The Renewables Industry: Green Eggs and Scam?

shale gas outrages - Tom Shepstone ReportsTom Shepstone
Shepstone Management Company, Inc.

 

The renewables industry has both fantasy and scam aspects that bring to mind, not only the famous Dr. Seuss book “Green Eggs and Ham,” but also P.T. Barnum.

We’ve spent  fair amount of time on this blog talking about the renewables industry from two perspectives; (a) the fact it best succeeds and arguably can only succeed where there is a natural gas complement, and (b) that the industry is riddled with hucksters and utopians who are trying to jam what should be free market choices down everyone’s throats to the detriment of its own long-term prospects.

We’ve talked about the scam nature of Elon Musk’s enterprises, the liklihood Andrew Cuomo may have killed fracking to protect his big bet on SolarCity, a Musk family enterprise of incredibly crappy economics. We’ve also explained, many times, what a lousy deal these solar scams are for other ratepayers and taxpayers in New York and how the Catskill Montainkeeper, a member of the NRDC gang of elites, and friends were given a $1.8 million slush fund to promote solar scams while they pursues its real objective – killing fracking anywhere near the Mountainkeeper’s base of land scam activity in the Catskills where the principals have immense holdings.

Every day, though, still more evidence arises that what we’re dealing with here is a case of “green eggs and scam” with a modern day P.T. Barnum in pretty-faced Elon Musk thrown in to market it all. Renewables industry marketing, in fact, has taken on the character of an infomercial for the latest beauty products, which is no coincidence.

Renewables Industry

It’s no coincidence because, in the case of SolarCity, for example, the marketing strategy was essentially acquired by purchasing a company called Paramount Solar, which happened to be owned by a beauty products direct marketing powerhouse called Guthy Renker, the same people who sell acne treatments, hair care products and beauty secrets using all those famous faces. Paramount Solar marketed its corner of the renewables industry using many of the same techniques and when Musk and family needed to close more deals faster, it turned to Paramount, buying the company in September, 2013. It hasn’t gone so well as articles here, here and here demonstrate. Consider just these few excerpts from the first link (emphasis added):

The Paramount acquisition’s biggest impact on SolarCity has been its leadership and culture. Hayes Barnard, Michelle Magee, and Paul Stephan have transformed SolarCity from a customer-focused services company to a mission-focused sales company. Instead of quietly figuring out how to innovate, the company loudly talks about changing the world. Employee videos regularly congratulate themselves for doing morally righteous work. Salespeople love it, and earn great commissions.

But this new sales-focused culture appears to cost customers, the public, and investors. In a self-righteous mentality, hard-charging salespeople can more easily justify their short cuts with customers. This has given ammunition to regulators who are investigating SolarCity’s marketing claims. Last year, both Republicans and Democrats expressed concerns. 12 Congressmen sent a letter to the Federal Trade Commission, complaining about SolarCity’s core product. They wrote, “consumers are being enticed by solar leasing companies who offer zero-down leases, essentially teaser rates, for a 20-year lease agreement.” Their “particular concern” was that solar companies “may be utilizing deceptive marketing strategies that overstate the savings the homeowners will receive, while understating the risks.” They point their fingers directly at Paramount, saying “one of the largest solar leasing companies has partnered with a strategic sales company that sold large numbers of subprime mortgages to unsuspecting homeowners in the run up to the subprime mortgage crisis.” 

Investors have echoed the concerns of these senators and congressmen. Most notably, the hedge-fund investor Jim Chanos has aggressively called SolarCity a “sub-prime” leasing company. He questions the company’s valuation, based on the “net retained value” the SolarCity systems produce over 30 years. SolarCity believes that nearly all customers will make all their payments for 20-years, and then renew their contracts for an additional 10 years. Chanos believes Paramount sales tactics are targeting customers likely to default over time. While educated customers are using tools like Google’s Project Sunroof and EnergySage to find the best prices to buy solar systems, SolarCity is going after less discerning customers through Home Depot and door-to-door sales. With the Paramount team driving sales and marketing, it seems worth asking if Chanos is right. Is SolarCity adopting the practices of the sub-prime mortgage crisis in 2008? Are they misleading customers, pressuring them to sign expensive, 20-year lease contracts when there are lower-cost lease options? Are they misleading investors with an overly optimistic view of customer payments and renewals?

