether buying a few bottles or joining the club, all purchases help support NPR programming and fund quality reporting developed to connect people to their communities and the world they live in. More at nprwineclub.org slash podcast. Must be 21 or older to purchase. Okay, so it is easy to look at what happened to Christine and John in Florida and say, you know, they just got a bad deal.

9:33It happens. But Alana, your reporting suggests it didn't just happen by accident. No, exactly. Kind of everything about how it went down for them, the way they financed and leased their solar panels, the aggressiveness of the salesmen who signed them up, even how bad their customer service experience has been, all of that actually ties back to how the residential solar business was built in the first place. One of the big companies that helped shape the industry in those early days was called Sunrun. We got in touch with one of its founders. My name is Nat Kramer. I've been a clean energy entrepreneur for nearly two decades.

10:07Nat, we should say, does not work at Sunrun today, but let's just start with how customers tend to pay for rooftop solar. Nat says the model for that was developed in the early 2000s, when people in the business were trying to solve this pretty fundamental problem. So people get excited about the idea of solar. They get excited about the idea of clean energy. early adopters, that was definitely true. But you then say to them, you've got to go invest 50, 40, whatever number of thousands of dollars. In other words, pay cash for a solar system. It's like saying pay cash for a car. And there just weren't that many customers ready to pay that kind of money for solar.

10:50Right, you see this with a lot of new technologies. You have your early adopters, and then you have to figure out how to pull in everyone else. Nat's solution? Instead of asking homeowners to pay$50 ,000, his company would come to your house and put panels on your roof. You never had to buy anything. Nat's company would own the panels. All you had to do was agree to buy the electricity those panels generated at some agreed-upon price, which was likely to be lower than what you were paying your utility. This is called a PPA, a power purchase agreement. Sunrun signed its first PPA in California in 2007.

11:25And actually that got featured in a story in USAT. It has the picture of the homeowners standing on the roof and there are these redwood trees around and you're up by Skyline Drive in California. So as Sunrun was selling PPAs, another company, SolarCity, which was founded by Elon Musk's cousins, by the way, they were selling solar panel leases. The idea here was similar to Nats. Consumers would get solar panels on their homes without paying all this money up front. Both PPAs and leases made it possible for a lot more people to make the switch. And as solar panels got cheaper and more efficient, a lot of people signed on to use solar to try to lower their electricity bills.

12:06You end up in the next 10 years with over a million homes going solar versus 40 ,000 in the previous 40 years. We changed the solar industry. Christine and John in Florida, they financed their first set of panels, and they got their second set with a 25-year lease. But while residential solar companies had solved one problem, how to grow their customer base, they had also kind of created a second one. All these people putting$50 ,000 solar systems on their roofs, they weren't shelling out a lot of cash up front. Which meant that the sunruns and solar cities of the world needed a lot of capital to pay for all this.

12:41And so the industry made a big pivot. The companies started treating solar panels less like a consumer product and more like a financial one. We innovated a bunch around financing, and this may all sound really esoteric, but why were we doing it? It's because we wanted to make solar the cheapest form of energy. And there were a couple other ways solar companies like Nats could make money besides, you know, just installing solar panels. The first one was tax credits. Right. For almost two decades now, the U.S. government has offered a 30 percent investment tax credit for some clean energy projects.

13:20So say a homeowner puts a$50 ,000 system on their roof, they could deduct$15 ,000 from their taxes. But remember, Nat's company, Sunrun, they were the ones who owned the solar panels, not the homeowner. So Nat was like, can we get that tax credit? We spent a half million dollars or more with tax lawyers and accountants effectively figuring it out. The answer, it turned out, was yes. Sunrun could claim that credit. But these solar tax credits only really helped if you had taxable income. And Sunrun was not turning a profit. But what Nat figured out from all those lawyers is that you were allowed to partner with another company that did have a big tax bill to pay and could use those tax credits.

