Energy

Law professor prepares solar suit

A Vermont Law School professor is seeking community solar array customers for a possible class-action lawsuit.

Certain solar providers can’t claim to sell solar or renewable energy when it comes from community solar projects. The state Attorney General’s office last month said some companies have been doing so and deceiving their customers.

Under federal consumer protection laws, solar companies commit fraud when they sell a community solar array’s renewable energy credits (REC) while also telling customers they are purchasing renewable energy. The Attorney General’s office has already stated an intention to seek civil penalties against solar companies that continue to violate this law. A similar state law forbids the practice as well.

“Our view is that if you are in any way implying to customers that they’re ‘going solar,’ but you’re selling those RECs to sophisticated out-of-state utilities … then you’re potentially involving the Vermont consumer protection act, which prohibits deceptive and unfair practices,” Vermont Law Professor Jared Carter said.

Vermont Law Professor Jared Carter. Photo courtesy of VLS.
Vermont Law Professor Jared Carter. Photo courtesy of VLS.

In upcoming weeks, Carter will hold meetings across the state to determine whether solar customers have been deceived on a large scale, and to give them the opportunity to join a potential class-action lawsuit against companies that have engaged in illicit practices, he said.

Carter said he hopes to resolve the issue legislatively, or through voluntary action on the part of solar companies, but said he’s prepared to take up a class-action lawsuit if no other solution arises.

He is doing so as a member of the Vermont Community Law Center, a non-profit that takes on lawsuits and other legal efforts in the interest of the public. The organization two years ago sued Log Cabin and Birdseye for marketing as “all natural” foods that contained synthetic ingredients.

In the wake of the Attorney General’s letter last month, companies including SunCommon were forced to reword some of their advertising language. Carter said that wasn’t enough to satisfy state law.

“If they’re implying in a way that a reasonable consumer would think they’re getting solar energy, I think that’s putting them on precarious ground according to the consumer protection act in Vermont,” Carter said.

Out-of-state utilities must buy certain amounts of renewable energy, and they often purchase it in the form of renewable energy credits. Doing so is typically cheaper than building their own solar facilities.

When in-state solar providers build solar arrays whose renewable energy credits are sold out of the state, Vermonters are subsidizing another state’s renewable energy costs, Carter said. When those same companies lead in-state customers to believe they, too, are purchasing renewable energy, the companies deceive their customers, Carter said.

“This funding scheme allows out-of-state utilities to externalize the actual costs of building renewable energy… because Vermonters in good faith are subsidizing the true cost of going solar, and that’s what these RECs are allowing us to do,” he said.

It’s cheap for utilities to purchase renewable energy in the form of RECs from Vermont community solar arrays because solar companies pass the cost of building the projects onto their customers, Carter said.

“In our view, they’re essentially getting hardworking Vermonters to subsidize out-of-state utilities,” Carter said. “We support renewable energy in Vermont, but we think this sort of practice hinders Vermont’s ability to be a leader, and quite frankly compromises the renewable energy industry.”

Carter said he’s more interested in “restoring integrity” to the renewable energy industry than he is pursuing litigation. He said he’s asking solar companies to cease marketing their product as renewable when they shouldn’t. He’s also calling on solar companies that sell RECs to allow customers to break their service contracts in order to buy energy instead from solar companies that do not sell their RECs.

Carter said he’s also pursuing a legislative solution.

The Senate Energy Committee has already commissioned a study on the matter of RECs, which is to be presented this session, Senate Natural Resources and Energy Chair Chris Bray, D-Addison, said. Should that study find that current practices harm the development of renewable energy, he might attempt legislation to correct that, Bray said.

“What needs to be clear for people is how RECs work, and what they really mean, financially, and environmentally, and even from an engineering standpoint,” Bray said.

“I’ve heard incompatible assessments of what renewables in Vermont do,” he said. “I’ve heard the utility world say, when you add renewables in Vermont, even when you sell the RECs in Connecticut, you still keep fossil-fuel-fired plants in Connecticut from firing up; and then I’ve heard other people say, when you sell the RECs in Connecticut, you allow that fossil-fuel-fired plant to keep running. Only one of these things can be true. To me it seems like an engineering question, and we need to get to the bottom of it.”

