Virtue Signaling and Tax (subsidy) Equity Investors

In the elaborate article for Bloomberg, the author delves in to complex financial structure used by mega investors to harvest solar subsidies, while weaving in the appropriate smattering of virtue signaling.~ctm

From Bloomberg

What Happened When I Bought a House With Solar Panels

Third-party ownership and decades-long contracts can create real headaches.

By Esmé E. Deprez

‎February‎ ‎14‎, ‎2019

From the article

Two days after walking through Jug’s ham shack, we made an offer. A week later, just before we entered escrow, we learned the solar array hadn’t belonged to Jug. It was, in the language of the industry, a third-party-owner, or TPO, system, belonging to Sunrun Inc., the largest provider of residential solar in the U.S. I started looking into the TPO model. It’s used less often than it once was, but it’s been important in making residential solar, once out of reach for most people, much more widespread. The reason is simple: Homeowners usually pay nothing upfront. A company like Sunrun puts solar panels on your roof, connects them to your home, and claims a tax benefit for owning the system. Going forward, you pay Sunrun to provide the bulk of your electricity needs instead of your utility.

I’d soon learn that the system was tied to the title of the house. It appeared that if we bought Jug’s place, we’d have to assume his lease arrangement with Sunrun. I wasn’t sure how I felt about this as a buyer, but it definitely piqued my curiosity as a journalist. I set out to examine the value proposition carefully.

And quickly discovered.

A Sunrun customer service representative told me that in the year before he went solar, Jug’s monthly bill to Southern California Edison averaged $115. Under the terms of his deal, he paid $75 a month to Sunrun. The panels on his garage were expected to cover 85 percent of his energy needs. That left him reliant on SoCal Edison for the remaining 15 percent, at a cost of about $17 a month. All in, his energy bills came to about $92, a savings of about $23 a month.

I got ahold of a copy of Jug’s contract, and quickly saw how Sunrun could afford to extend such an offer. It lasted 20 years. The payments escalated annually by 2.9 percent—they’d be 72 percent higher by 2036. The tax credit was worth at least $5,000.

Alex and I were living in a condo 50 percent bigger than Jug’s house (with air conditioning, which Jug didn’t have), and still our energy consumption didn’t come close to what Jug, with all his electronic gadgetry, had been using. We’d be paying Sunrun for more capacity than we needed. A state policy called net metering meant we could sell back excess production to SoCal Edison, earning us about $7.50 a month, but even so, the utility would charge us $10 a month or more to remain connected to the grid. Accounting for all these things, taking on Jug’s lease would translate to us paying at least $30 a month more. We’d lose money from Day 1. Supporting renewable energy is important, and I get spending a little more to help the planet. But a for-profit company like Sunrun wasn’t my idea of the right place to do it.

I do love the horror above of paying a “for-profit” company.  Grade A virtue signaling.

I asked Sunrun if it would take back the system to put it on someone else’s house. It wouldn’t. The only way to get out from under the obligation, as far as we could tell, was to prepay the balance on the remaining 18-plus years’ worth of payments and buy the hardware outright. The price: $27,300.

It’s a long and rambling article, but the money shot is in the middle.

Sunrun finances its initial costs by taking on debt and raising capital from what are called tax equity investors. Only a few dozen companies have the appetite for tax credits and financial sophistication to be in this pool, including Google, JPMorgan Chase, and General Electric, says Joe Osha, an analyst who covers energy technology at JMP Securities LLC. They invest in Sunrun not to generate significant cash returns but to reap tax benefits: By assuming ownership of thousands of solar systems they can claim the credits and thus lower their tax bills from other economic activities. Hugh Bromley, a solar analyst at BloombergNEF, says Sunrun and its competitors offer solar, sure, but can be better understood as having created “one of the most sophisticated financial engineering industries of any sector of the U.S. economy.”

Read the full article here.

HT/The Editor of

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February 18, 2019 6:19 pm

Taxes and subsidies don’t affect business decisions. Right!

Reply to  Andy May
February 18, 2019 11:21 pm

There is definitely money to be made investing in tax credits and government subsidies.

Curious George
Reply to  Andy May
February 19, 2019 11:23 am

A recent example, Amazon’s HQ2 in New York.

