solar roof top

Rooftop Solar / June 20, 2017

A couple of years ago, Steven Weissman, an energy lawyer at the University of California-­Berkeley, started to shop around for solar panels for his house. It seemed like an environmental no-brainer. For zero down, leading residential provider SolarCity would install panels on his roof. The company would own the equipment, and he’d buy the power it produces for less than he had been paying his electric utility. Save money, fight climate change. Sounds like a deal.

But while reading the contract, Weissman discovered the fine print that helps make that deal possible: SolarCity would also retain ownership of his system’s renewable energy credits. It’s the kind of detail your average solar customer wouldn’t notice or maybe care about. But to Weissman, it was an unexpected letdown.

To understand his hang-up, you need a bit of Electricity 101. If you have solar panels on your roof, the electrons they produce flow across the electric grid like water, following a path of least resistance. As they whiz around, electrons are impossible to track and look identical, whether they’re coming from solar panels, a coal plant, or whatever. But there is value in keeping tabs on the renewable ones, so energy wonks came up with renewable energy credits (RECs), a tradable financial instrument that corresponds to a certain amount of energy produced by a certain renewable source like solar or wind.

By selling the RECs instead of keeping them for yourself, you could just be helping the utility meet a goal it was already mandated to meet.

Because RECs have value—ranging from under a penny to a buck or two for each hour’s worth of electricity your roof produces, depending on the state, companies like SolarCity can sell them and thus help justify giving you the solar panels for little to nothing. The biggest buyers of RECs are power companies looking to satisfy state-mandated clean-energy requirements, known as renewable portfolio standards. In effect, the power company pays for the right to claim the climate benefits of the panels on your roof.

It sounds like an esoteric distinction, but it matters: By selling the RECs instead of keeping them for yourself, you could just be helping the utility meet a goal it was already mandated to meet—thus helping excuse it from building more solar capacity itself. In other words, your direct net contribution to reducing greenhouse gas pollution is nil.

SolarCity CEO Lyndon Rive argues that his REC-less customers are still part of the climate solution by creating the RECs in the first place. “By you installing solar, whether you own the REC or not, every kilowatt-hour [of electricity] you produce is clean, ” he said. But the half-­dozen energy economists and lawyers I spoke to—from universities, think tanks, REC brokers, and the federal government—said that solar leasing companies’ marketing can be misleading. “A lot of individuals buy green power because they want to know that the power they’re buying wouldn’t be there unless they bought it, ” says Jennifer Martin, executive director of the Center for Resource Solutions, a nonprofit firm that certifies RECs’ authenticity. But if that’s what you think, and you don’t hold onto the RECs, “you’re not getting what you’re paying for.”

Politicians who see solar on their constituents’ rooftops are “going to be encouraged to dream big, ” says one expert on renewables.