Bray said that he wants to address the problem of climate change more than he wants to dictate the terms of funding mechanisms used to accomplish that end.

Bray also said he fears that “some people are spoiling for a fight,” and that attempts to resolve the question of REC sales doesn’t “poison the well” with Vermonters who want their power supplied from renewable sources.

The ability to sell RECs is a sound piece of public policy that allows solar companies to offer affordable energy to customers while still putting new solar facilities on the ground, SunCommon co-owner Duane Peterson said in an email.

“RECs have helped SunCommon bring community solar to 500 Vermonters, providing CSA members the opportunity to help generate renewable energy while saving money on their power bills,” he wrote. “ We’ll continue to make this innovative solution to climate change available to Vermonters.”


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Mike Polhamus

Recent Stories

  • Duane Peterson

    This lawyer fundamentally misunderstands the sound public policy behind innovative energy programs. A recent 82-page federal report found that Renewable Portfolio Standards and the REC market they created have “resulted in a 3.6% reduction in total fossil fuel generation” during 2013 alone. This is a good thing. We should all celebrate utilities putting money into building new clean energy facilities, as the thriving REC market is working as planned. We at SunCommon are committed to continuing to use this tool to help build more solar, while sharing the details and the benefits with our customers.

    • Glenn Thompson

      “A recent 82-page federal report found that Renewable Portfolio Standards and the REC market they created have “resulted in a 3.6% reduction in total fossil fuel generation” during 2013 alone.”

      Can’t wait to read the 2015 report when the Shutdown of VY is figured into the data?

      This link makes me think Duane Peterson will not be bragging about the 2015 report!

      http://yesvy.blogspot.com/

      • Willem Post

        Glenn,
        Closing VY will increase Vermont’s CO2 emissions, and of all other NE states, because the proportion of fossil fuel energy on the NE grid will increase.

        GMP is making matters worse. It is very busy reducing its purchases of steady, low-cost, near-CO2-free, hydro energy from HQ, which will worsen the NE CO2 and economic situation.

    • Annette Smith

      Most socially responsible business people would be totally honest and up front in every way, and when selling solar arrays to the public and selling the environmental attributes out of state, that would be expected to be part of the sales promotion. Transparency is key.

      The response to the article indicates a lack of willingness to uphold those socially responsible attributes. You are welcome to boast about the benefits of the REC market. Your customers are welcome to purchase Community Solar Arrays that sell the RECs. But if they did not know that they were not getting real renewable solar power, if your company did not disclose that fact, it is legitimately called deception.

      It would be good for all the developers who are operating in Vermont to put their practices in writing, put them in all their materials, and make sure people know what they are buying. Having not done that until called out by the Attorney General makes it seem like you are trying to get away with something. Be honest. That’s what Vermonters want.

    • John Greenberg

      Duane Peterson:

      Please provide a link to the report you refer to. It would also be interesting to know, in light of Glenn Thompson’s comment below, what the scope of the report is: New England? the whole country? something else?

      Thanks.

    • Willem Post

      Duane,
      Vermont would be a dumping ground for wind and solar systems, if RECs are sold to out of state entities, so these entities need not destroy their state’s ridgelines and meadows to build those systems.

      Chris Bray,
      No big engineering study is required regarding selling RECs. The utilizes you talked with are right. The more solar gets built, the less fossil energy would need to be generated.

      However, if RECs are sold to out of state entities, Vermonters can no longer claim that RE energy as counting towards its fanciful goal of 90% RE of ALL energy by 2050, not just electrical energy, which is only about 35% of all energy.

      For some years, this has been understood to be the case by all technical and semi technical people, including some VT legislators.

  • Scott Woodward

    As a public benefit corporation, I would like to see SunCommon reveal its investors and the financial returns made from selling RECs.

  • Kathy Nelson

    ““RECs have helped SunCommon bring community solar to 500 Vermonters, providing CSA members the opportunity to help generate renewable energy…”, says Mr. Peterson.

    Mr. Peterson may have just violated the law by claiming that solar generation for which RECs are sold is “renewable” energy. I believe the AG’s office has determined that this is not allowed because it is an act of fraud. I hope someone over at the AGs office is reading the Digger.

