How we bought a house with solar panels, and what came of it

Problems arising when property is owned by third parties, and the difficulties of long-term contracts: the history 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 with the most interesting and discouraging purchase in our lives. We bought a cream-colored bungalow that needs repair, built in 1924, and located a few blocks from the house in Santa Barbara, California, where we rented our accommodation. But the unassuming view of the house from the street was more than compensated for by its charm and convenience: the classic sideboards in the dining room built into the wall; how light streamed through a large number of windows; the yard, surrounded by a fence, where our shaggy dog ​​could play. Moldy linoleum in the bathroom will be easy to tear off. A shower watering can, which for some unknown reason hangs over the sink in the kitchen, will be easy to remove. The location was very tempting, as was the fact that the red sloping roof of the double garage was equipped with 17 solar panels. We were ready to contribute our share in support of the planet.

An array of solar panels has become a modern addition to real estate, which otherwise has not changed much since the 1950s, when Michael Dzhogolev, nicknamed Djag, moved into it, while he was still in kindergarten, along with his mother and aunt, immigrants from Iowa. He never moved anywhere else. He grew up a large man with a barrel chest, and all his life was a bachelor, becoming a regular organizer of the parties of the whole district. In the atmosphere of the house one could feel the owner’s enthusiasm for all kinds of electronics, in particular, there were various amateur radio sets there. “Radios and computers occupied all the available places in the house,” and “the roof bristled with all sorts of antennas,” wrote in the Santa Barbara radio amateur club after he died of cancer in January 2017 in 70 years. “He was a complete radio amateur fan, he could do anything he wanted, and he did! The world of amateurs has lost one of the last real fans. ”

After walking a couple of days through the Djag radio hub, we made our offer. A week later, just before the payment itself, we learned that the solar panels do not belong to Jag. In the language of the industry, 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 started to deal with this model. Now it is used less frequently than before, but it plays an important role in the distribution of home solar panels that most people once could not afford. The reason is simple: in this case, homeowners do not pay immediately. A company, such as Sunrun, places panels on your roof, connects them to your home, and receives tax benefits for owning the system. In the future, you pay for most of the electricity not to the public utilities, but to Sunrun.
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Soon I learned that this system was legally attached to the house under the contract. Apparently, buying a house, we automatically renew leasing with Sunrun. I'm not sure how I treated this as a buyer, but my journalistic curiosity definitely spurred this fact. And I decided to carefully study this proposal.


Sign next to the house "My home is working from the sun"

A Sunrun support specialist explained to me that a year before Jag decided to switch to solar energy, he paid $ 115 a month on average to Southern California Edison. Under the terms of the agreement, he pays Sunrun $ 75 per month. The panels on the roof of the garage should cover 85% of its energy needs. This leaves 15% of the share of 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 annually by 2.9% - by 2036 they will be 72% more. And the tax rebate is at least $ 5000.

Switch to Sunrun

Would Jag save on electricity costs with its solar array from Sunrun? It depends on what will happen to utility payments in the future.

If the cost of electricity at Southern California Edison will grow by 2.2% annually, as it has been on average in the last 10 years, the costs of Jag, switched to solar energy, would increase by $ 6,000 over 20 years.


Black - SoCal Edison board, yellow - Sunrun

Sunrun partially managed to get Jagu into the contract because they told him that the cost of payments in favor of SoCal Edison is increasing annually by 4.75%. If this were the case for the next 20 years, then solar energy would save Jag at least $ 2,000.



Alex and I lived in a condominium, which was 50% more than Jag's house (and we also had an air conditioner, which he did not have), and still our energy consumption cannot be compared with his consumption, considering all his electronic toys. We would pay Sunrun for the electricity we didn't need. According to local rules, there is a “ net metering system ”, according to 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. Considering all this, taking on the Jag lease agreement, we would pay $ 30 / month more. We would immediately start losing money. Renewable energy support is important, and I’m in favor of spending a little more helping the planet. But it seemed to me that it was wrong to do this by transferring money to a commercial company like Sunrun.

I asked Sunrun if they could take this system and put it on someone else's house. They disagreed. The only way to get rid of this burden, as far as we understood, was to pay the entire amount at once for over 18 years of payments by purchasing this equipment. Its cost was $ 27,300.

By mid-February, we reached the dead center. We did not want to complete the transaction if it meant taking on obligations under the contract with Sunrun. The trust that ruled the inheritance of Jag on behalf of his heirs refused to buy the system. Sunrun blocked the sale of a document called UCC filing, which said that the company has rights to its property. Our lender refused to give us money without resolving this issue.

At first I was saddened, and then I felt like a mercantile insignificance because of such a strong attachment to a wooden box. But, of course, it was not so simple. By that time, the house had already meant a place for us where Alex and I could, perhaps with one or two children, build our future.

