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

via Watts Up With That?

February 18, 2019 at 08:07PM

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