    • John Greenberg

      Kathy Nelson:

      The statement you quote from Duane Peterson refers to “the opportunity to help generate renewable energy.” Building solar projects, regardless of who buys the power, does precisely that.

      The question here is not whether solar energy is generated when projects are built – clearly, it is – but who is consuming it. The AG’s warning concerns the claim that power sold to customers once RECs have been sold is “solar” or “renewable,” because those attributes were sold with the RECs and cannot be claimed twice.

      Since that’s not the claim Duane Peterson is quoted as making, his statement is perfectly legitimate.

      • Willem Post

        John,
        The issue is NOT who is consuming it, because energy spreads at near the speed of light.
        The issue is who claims the RE of systems built in Vermont. If RECs are sold to out of state entities, the Vermont owners and the state of Vermont can no longer count that energy as RE to fulfil goals, including saving the world.

    • Duane Peterson

      Ms. Nelson, the AG’s Guidelines (page 4, section 1a) inform solar purveyors who sell Renewable Energy Credits that we “…may say that consumers are helping to generate renewable energy…”

      My comment uses the Guidelines wording; your charge is ill-founded — Duane, SunCommon

  • Moshe Braner

    “I’ve heard the utility world say, when you add renewables in Vermont, even when you sell the RECs in Connecticut, you still keep fossil-fuel-fired plants in Connecticut from firing up; and then I’ve heard other people say, when you sell the RECs in Connecticut, you allow that fossil-fuel-fired plant to keep running. Only one of these things can be true. To me it seems like an engineering question, and we need to get to the bottom of it.”

    – no, this is not an engineering question, and both statements are true. When renewable power is generated and injected into the grid, then somewhere fossil fuel use is prevented. That is good. But, when VT RECs are sold to utilities out of state, those utilities can then use fossil fuel generation that is otherwise not allowed by the laws of those states. Thus, those states can legitimately say that they reduced fossil fuel use, while VT cannot, since we did not require our utilities to do the same. Had those renewables not existed in VT, those out of state utilities would have had to set up (or buy RECs from) renewables elsewhere. Thus the VT actions have no net effect. If the VT legislature were to disallow selling those RECs out of state, or require VT utilities to buy renewable power and keep the RECs here, THEN we’ll be contributing to the global effort. Yes that will cost us money. No pain no gain.

    • Richard Ratico

      Moshe,

      “Thus the VT actions have no net effect.” “No pain, no gain”.

      Kevin Jones writes, and most energy experts concur, “Renewable Energy Credits (RECs) are an important component of honest and efficient markets for renewable energy and are a key component for compliance with state renewable portfolio standards (RPS). “

      In any “market”, RECs in this case, in order for there to be a buyer, there must be a seller. They are partners in the transaction. One cannot exist without the other. Vermont energy companies are sellers, New England utilities are buyers. We share the same electricity grid and the mix of energy it distributes. As a result of RPS programs and the resultant REC sales and REC purchases, our grid has more clean, renewable energy than it did without them. That was, in fact, their purpose. Those programs work.

      Vermont has put public policy into effect that incentivizes construction of new renewable energy generation. It is inarguable that those policies have had exactly that result, “net effect”, as you call it, regardless of whether or not you consider that a good thing.

      Development of these resources is price sensitive. They are more costly, at least in dollar terms alone, than other non-renewable, polluting alternatives. Their construction already involves significant financial “pain”. The more affordable we can make them, the more we can build. The more expensive they are … well, you figure it out.

      REC sales can be a part of that equation. You can’t on the one hand, maintain that RECs are a good thing while simultaneously saying selling them is bad.

      Moshe, if you can afford more cost, more “pain”, go for it. Not everyone can.

  • Phyllis North

    I admit to not having a full understanding of this topic, but it seems like Vermont is trying to have two bites at the apple, and that this has led to confusion among solar buyers. Is it true that we are the only state that allows the sale of RECs to out of state utilities? If these utilities buy RECs from Vermont to meet their own state’s renwable portfolio standards, doesn’t that mean they are in essence having these sites built here instead of in their own states? Do we really want to be an energy colony for Connecticut and Massachusetts and have our capacity for renewable energy used up by them? I support solar, but let’s have the solar installations here count toward our own renewable production.

