September 4, 2011
California

Fraud probe causes pain for small wind sites

By Anne Gonzales, Bee Correspondent, The Sacramento Bee, www.sacbee.com 4 September 2011

The California Energy Commission suspended a key rebate and incentive program for smaller wind turbines in March so it could investigate allegations of fraud in the industry.

The investigation has halted promising growth in construction of small, on-site, “distributed-use” systems in hundreds of homes, businesses and public sites.

The commission subsequently filed a complaint July 26 against DyoCore Inc., based in Carlsbad, for overstating the performance of its turbines and making them eligible for rebates.

The DyoCore case also prompted a rewrite of rules for the program, which could snarl business agreements already in the pipeline.

The commission will conduct a public prehearing conference on Sept. 19 to hear testimony from DyoCore and other parties and organize a schedule of hearings and proceedings.

“This is giving the small wind industry a black eye,” said Mike Bergey, president of Bergey Windpower in Oklahoma and president of the Distributed Wind Energy Association. “A lot of innocent people are being punished.”

Bergey said it was necessary for the commission to suspend the rebate program, but the industry is suffering while the investigation and recrafting of guidelines drags on.

“The suspension has put a lot of stress on the sales and installation dealer network in California, causing some to shut down for lack of business,” he said.

“The longer it takes to get up and running, the more damage is done to the sales and installation infrastructure.”

Since the rebate program started in 1998 to spur use of wind and fuel-cell systems, the commission’s Emerging Renewables Program has given rebates totaling $8.7 million to 577 customers who purchased and installed small wind systems for a cumulative installed capacity of 3.6 megawatts. Between January and March, however, DyoCore customers filed 1,000 applications for rebates.

The commission alleges DyoCore’s claims for the energy-generation capacity of its turbine are 7.5 times greater than theoretically possible. Many of the sites where installations were made were in low wind areas that would not have supported power production, the complaint says, and some systems qualified for up to $28,000 in rebates, which fraudulently gave free systems to customers.

The commission said the program was not intended to cover the entire cost of distributed-use systems, as that would “create a subsidy that’s unsustainable and sends improper signals to the market” by allowing manufacturers to undercut competitors.

DyoCore customers already collected $515,000 in rebates, and another 249 were approved for almost $6.4 million, but not paid out. An additional 1,069 rebate applications for DyoCore turbines, totaling more than $31 million, are under review.

The state may try to revoke some rebates already paid, and may refer the matter to the state attorney general for prosecution.

The complaint was forwarded to a committee of commission members. DyoCore denies the fraud allegations, saying “errors were committed out of inexperience and naivete” on the part of the company.

David Raine, DyoCore’s founder and chief technology officer, said in a letter to the energy commission committee that removing the company’s turbines from the list of certified products would hurt dozens of businesses and thousands of California customers.

He said hundreds of DyoCore’s SolAir turbines had been installed in the state and more than 1,000 nationwide, with another 4,000 new installations planned this year.

Raine said his company wants to continue to work with the energy commission to become eligible for rebates.