California has long been a frontrunner in the adoption of solar energy, driven by ambitious climate mitigation policies and goals for a carbon-free energy future. However, a recent study has revealed a concerning underbelly to this rapid expansion: widespread corruption and abuse within the state’s solar market. This article delves into the findings of this study, exploring the various forms of corruption, their impact, and the urgent need for reforms to ensure a just and sustainable energy transition.
The Dark Side of California’s Solar Success
While California’s solar energy production has increased exponentially, reaching 79,544 gigawatt hours in 2024, a new study in Energy Strategy Reviews exposes the “dark side” of the state’s rapid solar investment, deployment, and adoption. Researchers at the Boston University Institute for Global Sustainability (IGS) have identified seven distinct types of corruption abuses and risks in the California solar energy market, taking a first-time look at patterns of public and private sector corruption in the California solar market.
These include:
- Clientelism and Favoritism
- Rent-seeking and Land Grabbing
- Service Diversion
- Theft
- Greenwashing
- Tax Evasion
- Non-Transparency
The study highlights that efforts to accelerate solar infrastructure deployment in California have inadvertently contributed to a disturbing array of corruption practices and risks. These encompass abuses of power during project approvals and licensing, displacement of Indigenous groups, and manipulation through tax evasion and falsification of project information.
Seven Shades of Corruption in the Golden State’s Solar Sector
The IGS study details seven specific types of corruption observed in California’s solar industry:
1. Clientelism and Favoritism:
This involves the unfair allocation of government contracts, permits, or licenses to project developers, often based on personal connections rather than merit. A particularly egregious example involves instances where such favors were allegedly exchanged “for sex”. This includes hiring friends or family over more qualified candidates for solar projects.
2. Rent-Seeking and Land Grabbing:
This refers to redirecting public funds or lands to benefit private developers, as well as seizing communal or public land from Indigenous peoples or other communities for energy infrastructure siting.
3. Service Diversion:
This involves avoiding the distribution of local benefits that should arise from solar projects, such as jobs or community investment.
4. Theft:
This includes the coercive removal of equipment, property, or cultural artifacts from project sites. The study cites instances where culturally significant items belonging to Native tribes were removed or destroyed during the development of solar facilities.
5. Greenwashing:
This involves producing flawed environmental impact assessments or misleading the public about the environmental benefits of a project, often to downplay negative consequences.
6. Tax Evasion:
This refers to the nonpayment or underpayment of taxes, or strategically avoiding the payment of local taxes.
7. Non-Transparency:
This is evidenced in the hiding or failing to disclose relevant or important information about solar projects, hindering public oversight and accountability.
“Sex for Solar”: A Shocking Revelation
One of the most alarming findings of the study is the alleged exchange of sexual favors for preferential treatment in project approvals, an abuse the researchers called “sex for solar”. The report cited an alleged example of clientelism and favoritism in direct exchange for sex during the development of the 250 MW Genesis Solar Energy Center. The authors cite an incident involving a senior counselor to the interior secretary who was recused from oversight of renewable energy projects after it was revealed he was engaged in a romantic relationship with a corporate lobbyist representing the developer.
According to the authors, the same official maintained additional friendships with other lobbyists tied to the project and allegedly accepted items of value from the developer after formally recusing himself from oversight. This initial breakdown in oversight of environmental and cultural protections opened the door for other forms of corruption to follow.
Impact on Indigenous Communities and Cultural Heritage
The study highlights the devastating impact of solar development on Indigenous communities, particularly concerning the destruction of cultural heritage sites.
The paper said, “the Final Environmental Impact Statement for Genesis confirmed that 99 archaeological sites had been identified within the project site.” One interviewee claimed that “a lot of artifacts” were removed, including “pottery and mammoth skulls.” Another said that the Genesis project was built atop burial lands and that excavation work uncovered “several old remains.”
The researchers argue that theft occurred next—specifically, the removal or destruction of culturally significant items belonging to Native tribes in the region.
The Need for Major Solar Reforms
The authors of the study emphasize the urgent need for major reforms in California’s solar energy market to address these pervasive corruption issues. They call for increased transparency, stronger oversight, and greater accountability in all aspects of solar development, from project approvals to environmental impact assessments.
The research implicates solar energy in numerous corruption practices and risks that have adversely affected communities, policymaking and regulation, and siting decisions and planning. “The most eye-opening finding for me is how common corruption is at every level of solar development, from small-scale vendors to high-level government officials, even in a well-regulated, progressive state like California,” says co-author Alexander Dunlap, an IGS research fellow.
Recent Challenges in California’s Solar Industry
Beyond the issues of corruption, California’s solar industry has faced significant challenges in recent years, impacting its growth and the financial viability of solar projects.