    • Steve Woodward

      Phyllis North:
      Well put.This is exactly the type of thing that bothers me about the renewable energy craze.Vermont is the only state that allows out of REC sales?You learn something new every day.I thought the REC market was wide open.Now I’m really outraged.If we are going change our pastures and ridge lines forever,let’s keep our energy here,not sell a credit to someone so they don’t have to endure these projects in their back yards.This policy is nothing more than a lobbyist dream.

    • Phyllis, other states also allow the sale of RECs across state lines. When Vermont’s renewable energy standard goes into effect in 2017, Vermont utilities will be allowed to meet that standard using RECs purchased from facilities outside of the state, if that is the easiest way for the utilities to meet the standard. (Vermont’s renewable energy standard requires a subset of utility power to come from in state facilities.)

  • Kevin Jones

    Renewable Energy Credits (RECs) are an important component of honest and efficient markets for renewable energy and are a key component for compliance with state renewable portfolio standards (RPS). Unfortunately they are also abused by some in the industry. There is nothing “innovative” about stripping the RECs from a solar array and selling them to a third party and then calling that product community solar. I have heard people in the industry in Vermont claim that this is how the low income and renters can go solar. I have heard the claims that selling RECs off a so-called community solar array is necessary to build more solar. These statements are not accurate, are deceptive to Vermont consumers who want to go solar, harm the many honest solar companies in Vermont, and result in less solar being developed than what Vermonters and consumers in other states demand. I applaud the efforts of Jared Carter and everyone else who wants to expose the efforts of the companies who are trying to cheat fellow Vermonters and the planet. Apparently we need Bernie for Governor too since the corrupt are not just on Wall Street.

    I do believe we need regulatory and legislative changes to help shift this unfortunate practice and a good start would be to require that RECs from net metered projects remain bundled and owned by the Vermont electric customer or at the customer’s choice are turned over to their distribution utility for retirement toward Vermont’s goals. Given that we pay a premium for net metered solar (currently 19 cents/kWh) we should ensure that these facilities contribute to local greenhouse gas reduction. Currently the vast majority of the capacity that has taken up all of GMP’s net metering cap is solar energy that is being sold to states such as CT and MA. Why are we paying a premium for the power, utilizing our best sites, taking up all of the available interconnection capacity, and then allowing these companies to pocket another six cents of profit by selling this renewable energy to MA and CT? This is ridiculous public policy. There are many excellent solar companies that are just building solar for Vermonters at fair prices under our net metering program without selling RECs and deceiving consumers. We can easily fix this net metering problem without costing Vermonters another penny and ensuring that net metered solar reduces Vermont’s greenhouse gas emissions. It will also lead to more solar being built in the New England which is good for the solar industry and the planet.

    • Richard Ratico

      Kevin,

      Not for the first time you contradict yourself:

      “Renewable Energy Credits (RECs) are an important component of honest and efficient markets for renewable energy and are a key component for compliance with state renewable portfolio standards (RPS).”

      “a good start would be to require that RECs from net metered projects remain bundled and owned by the Vermont electric customer or at the customer’s choice are turned over to their distribution utility for retirement toward Vermont’s goals.”

      Vermont doesn’t have an RPS while MA and CT do. We share the same electrical grid and the same mix of energy it distributes. There is more clean, renewable energy on our grid as a result of these policies, than without them. Vermont (and all of New England) benefits from that clean energy even if we can’t claim we generated it when the RECs are sold.

      Transparency about REC sales is critical. Vermonters deserve ALL the facts regarding their decisions regarding solar.

      • Richard, Kevin Jones has not contradicted himself. It is possible for RECs to be used appropriately as part of markets for renewable energy, and simultaneously to be used inappropriately when it comes to marketing renewable energy products to general consumers.

        For example the proposed solar project at the former Elizabeth mine in Strafford will sell RECs as part of its financing plan. This is a wholesale energy facility which will sell its electricity directly to Green Mountain Power. There are no customers involved who might misunderstand what exactly they are purchasing. Phyllis North raises the point above about Vermont land being used for energy generation that benefits out of state utilities in meeting their renewable portfolio standards. This is a separate issue from the marketing of renewable energy to consumers.