14:04Like, say, Google, who was making a lot of money and who wanted to do something good for the environment. And so that's what Nat's company did. Google, we should say, is a sponsor of NPR. But this is kind of wild to me, how these tax incentives that were initially designed to get regular homeowners to put solar panels on their houses ended up lowering tax bills for Google. Yeah. Welcome to America, Keith. Thank you. OK, so tax credits. That's one additional way for these solar companies to make money. Another one is asset-backed securities. Good old asset-backed securities. Yeah, we all learned about those during the financial crisis.

14:44And the way they worked is that banks bundled together the income streams from lots of mortgages and then sold them as securities. So now solar companies did a version of the same thing. They bundled up the income streams from these solar panel leases, PPAs and loans, and they sold them to investors as securities. And that helped the big solar companies get some of the cash they needed up front instead of having to watch it dribble in over 20 or 30 years. Now, we have no way of knowing whether the companies that Christine and John from Florida worked with passed along the tax credits that would have come with their panel installation to another company or bundled their payments into an asset-backed security.

15:22But when you look at how little help they've gotten in terms of customer service over years of trying, it's not hard to get the sense that they are being treated less like valued customers and more like an income stream on some giant spreadsheet somewhere. And this is something I've heard from customers across the country. Big solar companies pay them a lot of attention until they sign on the dotted line. And then they don't do a great job with customer service after that. Now, there's another piece to this puzzle, because all the tax credits and asset-backed securities, they didn't get these solar companies all the money they needed to stay afloat.

15:59This whole time, they'd also been trying to raise money in more traditional ways. They issued stock, they took on debt. And to be attractive to investors, they had to make themselves into these fast-growing companies. And Nat says this growth imperative might have led some folks in the industry to cut a few corners. You did have some corporate leaders who wanted to look the other way, and it was all about volume for them. Volume, as in doing everything they could to convince as many people as possible to buy solar, which meant deploying salespeople. Lots and lots of salespeople. Yeah, my name is Waleed Halti.

16:35Waleed was not one of the salesmen who came to Christine and John's house, but his story really captures how the sales part of all this contributes to the problem some people are having. So Waleed gets into solar about a decade ago. Back then, he's going to college in Massachusetts. He has a minimum wage job, busing tables, and he hears about one of his friends who is making way more money than he is. Someone I knew was making like$20 ,000,$30 ,000 a month selling solar. And I'm like, if this dude can make that much money selling solar, there's no way I can't also do that, if not double, triple that.

17:10So Waleed signs up and he goes to this boot camp where all the secrets of solar sales are revealed to him. When you go knock a door, there's a certain distance you want to stay away so you don't come off as invasive to the homeowner. You want to stand sideways. It's less confrontational. You want to ask questions that are going to be sort of yes answers to. The more they say yes, the more likely they are to keep saying it. These little tactical things that do truly work. Office culture features a lot of young dudes, a lot of big talk. Everyone's going to be a millionaire. Everyone's going to make six figures.

17:46We're saving the world at the same time. This is it. This is what I've been waiting my whole life for. Do you know how well other people are doing? Yeah. There's a public leaderboard. You're almost like an athlete that's competing against others. Waleed, it turns out, is good at that competition. Like, really good. So good that he drops out of school. And according to him, he makes a lot of money. Fast. Third month in, I think I did like 14 installations, and it was like$20 ,000 to$25 ,000. In one month? Yeah, in one month. I'm like, holy smokes, there's no way. And it's not just one Waleed out there knocking on doors and using these tactics.

18:26It's thousands of Waleeds. because these solar companies need to grow and grow and grow. They are willing to do whatever it takes to keep their best salespeople cranking. I remember a leadership conference that SolarCity hosted, and they sent us all to Vegas, all expenses included. And, you know, you were with other top performers that were like, yeah, like we're crushing it, making all this money. You know, picture some motivational speaker stalking back and forth, firing everyone up, getting them to chant in unison. So everyone would say, I'm alive, I'm alert, and I feel great. I'm alive, I'm alert.