NEM 3.0 and its Impact
One of the most significant changes has been the implementation of Net Metering 3.0 (NEM 3.0). The California Public Utilities Commission’s (CPUC) new net metering policy, known as NEM 3.0, decreased the compensation for excess energy by about 75%. Under NEM 3.0, the compensation for excess solar energy sent back to the grid was drastically reduced, making solar less financially attractive for homeowners.
This policy change has had several negative consequences:
- Decline in Solar Installations: The country’s largest solar market saw a rush to get solar before the policy went into effect in April 2023, followed by a precipitous drop in installations. The changes have led to a 66% drop in residential solar installations in the first quarter of 2024 compared to the same period in 2022.
- Job Losses: The California Solar and Storage Association reported a 22% decline of solar jobs in California, equating to 17,000 fewer positions by the end of 2023.
- Business Closures: According to Solar Insure, a solar insurance company, 32 solar businesses in California closed their doors in 2023 and 2024. Among these were well-known top solar companies like ADT Solar.
Rising Interest Rates and Financing Challenges
In addition to NEM 3.0, rising interest rates have further dampened homeowner interest in solar plus storage, as contract prices have increased substantially. This, along with the rising interest rates and installer bankruptcies forced financing companies to tighten lending guidelines. As a result, solar installers faced liquidity problems, leading to bankruptcies.
Oversupply of Solar Energy
California’s push toward clean energy has led to an unexpected challenge: an oversupply of solar energy. At times, the state generates more solar power than it can use, resulting in the waste of clean energy. This phenomenon, known as the “duck curve,” describes periods when solar energy production exceeds demand, especially during sunny spring days when electricity use is lower.
In 2024, nearly 2.6 million megawatt-hours of renewable energy will have been wasted, primarily solar energy. This amount could power all the homes in San Francisco for a year.
High Electricity Prices
Despite the oversupply of solar energy, California residents, businesses, and factories pay around two to three times as much for power as the national average. Residential rates for customers of PG&E and Southern California Edison have risen by 51% over the past three years, far surpassing general inflation.
Curtailment of Solar Production
Oversupply of solar power is causing California’s operators to regularly halt production or even pay electricity traders to take power off their hands. Sometimes, other states snag the extra energy for cheap.
The curtailment has two causes, according to the United States Energy Information Administration. In some cases, power lines in the state don’t have capacity to take on and deliver energy; in others, generation exceeds customer demand. Either way, California’s grid operator tells solar producers to cut production using price drops or direct orders. According to the Times, oversupply has occasionally gotten so bad in California that the prices go negative, forcing solar plants to pay energy traders to take it off their hands. “This is all being underwritten by California ratepayers,” energy consultant Gary Ackerman told the outlet.
Adapting to the New Landscape
Despite the challenges, solar energy remains an appealing choice for many Californians. The industry is adapting by:
- Promoting Solar Batteries: To make solar installations cost-effective under the new incentives, homeowners now need to install batteries, which can cost an additional $10,000 to $20,000 or more.
- Challenging NEM 3.0: Solar advocates and industry groups in the state are challenging the NEM 3.0 policy in California’s highest court.
- Expanding Transmission Infrastructure: Mainzer advocates for expanding transmission lines to enhance the flow of electricity across the state. Without adequate transmission lines, new solar projects and other renewable energy sources cannot deliver their electricity to customers, leading to stranded generation. Permitting reform is essential to facilitate the construction of these lines.
Consumer Protection and Fraud Prevention
To protect consumers from fraud in the solar industry, California has implemented several measures:
- Solar Restitution Fund: California legislators established a $4 million fund to help victims of fraud in the solar installation industry. The program, overseen by Contractors State License Board (CSLB), allows people to recoup up to $40,000 if they feel they’ve been wronged.
- Consumer Protection Guide: The California Public Utilities Commission (CPUC) created a guide to provide information to homeowners interested in rooftop solar. The guide outlines common scams and provides tips for avoiding fraud.
- Right to Cancel: Consumers have the right to a 3-day cancellation period after signing a contract.
- Solar Disclosure Document: By law, a solar provider must provide a Solar Energy System Disclosure Document created by the CSLB and California Public Utilities Commission. This document provides information about the solar system, such as total costs.
A Crossroads for California’s Solar Future
California’s solar industry stands at a crossroads. While the state has made significant strides in renewable energy adoption, the challenges of corruption, regulatory changes, and economic pressures threaten to undermine its progress. To ensure a sustainable and equitable energy transition, California must address these issues head-on through comprehensive reforms, robust consumer protection measures, and a renewed commitment to transparency and accountability. Only then can the Golden State truly harness the full potential of solar energy for the benefit of all its residents.