A few months later, regulators will vote to make California the first US state , where, since 2020, in the construction of almost every new house, it will be necessary to use solar panels. So, the TPO system will soon become more common. (In connection with this news, the shares of Sunrun and their competitors soared). This should further complicate the economy of buying houses, after at least some buyers - or those buyers who come after them - conduct their calculations, as Alex and I did.

Lynn Juric, director of Sunrun since 2015, a mother of two children, regularly appears in the 40-under-40 lists [Forbes list of the most influential young people / approx. transl.] and "the most influential women in business." Harvard invited her to his home to play for the volleyball and basketball teams. She instead went to Stanford, and at the end 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. A few years later, while studying at the Stanford Business Graduate School, she met fellow student Ed Fenster, who worked at Blackstone Group LP, and his friend Neat 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 fact, the problem was mathematical - “a challenge in terms of business model and finance,” Yuric told me when we met her in December at Sunrun headquarters in San Francisco. 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, coming out first in the households market, and launching in 2006, with support of $ 10 million from Ilon Mask, a cousin of two siblings who founded this company. For years, Sunrun has watched the crazy spending of its competitors trying to take market share and how new companies have filled this area.


Solar households use in the US, GWh per day

In the end, Sunrun’s patience paid off. SolarCity nearly went bankrupt due to huge debts, and Tesla Inc. had to save it . in 2016 SunEdison, Sungevity Inc., and others declared themselves bankrupt . Sunrun continued to focus on improving margins and using government subsidies, while taking advantage of the position of the environmentalist and the poor state of Silicon Valley. By the beginning of 2018, the company produced more megawatts in households than any of its competitors. Each 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 clients are in California), and has a staff of 4,000 employees. Sunrun shares have almost tripled in price over the past 12 months, and the company expects its user base to grow by 30% in this fiscal year.

And the new mandate for California is not long to wait. Yurich believes that he will make the consumption of solar energy a normal phenomenon and a less risky venture in the eyes of homeowners. Specifically, she told me, it would be good for companies operating in the TPO model. Builders will not want to offer solar panels to the load to the house, this will increase the price tag. Instead, buyers will finance the system with a separate payment - Sunrun negotiates with the 10 largest state developers of the state. 85% of Sunrun’s business depends on TPO.

To provide customers with a panel worth tens of thousands of dollars without initial payment, you need to have a complex financial network. Monthly payments on 20-year contracts provide Sunrun with cash flow in the future, but money is needed today to find customers, buy equipment, and pay installers (and directors). The key point is government subsidies, especially investment tax rebates , allowing owners to deduct 30% of the cost of the panels from their taxes.


Contractors install panels on the roof of a new home in Sacramento

The tax breaks structure in the US also explains why the TPO model only flourishes in this country. Homeowners in other places buy solar panels at once , and are much cheaper; Americans pay twice as many people in other countries. In Australia and other countries, there are serious subsidies or cost 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 decrease in prices. In the USA, on the contrary, the people who bought the system right away do not receive a subsidy until they submit the next declaration, and then, the subsidy is due to them only if their taxes exceed it. These and other factors play into the hands of Sunrun.

Sunrun at the first stage of development gets into debt and receives investments from the so-called “tax portfolio investors”. Only a couple of dozen companies have enough financial capacity and interest in tax credits to do this. Among them are Google, JPMorgan Chase and General Electric, said Joe Osh, an energy technology analyst at JMP Securities LLC. They are invested in Sunrun not to make a serious profit, but to reduce tax payments: owning thousands of solar energy systems, they can receive discounts on taxes, reducing the burden in other areas of activity. Hugh Bromley, a BloombergNEF solar analyst, says Sunrun and its competitors, although they offer solar panels, are more interesting because they created "one of the most complex financial engineering industries from all sectors of the US economy."

Only 1% of US homes, where one family lives - that is, 1.8 million - are equipped with solar panels, and in general, the understanding of the operation of the TPO system in the real estate industry remains limited. Our realtor with 35 years of experience has never come across this. Agents involved in the sale of real estate Jag, also behaved uncertainly. At first they did not mention the panel at all. Then they said that the panels 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 passed back.

With the help of a local lawyer and my father-in-law, a contract pension lawyer, I wrote a letter to Djag's trust, accusing the agents of not being able to secure property rights without burdens from third parties, although they said the opposite. I threatened the court. This was the last attempt, and none of us thought it would work. But she worked.

On March 1, a representative of Jag's trust wrote an email to Sunrun, where he agreed to buy this system. On March 22, we received the keys to the house, and I stood, all so radiant, in the middle of an empty dining room, and then took a selfie. March 30, we moved.