19:03And everyone would scream and chant that. Can we all do the I'm alive, I'm alert, and I feel great chant? Yeah. Make sure you feel it, though. Make sure you don't just say it to say it. Get your body in it. Let's go. One, two, three. I'm alive, I'm alert, and I feel great. I'm alive, I'm alert, and I feel great. I'm alive, I'm alert. Oh, I did it too many times. It is easy to understand why the sales bros felt so great, because they got a lot of latitude from the companies they worked for. Waleed says on each sale, a salesperson would get a floor for how much they have to charge a new customer.

19:42You know, maybe$3 ,000 per kilowatt the solar panels could generate. But if the salesperson could get a new customer to pay$4 ,000 or$5 ,000 or$8 ,000 per kilowatt, they got to pocket the difference. You could sell it for as high as you'd like. As high as the homeowner would say yes to. And you would just get more and more money the higher the price you charge them? That's right. It's almost as if, you know, you got a$20 ,000 car and this, you know, the dealer, the dealership can sell it at$40 ,000 if they want. What this means is that people like Waleed can earn huge commissions, but homeowners like Christine and John end up paying more than they should.

20:23So in addition to the customer service problem, there's also this middleman problem. Is it a good system? Definitely not. No. Waleed makes a lot of money selling solar panels and managing people who sell solar panels. But as he hears more stories about customers who feel stuck in bad deals, he's like, the industry cannot keep going like this. You didn't have to be a genius to figure out, like, there's no way this is going to continue. You can't be making this much money, you know, and selling it at this high of a price and have this much of an unhappy customer experience. So he quits, but he doesn't get out of solar altogether.

21:05These days, Waleed runs a tech company called Mona Lee. It's designed to let homeowners get solar with no salespeople. After the break, we try to figure out exactly how viable the residential solar business is for the businesses themselves. And what that means for all the customers like Christine and John who are locked into a long-term relationship with that industry.

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22:59Alana, you have been reporting on the problems in the solar industry for Time magazine for the last year or so. You got into this because you had your own problems with solar panels, right? Yeah. So I bought a house with solar panels already installed. And when they didn't work, I also ran into customer service problems trying to get them fixed. So I started looking into why so many companies seem to be so bad at dealing with customers' problems. Right. And that is what we are going to turn to next, kind of whether the residential solar industry is even going to be able to survive using the business model we've been talking about.

23:33So for that, we are going to Paul Lethcano. I'm a senior analyst at Bloomberg NEF, the Clean Energy Research Division. When Paul started there in 2020, his predecessor left him everything he had written about residential solar. He labeled the U.S. residential solar industry as, I think, I believe it was called the residential solar death spiral. And then as I read those reports, basically day one in the office, I realized how broken the system is and how broken the industry is. Paul says the basic problem is that imperative to grow we talked about before. That has not gone away. Running a national solar business still requires bringing a lot of capital in the door.

24:17And to keep attracting investor money, the solar companies have to keep expanding their customer base. As you scale that business, as you try to get the additional customer, you're essentially spending more money in getting that new customer than the profits that you're making overall as a company. And Paul says these companies have ended up really far away from the nuts and bolts of installing solar systems. Your company is not a solar company. Your company is essentially a sales and a financial engineering company that just happens to install solar panels. And like we mentioned before, that can have a huge impact on how much customers end up paying.

24:59So am I correct in understanding if there wasn't so much sales and marketing, solar could be a lot less expensive in the U.S.? Yeah, that's exactly right. In a country like Germany, where energy costs are really high and people are motivated to get solar panels without being pestered by salespeople, customers pay half or a third of what they do here. Another thing about Germany, most of the installers are local. They don't spend a lot on marketing. Instead, they get customers based on their reputations. So better customer service. And because of fewer middlemen, better prices. We should say that the same thing is true in the U.S.

25:36There are plenty of successful smaller local companies who haven't run into these problems of trying to scale. But when Paul looks at the landscape for big national residential solar companies in the U.S., he's not super optimistic. So what happens to the big companies that have scaled, like Sunrun and Sinova? Where do you see them going? Well, I got to be careful with how I answer that question because as an analyst, I cannot say anything that makes any inference in public Ian, whether I think a company is going to fail or not. What I can say is that the big national listed solar installers have barely made any profit, if anything, since their existence.