While SolarCity publicly dismisses the questions of these regulators and investors as fossil fuel propaganda, the questions are legitimate. They repeat the initial concerns of the Paramount acquisition: Paramount’s reputation for high-pressure, deceptive sales in the mortgage industry.

What’s also interesting is that Paramount’s Chief Financial Officer before it was sold to SolarCity, a fellow named Matthew McGovern, has now gone off to form his own renewables industry venture called Cypress Creek Renewables. And, what is Cypress Creek Renewables now promoting? They’re hustling leases for “solar farms” in the Catskills, making a huge push to acquire leases in Sullivan County, New York and environs where folks connected with the Catskill Mountainkeeper and the nest of vipers from the NRDC gang operate run their land scams.

Is this another coincidence? Or, is there a link between the NRDC gang and/or SolarCity? Jeremy Neigher, the Cypress Creek Renewables Senior Director of Products, serves on the San Francisco Council of NRDC. One also assumes McGovern continues to have a relationship with his former Paramount buddies at SolarCity. There’s also the fact Andrew Cuomo is desperate to shut down the Indian Point nuclear facility and replace it with something else.  None of this amounts to a smoking gun, but it sure is fascinating to see all these things happening at once. It’s also clear Cypress Creek Renewables is making a big push to sign up landowners for its solar farms.

Renewables Industry

Is it a good deal for landowners? I’m neither an accountant nor a financial advisor and don’t presume to have any qualifications to advise on that score. Every landowner will have to decide for themselves in consultation with their accountant, attorney and/or financial advisor, but it is appropriate to ask a few questions, such as the following:

  • Will the lease interfere with other land uses such as gas drilling when it eventually comes to New York? Section 33 of the lease says “…Landlord shall not, and shall not permit, any activity, including, without limitation, the extraction of minerals, oil, gas, liquid or other substances, if such activity could result, in Tenant’s sole discretion, in a failure of subsurface support for the Premises or otherwise impair or adversely affect Tenant’s Property or Tenant’s use of the Premises,” which does not exclude the possibility of drilling another a solar farm, but should that decision rest solely with the solar farm operator?
  • What will the impact of the solar farm be on the value of adjoining lands and, especially, the remaining lands of the landowner leasing the property? Section 24 of the lease limits a lot of activities that might interfere with the solar farm operation and, presumably, most prospective buyers or users of any adding land will not want to have a solar farm on top of them. Therefore, there is likely to be an impact on the value of other land that must be factored into any deal. Notably, Section 20 of the lease gives the solar farm “an easement over, under and across the Landlord’s adjacent property for audio, visual, view, light, flicker, noise, vibration and any other effects attributable to the Intended Use of the Premises
  • Who will be responsible for obtaining any zoning approvals required? Section 12 of the lease says “Landlord shall sign and deliver all applications and other documents, and shall take all such other actions, as are reasonably requested by Tenant in connection with obtaining any re-zonings, variances or other approvals as Tenant shall deem necessary or desirable in connection with the operation of the Premises.” While zoning is an ordinary contingency in any sales or lease agreement and landowner cooperation is typically required, this language is ambiguous as to who is really responsible and it could be costly, as there are many considerations (see this zoning discussion for an example). Moreover, there is likely to be strong NIMBY opposition to solar farms, just as there is with wind farms. NIMBYs are opposed to all energy development anywhere near them, after all, and there’s “Get Out of Jail Free” card for the renewables industry. Finally, Section 24 requires the solar farm consent to any re-zoning of land initiated by the owner. Will this be an obstacle to a landowner’s application to change zoning on remaining property?
  • What are the tax implications of a solar farm lease? How will it impact the assessment of remaining lands of the lessor? If the property already receives preferential tax treatment as agricultural or forestry land and rollback penalties apply, who pays those penalties? Section 14 of the lease says “…Tenant shall pay Tenant’s Portion of such rollback tax liability, together with any related interest or penalties, other than interest and/or penalties arising from Landlord’s failure to timely provide Tenant with a copy of such Tax Bill.” This suggests the landowner could be responsible for rollback penalties on other land even though they might be triggered by the lease. The lease also raises a question regarding who is responsible for any tax appeals on behalf of the solar farm.
  • How will a solar farm lease impact the ability of the landowner to mortgage the premises, including land outside the lease but part of the same tract? A very complicated Section 27 of the lease raises several questions along this line that can only be answered a skilled real estate attorney.
  • What is the value of the right of first refusal granted to the solar farm and how will it impact remaining lands? Section 40 of the lease gives the solar farm the right of first refusal with respect to the entire tract not just the leased premises. How will this impact future desired transfers of property to other family members, for instance?
  • How will changes in tax credits available to the solar farm impact the landowner financially? Does Section 44 of the lease hold the solar farm harmless for any loss of tax credits? If so, who pays? Does the landowner take the risk and suffer a loss in revenue?
  • What infrastructure improvements will be necessary to accommodate the project? Will connection to the grid necessitate new power lines and stations and how will these independently impact surrounding land as well as the financials of the project? What energy storage or backup systems will be required?
  • Is the reward worth the risk? There is no guarantee and little evidence of financial strength to justify signing one’s property away for $1000/acre with a likely devaluation of the rest of the open space given the permanent structures that will be in place. Also, what assurance is there they’ll be removed in the event of project failure?