Joel O'Bryan
February 18, 2019 6:24 pm

At some point this home solar house of cards is going to come crashing down. It will be all fun and games until the music stops as the tax subsidies end.
Think of the countless tulip bulb-like bubbles, mining town collapses, bust, sub-prime meltdown, real-estate run ups that couldn’t last (and they didn’t)… the history books are full of them.
The high tide will retreat on home solar, and everyone will see who has been swimming naked (as it has already for Solar City and Solyndra).
Google and Chase Bank have the ample cash and capital on hand to simply walk away. And these solar companies will go bust as boom-bust cycle companies always have, leaving the TPO-solar home owners wondering who owns the contraptions on their rooftops. The same will happen in countless scenarios across the mid-west in the coming decades with wind farms. Wind farm owners will go bust. Turbines will cease to turn. Land owners will cease to get their quarterly easement payment checks. No one will know who to contact it the complex dealings of bankruptcy and ownership transfers. Mean while the lifeless and dead turbines and dust-covered solar panels will rot-away on land-owners’ acres and home-owners’ roofs unsure of what they can do.

(How’s that for trite cliches? But it is apt!)

Reply to  Joel O'Bryan
February 18, 2019 6:55 pm

The high tide will retreat on home solar, …“. True. I’ve just had solar panels installed, but I first very carefully costed it all, assuming that I would get nothing for selling power into the grid (if I do, that will be a bonus). There’s a government (Australian) subsidy for installing, and that tips the balance in favour of installing. Is it ethical to accept a government subsidy that one disapproves of? Well, I thought about it, and as a taxpayer who has to finance it whether I like it or not, I think it’s fair to take what’s on offer when it’s on offer. I reckon that if I change my usage pattern to take advantage of when the sun is shining, I’ll come out fairly well ahead. That equation wouldn’t apply to everyone, because some can’t change usage pattern that easily.

Planning Engineer
Reply to  Joel O'Bryan
February 18, 2019 6:57 pm

A proximate cause of PG&E going bankrupt may be the fires. But foundationally the renewable contracts may be the larger factor. Their bankruptcy would/will impact those counting on future sales to the utility at inflated prices

Joel O'Bryan
Reply to  Planning Engineer
February 18, 2019 7:32 pm

There are a lot of West Coast solar company bankruptcies and write-downs coming. The Topaz Solar Farm east of San Luis Obispo on the Carizo Plain was profiled here at WUWT a few weeks back is just one. That one is surely going under as PG&E will most likely get to terminate its contract by the bankruptcy court judge.

Dave Fair
Reply to  Joel O'Bryan
February 18, 2019 9:37 pm

No, Joel; the government will step in and force honoring the contracts that, under law, would be renegotiated or rejected. Think GM: the handing the assets to the unions and the shafting of the bondholders.

Reply to  Dave Fair
February 18, 2019 10:28 pm

And the shafting of “bad GM” employees who lost half or even all of their pensions. I got lucky, but many of my co-workers did not.

Reply to  Dave Fair
February 19, 2019 6:32 pm

The good news is that bankruptcy law is the province of the Federal Government, not the State of California. The progs in my state’s government will indulge in great screaming and gnashing of their teeth and possibly get a California state court to agree with them but Article VI Clause 2 of the Constitution is not referred to as the “Supremacy Clause for nothing. This has been litigated and the SCOTUS has ruled.

The bad news in my view as a California and Federal tax payer is that this ridiculous plan should never have gotten off of the ground. If a private company had floated a bond measure like that which the California state government put on our ballot the perpetrators would be enjoying an extended vacation in Club Fed.

Reply to  Joel O'Bryan
February 18, 2019 7:05 pm

Well said.

No one will know who to contact it the complex dealings of bankruptcy and ownership transfers.

It’s like trying to reverse-engineer a chess game from the leftovers once the players have gone home.

So who the fk owns it? Simple. Unplug or remove it, then all those worms with interest in it will crawl drooling from the woodwork. Then since they failed to maintain their side of the contract, make another on your terms or tell them to remove their trash from your property before you have them for fraud and unlawful dumping.

