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Claiming You've Gone Solar if You Lease May Run Afoul of the FTC


  02:58:00 pm, by Jim Jenal - Founder & CEO   , 1045 words  
Categories: All About Solar Power, Solar Economics, Solar Rebates, Commercial Solar

"Claiming" Solar and the FTC

Marketing their efforts at “Going Green” is a common reason why commercial clients install solar power systems. But now under the new revisions to the “Green Guides” proposed by the Federal Trade Commission (FTC), companies that lease rather than purchase solar systems may be engaging in deceptive business practices if they advertise the solar power system on their roof. The issue is “double counting” and the FTC is serving notice that it intends to crack down on companies that attempt to promote environmental credits that they do not own.

The Role of the FTC

First some background. The FTC is the nation’s primary consumer watchdog against false and misleading business practices. They are the folks who (attempt to) halt advertising that deceives consumers by promising something which the marketer cannot deliver. Since 1992 the FTC has issued “Guides for the Use of Environmental Marketing Claims” - known as the Green Guides - with revisions taking place in 1996 and 1998. Much has changed since 1998 and the Green Guides were sorely in need of revision. Thus, starting in 2007, “the FTC sought public comments on the continuing effectiveness of the Guides, held public workshops on emerging green marketing issues, and conducted research on consumer perception of environmental claims.” One subject area discussed at length in the new revisions - but not covered at all in the earlier versions - relates to marketing claims about the use of renewable energy.

Indeed, there are some very interesting results reported in the draft revisions about what consumers actually understand about marketing claims related to renewable energy. For example, when presented with an open-ended question that told them that a product was “made with renewable energy,” 17% could not explain what that claim meant and another 17% thought that it meant that the product was made from recycled materials! When given a set of options to choose from, 28% thought it implied that the product was made with renewable materials, 21% thought the product was made from recycled materials and 18% thought it meant that the product itself was recyclable! (Note to fellow renewable energy advocates - we need to do a much better job at educating the public.)

Against that backdrop of consumer misunderstanding, the FTC set forth to issue guidance on how renewable energy claims could be used without misleading an already confused public.

Double Counting

The greatest concern to the FTC - and by extension to solar power system operators - was the question of double counting. Central here is the question of who owns the Renewable Energy Credits (RECs) - that is, the actual commodity that constitutes the environmental benefit associated with the energy being produced. Thus, a commercial building owner might lease a solar power system and host it on their roof. The electricity from that solar power system helps to power their operations, hopefully reducing their electric bill enough so that the new bill plus the lease payment is less than the old bill. However, because the building owner does not own the solar power system, they do not own the RECs - any more than they qualify for the federal tax credit. Rather, those belong to the system owner who is free to sell them on the open market and thereby allow another company that buys them to offset their carbon emissions.  Leaving aside the simple case of outright fraud (where someone sells the same set of RECs to multiple parties) which the FTC noted was best left to law enforcement, the Commission tackled head-on the case where one party hosts the system but another party owns it.

The FTC was quite clear that under such a circumstance, the building owner who hosts the system is barred from making any claims whatsoever about the use of solar power at that facility! From the draft revisions:

The Commission agrees with commenters that companies should not sell RECs for renewable energy they generate onsite (e.g., by using solar panels on store roofs) and then tout their renewable energy facilities or equipment in advertising (e.g., this store is 100% solar powered). By selling RECs, the company has transferred the right to characterize its electricity as renewable. Therefore, even if the company technically uses the electricity from its onsite solar panels, an advertising claim about the renewable aspects of this energy is misleading. (Draft Guides, p. 165, emphasis added.)

Even claiming that you host a renewable energy facility is likely to run afoul of the FTC’s Guides:

Some commenters suggested companies in these circumstances should be able to claim that they host a renewable energy facility. The Commission study, therefore, tested this claim, and 62 percent of respondents stated that the company used solar/wind power to make its products. The Commission, therefore, proposes advising marketers that the phrase hosts a renewable energy facility is likely to mislead consumers if, in fact, the company has sold its rights to claim credit for the renewable energy. (Draft Guides, pp. 165-66, emphasis added.)

While it is possible that the FTC might soften its approach in the final rulemaking, commercial solar clients would be well advised to look closely at these regulations with an eye toward their future marketing plans before entering into any lease or rebate agreement that assigns away their RECs.

Other Concerns

The extent to which a product is made with renewable energy was also a point of concern. In the FTC’s study, “36 percent of respondents interpreted a ‘made with renewable energy’ claim to mean that ‘all’ of the product was made with renewable energy.” Accordingly, the Commission “proposes advising marketers not to use unqualified ‘made with renewable energy’ claims unless all, or virtually all, of the significant manufacturing processes used to make the product are powered by renewable energy.” The FTC offered the following example by way of clarification:

[I]t would be deceptive for a toy manufacturer to make an unqualified renewable energy claim if it did not purchase renewable energy to power all of the significant processes used to manufactured [sic] its toys. Determining whether that same manufacturer could make an unqualified claim if its plant were powered with renewable energy, but its delivery trucks used fossil fuels, would require further consumer perception research.  (Draft Guides, p. 163)

Manufacturers, like commercial building owners, need to pay close attention to these regulations as they contemplate making claims about how “green” they have become.  You can find the Draft Guides here.


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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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