Going or Turning Green? Caveat Emptor

I want to tell you a story about a couple approaching retirement and interested in reducing their expenses in preparation for that auspicious event.  They recognized that to live on a fixed retirement income they would need to make some changes.  They looked long and hard for ways to reduce their expenses and decided to reduce energy costs as an initial step.  They discovered the promise of “Residential Solar Energy” and the sad reality of its unfulfilled promises.

In 2011 they were approached by a well respected and licensed Solar Energy Contractor that held out the carrot of 30% overall savings if this couple would sign the contract.  It was December 29th, 2011 and in order to qualify for the energy rebates they would have to sign the contract immediately and schedule the installation prior to December 31st.  This contractor would install “Radiant Barrier” a product that reflects the energy of the sun away from the living area: it is a polymer film that is stapled to the roof rafters.  They would install “Solar Water Heating” which would significantly reduce the cost of making hot water by using the sun’s energy.  They would check the efficiency of the HVAC (Heating Ventilating and Air Conditioning) duct work and seal it to increase the air flow and limit the loss of conditioned air into the attic.  All of these things together would reduce the cost of energy for this couple by a minimum of 30%.  This was in the contract!  That’s right it’s in the contract!

The installation day came and these three things were according to the contract.  There were a few problems with the Solar Water Heater installation, but professional installer overcame them with no problem.

The couple waited patiently for the next month’s energy bills.  For the sake of simplicity I will lump the Electricity and Gas into the category of utilities.  So the first utility bills arrived and there was an increase in the costs.  They immediately thought that this was just an anomaly and the next utility bills would surely show the savings.  For the next 8 months they scrutinized their utility bills and discovered that there was no appreciable savings.  Being the rather tech savvy couple they took the data from 2010, 2011, and the recent 2012 utility bills and entered the data on a spreadsheet.  The analysis proved the suspicion that there was no appreciable savings.  If anything there was a 3% to 5% reduction in these costs.  After careful consideration they attributed the reduction to their change in heating and cooling habits.  Basically the cooling was set to 82 degrees and the heating was reduced to 68 degrees.  Again it is important to remember that the primary reason this couple embarked on this mission was to reduce their utility costs.

The couple patiently and diligently charted their costs over the next 10 months. They contacted the contractor to discuss the available options.  The contractor made what he considered a very generous offer to pay them $1000.00 to drop the entire matter or they could wait for the full year to file the necessary complaint form to recover the 30% guarantee.

There were a couple of clues that are not too evident here so let me explain the proper chain of events.

There should have been an energy audit performed prior to any work being performed.  This would have provided a baseline to properly establish the condition of their home and the normal utility usage and costs incurred prior to beginning work.  No such audit was performed.  The next logical step should have been for the contractor to perform a detailed analysis of the utility costs over the previous 12 months and to closely analyze the subsequent 12 months to ensure that the systems we indeed working properly to provide the promised savings.  During the analysis period any concerned contractor could make any necessary adjustments.  Lastly there were no questing concerning the water heater (gas or electric) or they type of HVAC unit (gas or electric) or the age of the system and SEER rating.  If the consumer is concerned about the savings, it is their responsibility to track and subsequently report.  It turns out that this is entirely up to the consumer to perform the analysis.

In February of 2013 the couple sat across the table from the owner and general manager of the Solar Energy Company to discuss options and remediation.  The Solar Energy Contractor suggested an energy audit to determine the condition of the home.  Remember this should have been completed prior to beginning work.  The energy audit showed that there were a few minor areas that could be improved, and two rather major items that would need to be replaced if the savings was to materialize: none of them individually or together could amount to the 30% savings.  The Solar Energy Company returned with an offer to perform three of the least expensive upgrades in exchange for the 30% savings guarantee.  They even offered to install a Photovoltaic system at their cost.  The retail cost of this system is over $25,000.00.  It also promises to significantly reduce the utility costs, and in many cases, will put energy back into the Utility Company’s system and they will have to pay you in return.  More on this later…

The couple contacted an attorney who immediately wrote a demand letter to the contractor citing a breach of contract for the lack of savings.  The Solar Energy Contractor responded quickly stating that the couple violated several State, Local, and Federal laws and they, the Solar Contractor, were no longer responsible.  The Contractor did not specify the laws broken, but inferred the couple were indeed in violation.  They further stated that the rebates from the State and Federal Government were considered part of the overall 30% cost reduction and as far as the Solar Contractor was concerned; the point was moot.

