How we bought a house with solar panels, and what came of it
Problems that arise when property is owned by third parties and the difficulties of long-term contracts: the story of the use of solar panels in solar Santa Barbara
One rainy day last year (a rare occurrence), my husband Alex and I went on a trip that ended in the most interesting and discouraging purchase of our lives. We bought a cream-colored bungalow that needed renovation, built in 1924, and located a few blocks from that house in Santa Barbara, California, where we rented our homes. But the unpretentious view of the house from the street was more than compensated by its charm and convenience: the classic sideboards built into the wall in the dining room; how light streamed through a large number of windows; a yard surrounded by a fence, where our shaggy dog could frolic. Moldy linoleum in the bathroom will be easy to tear off. A shower head, which for some reason hangs over a sink in the kitchen, will be easy to remove. The location was very tempting, as was the fact that the red pitched roof of the two-car garage was equipped with 17 solar panels. We were ready to make our share in support of the planet.
The array of solar panels has become a modern addition to real estate, which has otherwise changed little since the 1950s, when Michael Jogolev, nicknamed Jag, moved to it when he still went to kindergarten, along with his mother and aunt, immigrants from Iowa. He didn’t move anywhere else. He grew up a large man with a barrel-shaped chest, and his whole life was a bachelor, becoming a regular organizer of parties throughout the area. In the atmosphere of the house, the owner was fascinated by all kinds of electronics, in particular, there were also various amateur radios. “Radios and computers took up all the free space in the house,” and “the roof was bristled with all kinds of antennas,” wrote in the Santa Barbara Amateur Radio Club after he died of cancer at the age of 70 in January 2017. “He was a complete amateur radio fan, could do anything - and did!
After walking a couple of days on the Jag radio hut, we made our offer. A week later, right before the payment, we learned that the solar panels do not belong to Jag. In industry language, this is called "third-party ownership" [third-party-owner, TPO]; in this case, the owner was Sunrun Inc., the largest provider of home solar panels in the United States. I began to deal with this model. Now it is used less often than before, but plays an important role in the distribution of home solar panels, which once most people could not afford. The reason is simple: in this case, home owners do not pay anything right away. A company, such as Sunrun, places panels on your roof, connects them to your home, and receives tax credits for owning the system. In the future, you pay for most of the electricity not to utilities, but to Sunrun.
Soon, I learned that this system was legally connected to the house by contract. Apparently, when buying a house, we automatically renew leasing with Sunrun. I'm not sure how I reacted to this as a buyer, but my journalistic curiosity definitely encouraged this fact. And I decided to carefully study this proposal.
Sign next to the house "My house works from the sun"
A Sunrun support specialist explained to me that a year before Jag decided to switch to solar, he paid Southern California Edison $ 115 a month on average. Under the terms of the agreement, he pays Sunrun $ 75 a month. Panels on the roof of the garage should cover 85% of its energy needs. This leaves a 15% stake in SoCal Edison for $ 17 / month. In total, his electricity bill was $ 92 / month, and his savings were $ 23 / month.
I received a copy of the contract signed by Jag and quickly realized how Sunrun manages to make such offers. It lasts 20 years. Payments increase by 2.9% annually - by 2036 they will be 72% more. And the tax credit is at least $ 5,000.
Switching to Sunrun
Would Jag save on the cost of electricity with his Sunrun solar array? It depends on what will happen with utility bills in the future.
If the cost of electricity at Southern California Edison would grow annually by 2.2%, as it has been on average in the last 10 years, then the costs of Jag, who switched to solar energy, would increase by $ 6000 in 20 years.
Black - SoCal Edison board, yellow - Sunrun
Partially, Sunrun was able to suck Jag this contract, because they told him that the cost of payments in favor of SoCal Edison is growing by 4.75% annually. If this were so in the next 20 years, then solar energy would save Jaga at least $ 2,000.
Alex and I lived in a condominium, which was 50% larger than Jag’s house (and we also had an air conditioner that he didn’t have), and yet our energy consumption can’t even be compared with its consumption, given all its electronic toys. We would pay Sunrun for electricity that we did not need. Local regulation has a “ clean measurement system ”", by which we have the right to sell surplus solar energy back to SoCal Edison, and earn $ 7.5 / month, but even so the company would still require us $ 10 / month for the right to remain connected to the network. Given all this, By taking on Jag’s leasing agreement, we would pay $ 30 / month more. We would start to lose money right away. Renewable energy support is important and I’m for spending a little more to help the planet. But it seemed to me that it’s wrong do this by transferring money to a commercial company like Sunrun.
