Solar City is a company that I have followed for quite some time. As the only solar provider that manufactures and installs its products I see them as sort of an example for alternative energy companies. I began to follow them with the idea that they were the future, that they saw the end of oil coming and since they received funding it is assumed that they convinced their investors of its demise, as well. With all the controversy surrounding the sourcing of fossil fuels, I believe that renewable energy is the way to go. Unfortunately, this realization may have been too good to be true.
As the government attempts to move closer to this realization, they have put forward new legislation to further incentivize businesses to use renewable energy. They provide these incentives in the form of tax credits as a percentage of the value of the firm’s renewable assets. On an annual basis, Solar City reports the fair market value of its solar assets to receive a stipend or tax credit that is worth 30% of the asset’s value. Solar City has been accused of inflating the FMV of its solar panels in order to receive more of the taxpayer money that is used to finance these credits. At first, I was surprised to learn about the misaligned motives of one of my favorite companies. It may seem curious that Solar City values its solar panels, on average, about 29% higher than its competitors. However, these accusations begin to make sense when you analyse the financial structure of the company. Solar City is financed by some of the biggest companies in the world; this includes Google, Pacific Gas & Electric and U.S. Bancorp. At this time, Solar City does not make money so there is no taxable income for them to pay to the government. Based on this, we can derive the fact that Solar City has no use for the tax credits so it becomes clear that the credits are awarded to their investors who could benefit greatly from a tax break.
I begin to realize that Solar City is acting on the whim of their corporate sponsors. I start to question the integrity of the firm and whether or not it can actually be, or even intends to be profitable. Did these corporations simply invest so that they could receive a tax break? Is Solar City actually seeking to find a solution to the energy crisis? At this point, who do we blame? Solar City because they took the corporation’s money knowing they would be taken advantage of, or should we blame the organizations who only have their best interests in mind? According to a report, these inflated tax breaks add up to over $25 million in extra tax payer money distributed to big corporations that already have more than enough. I would never think that business men would take advantage of our efforts to sustain the well-being of our world and our society. Personally, I don’t think Solar City is to blame, as this predicament is a result of the complex process of trying to “do good” in the world. Big corporations are always at the heart of these issues, but among other things these accusations shine a light on some issues that are closer to home.