All of these questions are potentially answerable, but all also have serious implications for communities and landowners. The biggest question of all, of course, is what this is all about. Is this green eggs and scam? Or, is it simply an opportunity for landowners to create ancillary income? It is, to be sure, not an ancillary use, though, in the way a gas well well pad is. Rather, it is a permanent and large impact use that forecloses most other uses. Is it part of a plan to replace Indian Point? Is Cuomo pushing it? Is there a NRDC connection? Is there a SolarCity connection? Or, is this just Cypress Creek Renewables pursuing an opportunity and using some of the same techniques practiced by Paramount and SolarCity on a larger scale?

It’s difficult to know, but Elon Musk’s other adventure in the renewables industry, the Tesla, may provide some clues.  A tidbit from the Daily Kanban tell the story:

Daily Kanban found that Tesla’s solution to peak demand for grid-powered Superchargers that are also on-site does not involve stationary battery storage or customer battery-swapping at its only swap station. Instead, the company relies upon  backup Superchargers powered by diesel generators. Moreover, several Tesla customers were observed charging from the noisy, carbon-emitting backup generator even when the standard Supercharging station had numerous plugs available. This oddly un-green charging option, foisted on customers as a result of Tesla’s lack of desire to make its battery swap capabilities widely available, in turn raises unanswered questions about the environmental claims Tesla has made about its entire charging network.  …no more than a handful of Supercharger stations are in fact solar powered. …At least one 2015 media report repeated Tesla’s 2012 claim that all Superchargers are solar-powered, and this misperception shows up repeatedly in online discussion.

So, solar power isn’t all it’s cracked up to be…hardly shocking. The lesson: buyer beware when it comes to green eggs and scam and don’t think solar won’t be just as impactful or more so than natural gas.

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12 thoughts on “The Renewables Industry: Green Eggs and Scam?

  1. There are some things about these people who demand we stop using fossil fuels and switch to renewables that I don’t understand.

    # 1 They claim it is free. Fact is isn’t free or it wouldn’t be subsidized with our tax dollars. It requires building these huge projects and the equipment doesn’t come from outer space. Then the equipment has to maintained which costs money. Then once these huge renewable energy projects are built they still get an electric bill.