Joel O'Bryan
Reply to  ЯΞ√ΩLUT↑☼N
February 18, 2019 7:43 pm

It’s an impossible game. Like trying to determine the original numbers that made up a number, given only the sum. Impossible. Countless possibilities of who owed what, to who, and when did they owe it to collect back royalties and unpaid lease payments. And if it went through bankruptcy, then any unsecured amounts owed pre-bankruptcy were likely reduced to 6 pennies (or less) on the dollar owed.

Reply to  Joel O'Bryan
February 18, 2019 7:31 pm

+1 Joel O’Brayn…. When the hype and free ice cream ends who will be accountable for the mess?

Michael S. Kelly, LS BSA, Ret.
Reply to  markl
February 19, 2019 3:43 am
Reply to  Joel O'Bryan
February 19, 2019 6:48 am

not sure about Google, but Chase will not lose any money. They get the tax credits and, as you see in the article, their profits are contracted. The poor climate aficionado who signed up is on the hook.

J Mac
February 18, 2019 6:30 pm

Yet another clear example illustrating the ‘profits’ from solar energy are entirely dependent on government subsidies and adverse regulations. The title impairment to the property by the adverse solar panel installation contract is just the polished turd on top of the cow flop cake.

The economic result is the property should be fairly valued by discounting it sufficiently for the remaining 18-plus years’ worth of payments and the hardware buy out price of $27,300.

John F. Hultquist
February 18, 2019 6:44 pm

I do not actually know anyone with solar, although there are some in our area.
I hope others can add to this interesting story.

Joel O'Bryan
February 18, 2019 7:01 pm

You have to read the whole article. It really is worth your time. Trust me.

Here’s the last paragraph, but there’s a lot in there on how deceptive the entire home solar industry is today.
(Spoiler Alert: They had the rooftop solar system removed completely before purchase.)

“As I write this I’m pregnant. The life Alex and I pictured the first time we walked through Jug’s house, now our house, is taking shape. And let me tell you about our electricity bill. Had we assumed Jug’s lease, we’d be paying $79 a month to Sunrun (the second escalator would have kicked in) plus at least $10 to SoCal Edison to stay on the grid, minus $7.50 for net metering. We’ve been in the house 10 months, and our average SoCal Edison bill is $30. Compared with becoming Sunrun customers, we’re saving $50 a month. We’re going to give some of that to help protect the environment.”

Reply to  Joel O'Bryan
February 18, 2019 7:15 pm

Pretty much the same minefield happens in Oz. The “Company” tells you what their rates per kW or whatever are and that they’re “Roolly competetive”, but through some unimaginably complex number-juggling the end bill always seems to be more than you could possibly calculate. One reason is the supply charge which is the real killer, then the illegal Goods and Services Tax on the lot, plus rate hikes they didn’t tell you were coming etc etc. It’s even a mug’s game if you pull it from the lines for free, because supply ripoff etc.

Craig from Oz
Reply to  Joel O'Bryan
February 18, 2019 10:04 pm

Wait? The author is WHAT?

Having a baby?

Has she not read the script book? Women these days are simply not having children for fear of Climate Change(tm)! Get with the programme, Esme!!!


(also Good and Happy Luck to Mini-Esme.)

Dave Liggett
Reply to  Joel O'Bryan
February 18, 2019 10:08 pm

The article is indeed enlightening re: industry practices, I can’t get past the $30 average monthly electric bill. Is that feasible in SoCal? If so, my perception of power costs in CA are seriously skewed.

Reply to  Dave Liggett
February 19, 2019 7:28 am

No AC, nat gas for cooking and water heater.
Electricity is just for lights, computer, TV.

old white guy
Reply to  Joel O'Bryan
February 19, 2019 4:03 am

Those idiots still think they can or are going to protect the “environment”.

February 18, 2019 8:22 pm

For-profit company. For-profit non-profit company. For-profit employee. And so on and so forth.

Renewable drivers, not converters. They’re only getting a marginal 50% return on their virtue investment, which doesn’t discount for stabilization via hydrocarbon and other energy sources, and performance progression during the on-site converter’s useful lifetime, with seasonal climate change, and the evolution of weather in smaller frames. Still, at least they’re doing something to delay the prophecy.