The roof of the garage after removing the panels

In Sunrun, our demand from the Jag Trust for the purchase and removal of the system is “extremely unique and rare.” Most often, sellers hand over a contract to customers - Sunrun says that this happens in 94% of cases - or prepay the panels, and they stay on the roof for the next owner to use. I reproach myself since I found out about the latest version. It would save $ 12,000 and allow us to support the solar industry and get “free” electricity, while Sunrun would still be in charge of maintenance and repair.

From the point of view of Sunrun, this would also be a good option. The full price of a buyout of $ 27,300 is due to the need for TPO accounting. Federal tax rebates and accelerated depreciation used by Sunrun and its investors require that the systems remain operational for five years. If the system is no longer used before, then the tax authority returns its value to itself. The cost of purchasing equipment from Sunrun includes not only the remaining payments for 18 years of use, but also a loss of tax rebate and amortization.

All these difficulties made me think about Jag. When he signed a contract 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 together with panel maintenance would have resulted in $ 24,000 for Jag

The saleswoman from Sunrun, who worked with Jag, was part of an extensive network of vendors working for a commission, which includes both direct employees of the company and employees of third-party organizations. Sunrun made sales, sending people to spud fans at football games and shoppers in stores (as the former seller told me, Costco is just a goldmine), as well as going door-to-door and making cold calls. The basis of the seller’s advertising speech is 20% savings, insurance against the unpredictable growth of utility tariffs and the emotional pleasure of improving the environment.

But customer review sites and local news are teeming with frustrated customers who warn others against entering into contracts with the TPO system offered by Sunrun and other companies. State attorney generals and politicians send complaints on behalf of people claiming they were sniffed by expensive systems they could not afford after signing a contract that they did not understand; or that they pay more for electricity, not less than they were promised; or that they now have problems with the sale of homes, because this system pushes away potential buyers, as it was with me. At the same time, customers of Sunrun and other companies are obliged to sign arbitration clauses prohibiting them from filing claims on their own or joining together for a class action.

I raised this question in a conversation with Yurich, who indicated that the A + rating was given to her company by the non-profit appraisal organization Better Business Bureau, and said that the “bright exceptions” that journalists attacked do not present a general picture of a typical customer experience. . She vehemently denied that her company strengthens the negative reputation of the industry. On the contrary, “I think it helps us to stand out,” she said. - For long-term success in such a business, first of all, a good reputation is required, therefore customer opinion is extremely important. If I wanted to just make money, I would stay in the investment business. I want to do something that will change the world. ”

I spoke with eight current and former Sunrun employees, and some of them praised the company's sales culture, saying that incorrect behavior was not encouraged. Others said that they were not punished for unethical sales tactics when it was opened. “When your salary depends on whether you are told yes, then all means are good, both in love and in war,” said Tank Hana from Arizona, the salesman who became the coach. “Everything can be done correctly, but this requires a certain level of skills and patience, which most sales representatives do not have, and which managers do not need.” Salespeople juggled with facts, hushed up important details, and valued the speed of work above all else, he told me. A trainer from California who listened to hundreds of calls from sellers for quality control, estimated that 60% of buyers had no more than 50% of the information at their disposal when signing the contract, and 10% had no idea what they were talking about.

Potential customers often ask what will happen if they try to sell their home. The salespeople I spoke with reassured them that solar panels add value to the home, reducing the cost of maintaining it. Juric 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 National Laboratory, a research organization in California, found that the entire system could be considered an asset. The study showed that TPO does not provide any advantages, and are not considered as assets or disadvantages (yeah, tell it to the Jag Trust).

One former employee sent me instructions for training Sunrun employees, which he said 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 require sellers to sow distrust and contempt for traditional utility providers and appeal to the emotions of customers. On page 61, pain is mentioned 31 times and fear 12 times. Interns are prescribed to “intensify the pain more actively” when discussing the traditional receipt for housing and utility services. Among the "components of success" is mentioned the "creation of pain and fear." Among the "five fatal mistakes" - "the inability to cause fear or pain."


Excerpt from Sunrun training instructions

Yurich was not slow in defending these tactics when I mentioned them in interviews. She called the pain "an honest description of the feelings of people" paying utility bills. "We sell the replacement of traditional electricity, so we need to demonstrate that our product is superior to existing ones." Later, a company representative, Georgia Dempsey, wrote an email to me: “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 client can make a purchase, and taking on commitments to solve all the problems that keep the client from achieving success”. Our growing customer base is evidence of the desire of households to switch to superior-quality electricity services offered by home solar panels and batteries. ”

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 that is lower than the average electricity bill in a particular place, and then increasing the cost of its services more slowly than the cost of traditional electricity increases. All this is based on the assertions that the cost of traditional energy in the past "has grown rapidly," and that this will continue in the future. Sunrun assumes that the cost of energy will grow 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 also falls as household appliances become more and more efficient). Sunrun , , , .

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