    #2 It doesn’t harm the environment. Fact is this equipment doesn’t come from outer space like I said. It requires mining for minerals like iron ore for steel, copper, rare earth minerals. Silica sand is used for solar panel manufacturing. Cement, sand and stone for wind turbine bases. Fossil fuels for fueling equipment for site preparation and transporting the equipment to site. This all comes with effects on the environment.

    #3 They hate billionaires, corporations and capitalists. Fact is Elon Musk is a billionaire corporation owner who is a capitalist. So are the people behind the Park Foundation, Heinz Endowments, and Rockefellers who fund anti- fuel groups. Then you have Warren Buffet who owns the railroads and fights pipelines because they will hurt his business.

    #4 They claim the fossil industry is subsidized. Fact is the renewable energy is subsidized yet they don’t have a problem with that.

    They all use fossil fuels and byproducts made from them in their everyday lives. I haven’t yet seen a wind turbine or solar panel that can provide these byproducts. None of them have stopped using them yet they demand we do.

  2. This is rich. The oil and gas industry telling me that solar is a scam. Fracking has been the Biggest Ponzi Scheme since Mr. Ponzi himself!!!!!!!!

    • Proof please that fracking is a scam! Who’s been scammed? Since fracking has been around since the 70’s, calling it a Ponzi scheme is the most foolish thing I’ve ever heard. If what you say had even a grain of truth, somebody sometime in the past 40 years would have blown the whistle. Sadly for your argument, the diatribes against fracking have only been around since the feckless Cuomo regime has been in power. That says all that needs to be said about the veracity of your arguments.

      As to Solar being a scam, here’s some proof: Solyndra – took the taxpayers to the tune of half a billion dollars before going bankrupt. Solar City – recipient of the Cuomo Buffalo Billion – is losing money every year, saddled with a ton of debt. In lieu of promised jobs, used prison labor in Oregon. https://naturalgasnow.org/solarcity-its-worse-than-we-thought/ This link will lead you to the original sources

    • I don’t think Eric even knows what a Ponzi Scheme is. This from the US Securities And Exchange Commission:

      What is a Ponzi scheme?

      A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the false appearance that investors are profiting from a legitimate business.

      Why do Ponzi schemes collapse?

      With little or no “legitimate” earnings, Ponzi schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.

      http://www.sec.gov/answers/ponzi.htm

      This isn’t what the oil and gas industries do. They use the money from their investors so they can drill wells and install infrastructure
      to supply a product to market.

  3. Eric, wow… your argument is ridiculous.

    Petroleum products have been a fundamental part in the development in our modern world, and our way of life.

    I hate the entitlement. These people like Eric are so LOUD. Green this, renewable that. Please, try and live your life with out the influence of any petroleum or fossil fuels. (thats over 70% of our electric generation as a nation, all plastics, how many of us heat with fuel oil, propane or nat gas?? not to mention gasoline and diesel in our planes trains, ships, and automobiles)

    I wonder what monthly expense’s would look like in a life without ANY fossil fuel influence. I bet that Gallon of O.J. at Wegmans goes from $5 to over $20. (If it would be even possible to get Florida orange juice up here without fossil fuels)

    Listen, I am all for renewable energy, I think it does have its place in the world. But it is no where close to Powering the world as we know it. And the government needs to stay the hell out of it.

    Great book “Uncle Sam Can’t Count”. All about government subsidies vs private market entrepreneurship.

  4. Hilarious that a natural gas mouthpiece, an industry infamous for ripping off rural landowners during the speculative land rush of the aughts is seeking to cast stones here. I guess the windows making up your glass house are covered with excrement?

  5. Do not sign a lease without an attorney. Found Cypress Creek to be inflexible in the terms of their lease. Remember you are the landlord. If it is not written then it is not so. their contract looks harmless, but not so. Goodly number of areas need to be modified and even removed from contact. We walked away because they were inflexible. The $ shuld be last thing of concern.

  6. Tom
    you are very misguide on your understandings. Every form of renewable is more economically feasible than any form of fossil once you truly peel back government subsides, period.

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