Bryan A
February 18, 2019 8:29 pm

While the sellers could stipulate the sale contingent upon accepting responsibility for the Solar Roof contract terms, the buyers could also stipulate the sale contingent upon it’s removal with the seller responsible for contract termination
Or the buyers could also stipulate a closing contingency of a successful renegotiation of terms of contract with the Solar provider

Geoff Sherrington
February 18, 2019 8:30 pm

At some time in their lives, many people have a career choice: should I invest my personal effort in making a tangible, useful good, or should I invest myself in making money (which often involves taking money from others less skillful in the art).
I am now approaching 80, as are many of my friends. All of us admit to frequent thoughts of whether we can rest with a plus that says we have put more into society than we will ever take out.
This is a kind way to say that if you have a career taking money from others, beware the horrible backlash later in life when what should be comfortable satisfaction becomes too many horrible had dreams.
It also helps if you forever expose and reject money scammers and their ilk. Geoff

Dave Fair
Reply to  Geoff Sherrington
February 18, 2019 9:58 pm

The danger, Geoff, is that many of the CAGW mongers believe they are contributing to society. Only the future will tell if they wind up with a Karma defect.

You and your friends seem to care about the positive social impacts obtained throughout long lives. Such commendable thinking is greatly appreciated. Please pass it along to everyone you meet.

Brooks Hurd
February 18, 2019 9:23 pm

I have a former Solar City (now Tesla) 3.12 kw system on my roof. I opted for the purchase plan and I got the tax credit which I paid to Solar City to increase my equity in the system. I am certain that the P G & E bankruptcy will mean a renegotiated power resale deal. I will most likely need to pay off the balance when I sell the house, but I won’t be sticking the buyer with the bad TPO deal that the Bloomberg writer was getting. Once it is paid off, there will be no payments to Tesla. If you own the system, you own the power it makes. The big question is who (if anyone) will honor the warranty when the inverter fails. Solar City told me that the MTBF is 8 to 12 years for these inverters and warranty was supposed to be 20 years.

Coeur de Lion
February 18, 2019 11:55 pm

In UK the feed-in tariff has fallen from 43 pence per kWh to about 3 pence. Screeches. Firms went bust

February 19, 2019 2:26 am

Supporting renewable energy is important, and I get spending a little more to help the planet. But a for-profit company like Sunrun wasn’t my idea of the right place to do it.

So… Esmé… WTF is your “idea of the right place to do it”? You may not be aware of this, but, “the planet” doesn’t have a PayPal account, nor does it need your help.

Bruce Cobb
February 19, 2019 4:23 am

It’s like the Bob Dylan Song, “Solar Day Women”

Well, they’ll scam you when you’re trying to be so good
They’ll scam you just like they said they would
They’ll scam you when you’re trying to go home
And they’ll scam you when you’re there all alone
But I would not feel so all alone
Everybody must get scammed
Well, they’ll scam you when you’re walking on the street
They’ll scam you when you’re tryin’ to keep your seat
They’ll scam you when you’re walkin’ on the floor
They’ll scam you when you’re walkin’ to the door
But I would not feel so all alone
Everybody must get scammed
They’ll scam you when you’re at the breakfast table
They’ll scam you when you are young and able
They’ll scam you when you’re tryin’ to make a buck
Then they’ll scam you and then they’ll say “good luck”
Tell ya what, I would not feel so all alone
Everybody must get scammed
Well, they’ll stcam you and say that it’s the end
Then they’ll scam you and then they’ll come back again
They’ll scam you when you’re riding in your car
They’ll scam you when you’re playing your guitar
Yes, but I would not feel so all alone
Everybody must get scammed alright
Well, they’ll scam you when you walk all alone
They’ll scam you when you are walking home
They’ll scam you and then say you are brave
They’ll scam you when you are set down in your grave
But I would not feel so all alone
Everybody must get scammed

Alan Watt, Climate Denialist Level 7
February 19, 2019 6:57 am

TPO deals are not unique to rooftop solar; they are being offered for HVAC systems as well. In legal terms a long-term lease is an “encumbrance” on the property, and limits your right to sell, transfer or otherwise dispose of it. Most homeowners have a mortgage, which is another encumbrance, but at least there is a long history of regulation and other legal structures which enforce a reasonably standard interpretation of what mortgage holders can and cannot do. If the assumptions behind the rooftop solar lease come true (rising costs from the utility), a working solar installation can be an asset which increases the value of the home to potential buyers.