I asked Sunrun if they could pick up this system and put it on someone else's house. They did not agree. The only way to get rid of this load, as we understand it, was to pay the full amount for 18+ years of payments at once by buying this equipment. Its cost was $ 27,300.
By mid-February, we came to a dead center. We did not want to complete the transaction if it meant taking on obligations under a contract with Sunrun. The trust, which managed Jag's inheritance on behalf of his heirs, refused to buy the system. Sunrun blocked the sale with a document called UCC filing, which stated that the company had rights to its property. Our creditor refused to give us money without resolving this issue.
At first I was saddened, and then felt like a mercantile insignificance due to such a strong attachment to a wooden box. But, of course, it was not so simple. By then, home already meant a place for us where Alex and I — perhaps with one or two children — could build our future.
Regulators Voting to Make California First State in a Few Monthswhere, since 2020, the construction of almost every new home will definitely require the use of solar panels. That means the TPO system will soon become more common. (In connection with this news, the stock of Sunrun and its competitors soared). This should continue to complicate the economics of buying homes after at least some buyers — or those who come after them — make their calculations, as Alex and I did.
Lynn Juric, director of Sunrun since 2015, a mother of two children, regularly appears on the 40-under-40 lists [Forbes list of the most influential young people / approx. trans.] and "the most influential women in business." Harvard invited her to his place to play for the volleyball and basketball teams. Instead, she went to Stanford, and at the end she went to work in a closed joint-stock company, where she was required to make cold calls to various company directors - she went because she knew that she would be uncomfortable doing this. A few years later, while studying at Stanford Business Graduate School, she met classmate Ed Fenster, who worked for Blackstone Group LP, and his friend Nat Creamer, a US Navy officer who had just returned from Afghanistan. This trinity has set itself the task of making solar energy more accessible. In essence, the problem was a mathematical one - “a challenge from the point of view of the business model and finances,” Juric told me when we met with her at the Sunrun headquarters in San Francisco in December. He and Fenster and Creamer founded Sunrun in 2007.
SunEdison has used the TPO model for commercial projects for years, and SolarCity Corp. overtook Sunrun, entering the households market first, and launched in 2006 with $ 10 million support from Elon Musk, the cousin of the two siblings who founded the company. For years, Sunrun has been watching the crazy spending of its competitors trying to gain market share and how new companies have filled this area.
US Household Solar Energy Use, GWh
Per Day As a result, Sunrun’s patience paid off. SolarCity nearly went broke due to huge debts, and Tesla Inc. had to save it in 2016 SunEdison, Sungevity Inc., and others declare bankruptcy. Sunrun continued to focus on improving margins and the use of government subsidies, while taking the position of an environmental advocate and the poor condition of Silicon Valley. By early 2018, the company was giving out more megawatts in households than any of its competitors. Every quarter, except for one, it increased its market share, and since mid-2015, it has 218,000 customers in 22 states, in Washington, DC and Puerto Rico (half of the customers are in California), and has 4,000 employees. Sunrun shares have nearly tripled in value over the past 12 months, and the company expects its user base to grow by 30% this fiscal year.
And the new mandate for California is not long to wait. Juric believes that he will make the consumption of solar energy a normal phenomenon and less risky in the eyes of homeowners. Specifically, she told me, it would be good for companies working on the TPO model. Builders will not want to offer solar panels in the load to the house, this will increase the price tag. Instead, buyers will finance the systems with a separate payment - Sunrun is negotiating this with the 10 largest state developers. 85% of Sunrun's business is TPO dependent.
To provide customers with panels worth tens of thousands of dollars without an initial payment, you need to have a complex financial network. Monthly payments on 20-year contracts provide Sunrun with future cash flow, but money is needed today to find customers, purchase equipment, and pay installers (and directors). The key point is government subsidies, especially investment tax credits , allowing owners to deduct 30% of the cost of panels from their taxes.
Contractors Install Roof Panels in New Sacramento
The US tax break structure also explains why the TPO model only thrives in this country. Homeowners in other places buy solar panels right away, and much cheaper; Americans pay twice as much as people in other countries. In Australia and other countries, there are serious subsidies or refunds - at one time, Australian subsidies covered 80% of the cost of a typical system. Today they cover 30% of the cost, with a general reduction in prices. In the USA, on the contrary, people who bought the system right away do not receive a subsidy until they submit the next declaration, and then, the subsidy is entitled to them only if their taxes exceed it. These and other factors play into the hands of Sunrun.
