Solar firms probed for possible ‘misrepresentations’ in getting public money

Three of the country’s most prolific installers of residential solar panels are under federal investigation to determine if they inflated the cost of their work to increase the payments they would receive from the government, according to government and industry officials familiar with the probe.

SolarCity, SunRun and Sungevity have received subpoenas from the Treasury Department’s office of inspector general for financial records to justify more than $500 million in federal grants and tax credits the firms tapped for performing work. The probe seeks to determine whether the companies accurately reported the market value of their costs when applying for federal reimbursement, which was calculated at one-third of the costs.

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The solar companies received money through the Treasury’s $13 billion program, known as the 1603 program, which used funds from President Obama’s stimulus initiative to offer cash grants to clean-energy developers. The goal was to spur the spread of wind farms, solar panels and other clean power sources nationwide.

SolarCity, SunRun and Sungevity have been by far the largest recipients among companies installing solar panels on homes. Working heavily in the sunny states of California and Arizona, the three firms collected hundreds of millions of dollars in federal cash grants to pick up a share of their costs on thousands of home installations during the past three years.

But the prices some of these industry leaders charged for their work were sometimes far higher than the broader industry’s market rate, according to solar experts and details of the Treasury investigation released in company reports. While firms can install solar panels for roughly $5 per watt of energy and make a comfortable profit, some firms were charging as much as $7 and $8 per watt.

SolarCity spokesman Jonathan Bass said Thursday the company believes its estimates were fair, does not know of any specific representations that are in question and says its costs were often at or below the recommended amount in guidance the Treasury Department provided at the time.

Sungevity and SunRun declined to comment.

The companies could be forced to repay the government millions of dollars if problems are found, as well as face penalties. SolarCity said if the government reduced the project cost estimates on its portfolio by an average of 5 percent, the firm could theoretically lose $17 million of the $341 million it has received or expects to receive through such grants. It could be ordered to repay the government some of those funds.

During the past year, senior administration officials and leaders in the solar industry have been privately discussing concerns that a few major solar companies — along with their financial partners — may be taking improper advantage of the program.

“We want to be good stewards of these incentives,” said Barry Cinnamon, a solar industry expert and former chief executive of Westinghouse Solar. “We don’t want to be perceived as being greedy or pulling the wool over taxpayers’ eyes. If it’s not ethical, then we don’t want companies in the industry taking advantage like this. If it’s lawful and ethical, then everybody should be able to do that.”