But if the assumptions turn out not to be true, the seller will have to take loss in one form or another to induce a buyer to take it off his hands. I assume that is what happened in this case.

If you decide a rooftop solar system is a sensible decision in your situation, you are almost certainly better off financing it yourself with a home equity line of credit (HELOC) or a second mortgage. Under current US tax law (or my understanding of it), since the loan is for the purpose of repairing, remodeling or improving the property, interest would be tax-deductible. Plus you would get the benefit of any available tax credits. This assumes of course you have enough equity in the property to qualify the needed additional borrowing.

Think “timeshare” and ask yourself why you hear so many commercials from firms claiming to get you out of those deals before you consider a lease deal on HVAC or rooftop solar.

February 19, 2019 8:09 am

PLEASE, those that believe this con Please do the calculations. Take the amount of money that a solar installation costs, add in maintenance, Increased taxes due to increased value of the home, increased insurance due to increased value, subtract any “subsidy” figure out the TRUE cost for the life of this money pit. Do it both ways – outright cash investment and loan for the purchase price if you plan on borrowing the money. Then take that same amount of investment (including maintenance, repairs, cleaning, etc.) and put it in any decent S&P, NASDAQ or DJIA tracking mutual fund.
The internet is loaded with online calculators to help you figure out the projected earnings and loan cost. I have made these calculations about every five years since 1973. As a result. my retirement fund has $200,000 MORE in it than if I had followed my dream and put one on my roof. Using the actual earnings of my investments, I could pay the electric bill (with inflation in price included) from the invested funds after the so called period the solar panel has paid for it self date, and continue paying my electric bill for the rest of my life.
Think about it, which is better having so called “Free Electricity” for the life of that panel (ignoring the annual maintenance and many other expenses that are ignored in the sales pitch) or more than a two thousand dollars a year in your retirement income? One never mentioned – How much does it cost to replace a roof when you have to remove the Solar panel first and then replace it along with the ones broken in the removal?

D Anderson
February 19, 2019 8:16 am

What happens if the house burns down? Do you have to pay Sunrun $27,000?

Adam Gallon
Reply to  D Anderson
February 19, 2019 9:24 am

Bet you will!

D. Anderson
Reply to  Adam Gallon
February 19, 2019 10:27 am

I doubt a standard insurance policy would cover that. You could probably get it insured if you were willing to double your premium.

Bryan A
Reply to  D. Anderson
February 19, 2019 12:21 pm

Unless it was determined that the fire was a direct result of faulty wiring or equipment that Sunrun installed, then they would be on the hook for the replacement costs of both the solar system AND your home.

Fred Middleton
Reply to  Bryan A
February 19, 2019 6:17 pm

FEMA can may does today fix broken insurance systems.

Curious George
Reply to  D Anderson
February 19, 2019 1:02 pm

How about an earthquake insurance? Or are the panels quake-proof?

February 19, 2019 9:53 am

Blinders-on renewable energy journalism never connects the dots of this financial engineering involved in rooftop solar with other aspects of the sector like the tax policy-induced side step of the economies of scale from not investing in community scale or utility scale solar. That comparison of cost, efficiency, and maintenance difference should be a regular part of public policy discourse on solar energy. The lobbyist push prevents that and instead plays up the solar jobs impact as a major talking point.

February 19, 2019 11:36 am

Owning shares in a large scale solar farm gets you the economies of scale and professional management without the rooftop and mortgage or house insurance issues. Such ownership advantages are not discussed by solar advocate politicians because all the lobbying is done by rooftop small business associations with solar job creation as one of their main metrics. Renewable energy journalism also side steps the issues and disparities of cost.

February 19, 2019 6:48 pm

The sales tactics described in that article are sleazy at best. The insurance questions raised above are good.

Their shingles look like they may need to be replaced soon. How does that work if someone else owns the panels installed on top of them?

The article mentions the solar panels, but what about the rest of the equipment necessary to connect them to the grid? That would make another part of your house that somebody else owns. It smells like trouble.

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