At the first stage of development, Sunrun incurs debt and receives investments from the so-called “tax equity investors”. Only a couple of dozen companies have enough financial opportunities and interest in tax rebates to do this. Among them are Google, JPMorgan Chase and General Electric, said Joe Osh, an energy technology analyst at JMP Securities LLC. They invest in Sunrun, not to make serious profits, but to reduce tax payments: owning thousands of solar energy production systems, they can receive tax rebates, reducing the burden in other areas of activity. Hugh Bromley, a solar energy analyst at BloombergNEF, said that Sunrun and its competitors, although they offer solar panels, are more interested in
Only 1% of US homes where one family lives - that is, 1.8 million - are equipped with solar panels, and overall understanding of the TPO system in the real estate industry remains limited. Our realtor with 35 years of experience has never encountered this. Jaga's real estate agents also behaved insecurely. At first they didn’t mention panels at all. Then they said that the panels belong to Sunrun, and if we do not want to renew the contract, the company will remove them. Then, apparently, having learned the cost of this option, they turned back.
With the help of a local lawyer and my father-in-law, a lawyer for retirement contracts, I wrote a letter to the Jaga Trust, accusing the agents of failing to secure property rights without being encumbered by third parties, although they stated the opposite. I threatened the court. This was the last attempt, and none of us thought that it would work. But it worked.
On March 1, representative of Jaga Trust wrote an email to Sunrun, where he agreed to buy the system. On March 22, we got the keys to the house, and I stood, all so radiant, in the middle of the empty dining room, and then I took a selfie. March 30, we moved.
Garage Roof After Removing Panels
Sunrun has called our demand from Jag for the purchase and removal of the system "extremely unique and rare." Most often, sellers pass the contract to buyers - Sunrun says that this happens 94% of the time - or prepay for the panels and they remain on the roof for the next owner to use. I reproach myself since I learned about the latter. This would save $ 12,000 and enable us to support the solar energy industry and receive “free” electricity, while Sunrun would still be responsible for maintenance and repair.
From Sunrun's point of view, this would also be a good option. The full buyback price of $ 27,300 is due to the need for TPO accounting. Federal tax credits and accelerated depreciation enjoyed by Sunrun and its investors require the systems to remain operational for five years. If the system is no longer used before, then the tax service returns its cost to itself. The purchase price of equipment from Sunrun includes not only the remaining payments for 18 years of use, but also the loss of tax discounts and depreciation.
All these difficulties made me think about Jaga. When he signed with Sunrun, eight months before his death, he had been fighting cancer for several years. Did he understand the consequences of his actions?
Of the four payment options, three would be more profitable for Jag than a contract with Sunrun. Over the 20 years of the contract, payments along with panel maintenance would have resulted in Jag at $ 24,000. A
Sunrun saleswoman who worked with Jag was part of an extensive network of merchants working for a commission, which includes both direct employees and third-party employees. Sunrun made sales, sending people to spoof fans at football games and shoppers in stores (as a former seller told me, Costco is just a gold mine), and also walk door-to-door and make cold calls. The basis of the seller’s advertising speech is 20% savings, insurance against unpredictable growth in utility tariffs and the emotional pleasure of improving the environment.
But customer review sites and local news are teeming with frustrated customers who caution others against entering into a TPO system offered by Sunrun and other companies. State attorneys-general and politicians send complaints on behalf of people claiming to have sucked in expensive systems that they cannot afford after signing a contract that they did not understand; or that they pay more for electricity, and not less, as they were promised; or that they now have problems with the sale of houses, because this system repels potential buyers, as was the case with me. At the same time, customers of Sunrun and other companies are required to sign arbitration clauses prohibiting them from filing claims on their own or joining for a class action.
I raised this question in a conversation with Yurich, who pointed to the presence of an A + rating issued by her company by the nonprofit evaluation organization Better Business Bureau, and said that the “bright exceptions” that journalists attacked did not represent the general picture of the typical experience the client received . She vehemently denied that her company was reinforcing the negative reputation of the industry. On the contrary, “I think it helps us stand out,” she said. - For long-term success in such a business, first of all, you need a good reputation, so customer opinion is extremely important. If I just wanted to make money, I would stay in the investment business. I want to do something that will change the world. "
I chatted with eight current and former Sunrun employees, and some praised the company's sales culture, saying that misbehavior was not encouraged. Others said that they did not punish unethical sales tactics when they opened. “When your salary depends on whether they say yes to you, then, like in love and war, all means are good,” said Tank Khan from Arizona, a salesperson who became a trainer. “Everything can be done correctly, but it requires a certain level of skills and patience that most sales representatives do not have, and which managers do not need.” The sellers rigged the facts, ignored important details, and above all appreciated the speed of work, he told me. A trainer from California who listened to hundreds of sales calls for quality control assessed
Potential customers often ask what happens if they try to sell their home. The sellers I spoke to reassured them that solar panels add value to the home, reducing the cost of its maintenance. Yurich said the same thing in our interview. However, for TPO systems, there is no data or research from a reputable organization that could confirm this. Lawrence Berkeley's National Laboratory, a California-based research organization, found that an asset could be considered an entire owner’s system. The study showed that TPOs offer no advantages, and are not considered either assets or disadvantages (yeah, tell this to Jaga Trust).