        On the other hand, many so called community solar projects sell the RECs from their facilities as part of their financing plans, yet their community customers may be mislead into thinking that they “go solar” by participating in the project.

        Then there is the further question of whether or not these community solar projects are “additive” in increasing the amount of renewable energy on the grid compared to the amount that would have been there if these projects had not sold the RECs. As Kevin Jones as explained many times, these projects merely shift the location of inevitable renewable generation. The only kind of community solar project that adds genuinely additional renewable generation is a project that retains its renewable attributes.

        It is entirely possible to develop successful community solar in Vermont without selling RECs. Anyone interested in community solar both for its financial benefits and for its potential environmental benefits should seek out these community solar projects.

    • John Greenberg

      Well said, Kevin Jones.

  • Bob Zeliff

    I’m amazed how twisted the understanding of Renewable Energy Credits has become. Yes, legally the renewable credit are sold and the energy produced may no longer be counted as power renewable output.

    In reality Renewable Energy Credits effective makes Non Renewable (mostly Carbon based old power sources) subsidize the construction and production solar and wind power. This is working very well. Out of state carbon producing power plants have invested, and will continue invest millions in solar and wind construction in Vermont. The results of these millions Vermont investment is thousands of jobs and taxes for towns and education have increased. All good things!!

    The electrons that come out of the solar panels, and wind turbines do not abide by artificial legal constructs. They go into the grid and by and large they are used locally. No they do not get on a bus and go to Connecticut.

    Vermonters and Vermont Power producers should be proud of the work they are doing to cut green house gas production. Don’t let lawyers confuse this good!

    • Kevin Jones

      RECs do not make Non Renewable (mostly Carbon based old power sources) subsidize the construction and production of solar and wind power. RECs are not offsets for polluting power producers, they are the rights to the renewable energy purchased by those who want to claim the renewable low carbon energy. RECs are ultimately paid for by consumers who want to purchase green power, either through a state mandate or voluntarily. The sale of RECs may enrich the developer but it does not buy green power for Vermonters or reduce Vermont’s greenhouse gas emissions. If a solar project wants to sell the RECs to a third party then they should stop trying to imply to their Vermont customers that they are selling them solar, renewable, or low carbon energy. The reason they are not transparent is that they know that Vermonters want to go solar and they want to profit off of the deception. As an economist who has worked on state RPS programs, environmental disclosure rules, electric retail choice programs, and complex power markets it is a smokescreen to suggest that this is about lawyers confusing people. It is unfortunately about dishonest developers who are cheating Vermonters, honest solar companies and the environment.

      • Richard Ratico

        Kevin,

        “The sale of RECs may enrich the developer but it does not buy green power for Vermonters or reduce Vermont’s greenhouse gas emissions.”

        Or, the sale of RECs may may simply be the difference between building or not building a particular RE project. Your sweeping generalizations do not contribute to a constructive dialog.

        A better metric than “Vermont’s greenhouse gas emissions” would be those of the overall electrical grid we share with our New England neighbors. Those have been reduced. Focus at the big picture Kevin.

  • Don peterson

    The electrons from my rooftop solar project flow to my neighbors. The REnewable Energy Credits from my rooftop go the the Vermont Electric Coop. The accumulated credits are sold to utilities that need to fulfill a quota of renewable energy. The proceeds of this sale are used to buy hydroelectric power from Quebec, which Is cheaper than ANY other power available to Vermont consumers. And also renewable, says our regulators. Just not profitable for Sun Common and their friends.

  • Jennifer Austin

    If this law professor is correct, it just makes the utter blight of the solar arrays that have blanketed the open land along Rt 7 in Addison County an even more bitter pill to swallow.

  • Robert Joseph

    Duane Peterson is saying “the REC market they created have “resulted in a 3.6% reduction in total fossil fuel generation” during 2013 alone. This is a good thing.”

    And what was the price of natural gas in 2013? About double the price it is today. Think that reduction trend is going to continue with all the push back on wind turbines and solar projects and the price of natural gas dropping? Not to mention the impact of whatever is happening in China on coal prices.

    My question is- Don’t we eventually have to stop selling RECs to meet the states 90% renewable goal? Then what?