I’m sure many people will read the very negative TIME article out today on US residential solar, “Rooftop Solar Industry Could be on the Verge of Collapse”.
I’ve seen a few of these hatchet jobs over the last 20 years—biased reports, but important contributions to ensure we address real issues in our market.
Firstly, I’m thankful that we operate in a market in the US where people are free to share their opinions. It’s terrible that certain individuals have signed contracts with solar providers, not fully understanding the mechanics, math, and commitments within those contracts. We need to dig into that and address this, more than we are already doing. There are, of course, issues in US residential solar sales, especially around aggressive sales tactics in a portion of the market and the complexity in finance. However, to ensure sustainable growth in this crucial industry, we do need a balanced picture. So, in case anyone needs the counterarguments—given they were not presented—and to provide an attempt at balance, I offer my perspective here:
The core source of issues with US rooftop solar, and why the market is declining right now, is that it costs 3x as much as everywhere else due to regulatory and permitting issues that don't exist outside the US. In addition, the once-in-a-generation hike in interest rates disproportionately affects solar economics given the high upfront cost relative to the low ongoing operating costs. As solar is more expensive in the US vs internationally, fewer people can afford the upfront cash, and so monthly-pay solutions are more common. In the US, over 80% of home solar is financed vs approximately 20% in most other markets. To achieve sustainable growth in the industry, we need to address the bureaucracy and cost problems, and the best way to do that is to roll out SolarAPP+, now used by over 150 cities, growing rapidly to standardize and automate permitting, addressing this issue—a fundamental problem not covered by TIME. And of course, interest rates are forecast to fall this year, which would reverse what is always a cycle (has been for hundreds of years, so let’s keep that perspective too), a fact also ignored by TIME.
The article suggests all solar finance is acidic and punitive, but how do we buy houses today? We buy them with mortgages. Finance itself is not the enemy. Yes, finance adds to the lifetime cost of going solar, but using finance also frees up your own capital to invest in other investments that themselves have returns. Therefore, we need to include the complete economic cost and benefit to a customer. Solar does have a higher upfront cost vs a fossil fuel-based solution (e.g., electricity via the grid), but what TIME also ignores is the low operating costs, which are extremely low compared to other (dirty) options.
The TIME article singularly avoids the environmental benefits of solar to homeowners and the community at large, with zero mention of the climate crisis and solar’s immense contribution to decarbonization, nor does it celebrate the millions of solar customers enjoying lower-cost energy today that is also silent, clean, and green.
The TIME article does not discuss the financial benefit to homeowners of locking in a fixed cost of energy (whether they pay cash upfront or monthly financed solutions). This is alarming given the rapid escalation in retail rates, e.g., the latest 28.4% rate rise in the corrupt CA market from PG&E.
To associate solar finance with mispriced, misrated, mis-sold mortgage-backed securities on Wall Street is inflammatory and without any basis of truth. Having a deep source of capital in the ABS market to lower the cost of capital to end customers is a huge achievement. We should be thanking the bankers (for once they are doing something useful to society and should be thanked!). To take the rise in interest rate of one single ABS, ignoring the rising interest rate environment generally is at best misleading. The problem is not finance. It is mis-selling. What the article doesn't say is the % of sales that are mis-sold. Which from the math they allude to suggests it’s a very low portion—in GoodLeap’s case 0.01%. “Mis-selling only 0.01% of solar sales in the clean energy revolution” as a headline would tell a different story. Given so many positive articles on solar, I truly applaud a journalist attempting a hack job to counter consensus, but it should be data-driven. Every industry will have some rogue salespeople, and we need to take this issue very seriously but also recognize that the vast majority of solar systems are sold by small local businesses, by incredibly high integrity individuals and teams who are out there to save customers money and clean up the energy sector with zero carbon, zero emission modern technology.
When profit-hungry, commercially-biased ambulance-chasing lawyers say they get ‘multiple calls’ without citing any data as a portion of the total sales made by the industry, we have to recognize a journalist looking for sensationalist headlines and ground ourselves with data. “Her case is not uncommon” is not a data point when there are over half a million new installs every year across the US.
We do need to address the mis-selling though, and the US has about 30% of sales today done door-to-door with often quite aggressive sales tactics. And it feels to me that SEIA, to the degree they are able to represent distributed solar, needs to step up with a framework for door-to-door sales, especially when involving finance, to help guide the industry to best practice. I think OpenSolar could work more with our finance partners to digitize the education process to ensure (with digitally recorded transcripts perhaps) that customers are made aware of all the critical elements of finance. Also, I personally think that we as an industry should not be ashamed to print interest rates with zero commissions so homeowners can see the cost of capital. Because the usual case is that the monthly payments save customers money! And as interest rates fall, that will only help us and the customers. The fact is that despite all this article's noise, the biggest headline, that the vast majority of Americans can spend less per month on energy with a monthly pay solar solution, is somehow missed. And that I think is a really powerful message that needs to be heard in balance with the important issues raised. And of course, I agree with TIME that we absolutely must always do better on sales and explaining finance to end customers. If SEIA can’t step up, I wonder if the largest solar finance companies could create a code of conduct and work with independent experts and the government to validate this so we can ensure improvement going forward? We can do a lot without adding another layer of cost and bureaucracy that would further inhibit the ability for clean energy to save customers money in the US—just as the rest of the world is scaling solar rapidly.
The US residential industry is struggling right now, due to interest rates and the change in California policy to remove the right to spin your meter backward with solar, which resulted from intense utility lobbying (and $111m of payments by the utilities and unions to buy the result in Sacramento—not mentioned by TIME magazine). California used to be 50% of the US solar market and has now halved in size. With high fixed costs for installers and challenging working capital conditions given the physical nature of solar purchases and installations, this has led to multiple bankruptcies, and certainly we will see more over the coming months.
But this is not due to a failure in the capital markets or mis-selling; it’s due to a failure in state policy and the broader interest rate cycle. This article is a kick in the teeth to the 99.99% of solar installers who work hard and work correctly every day to grow our industry and save customers money. So nice try TIME, but I don’t buy it. We’ve had these localized, time-stamped problems in the past, and we’ve improved and survived, and we’ll grow and thrive again, because solar professionals are stoic and heroic, and because Americans and all humans around the world want clean, low-cost energy for their families—and because the math is the math: solar is now the lowest cost electricity humankind has ever had (source: IEA).