One former employee sent me instructions for training Sunrun employees, which, according to him, was relevant at the time of his dismissal in April 2017. It is called the “Sunrun Successful Sales Guide” (the company confirmed the authenticity of the document). The instructions instruct sellers to sow distrust and contempt for traditional housing and utility providers and appeal to the emotions of customers. On page 61, pain is mentioned 31 times and fear 12 times. Interns are instructed to “intensify pain more” when discussing traditional receipts for housing services. Among the "components of success" is mentioned "the creation of pain and fear." Among the "five fatal mistakes" - "inability to cause fear or pain."
Excerpt from Sunrun Training Instructions
Yurich was not slow to defend these tactics when I mentioned them in an interview. She called the pain “an honest description of the sensation of people” paying utility bills. “We sell a replacement for traditional electricity, so we need to demonstrate that our product is superior to existing ones.” Later, Georgia representative Dempsey wrote to me by email: “The pain detection technique is attributed to David Sandler, who invented the Sandler Sales System. Sandler defines pain as “discovering the reasons why a potential customer can make a purchase, and taking responsibility to solve all the problems that keep the customer from achieving success." Our growing customer base is evidence that households have a desire to switch to superior quality electricity services,
Consumers want to be greener, but above all, as Sunrun emphasizes, they want to save. The company promises savings by offering a cost of services lower than the average electricity bills in a particular location, and then increasing the cost of its services more slowly than the cost of traditional electricity. All this is based on the assertion that the cost of traditional energy in the past "grew rapidly", and that this will continue in the future. Sunrun is based on the assumption that the cost of energy will increase by 3.76% annually. This is more than twice the average increase in the cost of electricity in the country, according to government statistics (average consumption is also falling, as household appliances are becoming more efficient). Sunrun claims that prices will rise faster in the future, in particular,
Regardless of what happens to the prices, a properly designed roof-mounted solar energy system should lower the utility bill for most Americans. If you have such an opportunity, it is best to buy such a system right away, but not everyone is capable of it. The simplicity and convenience of a TPO system can be enticing.
But there is another unexpected twist in this story. A few months after the end of this drama, a surprise awaited me.
When I first called Sunrun, they told me that the JC bill from SoCal Edison a year before he decided to install solar panels averaged $ 115 / month. It turned out that this is not so. In his file, as another representative of Sunrun told me, it was written that on average he paid $ 79 / month. Recall that his solar panels were supposed to provide only 85% of the need for electricity, that is, in reality, in the first year of their use, he paid $ 87 per month. This is $ 8 more than before. When I asked Sunrun about the new numbers, Dempsey said that Jag was “a happy and satisfied customer,” “appreciating the peace of mind” provided by the system.
I did not want to bother Jag's family or friends, but now I needed to find out everything about what prompted him to sign a contract with Sunrun. I found his two cousins from Iowa and two close friends in Santa Barbara, and asked if Jag was a “gray green” - an elderly man intending to save the planet. They all snorted - they say he only saved money. He lived according to the precepts of his mother, saved up - bought. They all actively wondered if he had been deceived. “Why would he sign a 20-year contract, knowing that he won’t live for so long?” Said Katie Bakus, a radio talk lover who met Jag at a ham club two decades ago and watched how cancer took his physical and psychic powers. “There is something wrong. This thing stinks like a three-day fish. ”
The story does not end there - for example, the panels at Jag never worked at full capacity. This is all due to what Sunrun described as “serious shading” due to a tree growing in the yard of a neighbor. Yes, exactly: Sunrun installed the system in the shadow of a large old tree. This again raises questions about the logic of the seller who worked with Jag. Sunrun has a guarantee - if the system falls short of performance, you will receive compensation. In the case of Jag, compensation of $ 203 was transferred to his account on July 17, 2017, six months after his death.
I write these lines while pregnant. The dream of how we will live in this house, conceived when we first entered here, is gradually being realized. And let me tell you about our electricity bills. If we took on the Jag contract, we would pay Sunrun $ 79 / month (this would be the second tariff increase), plus at least $ 10 SoCal Edison for the right to stay connected, minus $ 7.50 for the return of electricity. We have been living in a house for 10 months, and our average SoCal Edison electricity bill is $ 30. Compared to being Sunrun customers, we save $ 50 / month. We are going to give part of this money to protect the environment.