The couple contacted their attorney who told them that he would accept the case for a $2500.00 retainer, emphasizing that there was no guarantee of recovering anything… but he did think they had a pretty good case.

The cost of all of these systems and labor was $15,000.00 which the couple financed through a credit union that specializes in this type of loan.  The interest rate is 12% simple interest, which results in a $299.00 payment for 5 years.  If the promise of 30% saving was true, the savings would have reduced this payment to about $100.00 month, and over the next 15 years expected systems life span, would have covered the system cost easily.

The sad part of this story, as this couple discovered, is that none of the Solar Systems available will provide savings in the 30% arena.  This is a sales pitch to entice people to “GO GREEN.”  The photovoltaic systems can significantly reduce the cost of electricity and generate excess energy with judicious use:  BUT…  The local utilities are NOT required to purchase your excess electricity.

Caveat Emptor – Latin for Buyer Be Ware!

If you want to be a responsible citizen of this planet and reduce your carbon footprint by using less energy:  Good for you.  If you think that we have destroyed our planet and that these systems will save it…  You are mistaken.  If you think for a moment that any of these systems will reduce your costs up to or exceeding 30%:  you are very, very wrong.  Three years trends and responsible energy use have netted at most a 5% reduction.  The Solar Energy Company referenced that 2011 was one of the hottest years on record in Phoenix, AZ.  They also cited that the consumption had changed: the HVAC unit was 15 years old and the pump on the pool was an old style single phase 120VAC unit.  Replacing these older systems with modern equivalent systems would significantly reduce the utility costs.  Yes they would.  A 20 SEER unit sufficient to handle their home is between $10,000 to $15,000 depending on the manufacturer and the time of year.  The pool pump motor is about $1,100 according to this Solar Contractor (as cited in the energy audit).  So an additional $11,000 to $16,000 would reduce the overall utility costs by close to 30%.  So the initial investment this couple made, $15,000 was a down-payment which will require an additional $11,000 to $16,000 in order to realize close to the 30% savings.  Someone please do the ROI (Return on Investment) calculations for me…  It has to be decades…

As it turns out they could be saving right now if they would have diverted the $15,000 toward upgrading the HVAC and Pool Pump Motor.

Do Solar Systems work?  Yes, they do.  If you are in an area without local utilities or in places where they are limited, they do an excellent job.  They are VERY expensive, but for those that like to live “Off the Grid” they provide an excellent opportunity to do just that.  They make sense for Utility companies and corporations that want to have a positive environmental impact.  They make sense if we are to become energy independent, but they do not make sense for the average consumer unless you have a conscience that demands you to invest heavily for a very minimal impact.

So who wins and who loses?

The Solar Energy Company wins.  They sell equipment and labor.

The finance company wins through the investment of capital and the recovery of that capital plus interest.

The attorneys win, they don’t have to promise positive results and they get the $2,500 retainer plus any additional cost over and above that retainer.

The utilities win, because they continue to charge for provided services minus the paltry savings these systems provide.

The manufacturers of this equipment win because they continue to sell this stuff to Solar Energy Contractors.

The laborers win because they have jobs.

The Federal Government wins because we erringly believe that this is the path to energy self-sufficiency and steps to cleaning up the planet.  By the way, your tax dollars pay for the rebates…

The consumer is the BIG loser in these scams.  They believe these Solar Companies, our State and Local Governments, and the lies they propagate that these Home Solar Systems will perform as promised.

If this sounds ludicrous or contrived, it is not.  This happens every day.  Unsuspecting people in our country fall prey to these unscrupulous contractors that promise massive savings and are required to deliver nothing.  They hide behind the legal system knowing full well there are very few with the funds to properly pursue the resulting law suits.  They know that most people would never bother to track and chart their year over year costs.  They recognize that one complaint in a thousand installations results in very little impact.  They don’t care about our environment even though they purport a deep and abiding concern for our planet.  They don’t care who they hurt or the financial impact of these scams.  What they do care about is their profit.

The couple in this story was me and my wife…  The contractor is “Going Green Solar.”