Why have so many solar companies gone bankrupt?

Fast read

An orphaned solar system is a solar panel or inverter system abandoned by the manufacturer and the installation company. This can happen when the manufacturer goes out of business or the installation company becomes bankrupt or liquidates.

As a result, any warranties offered with the solar system became worthless—leaving the consumer with a system that may require costly repairs or replacement without financial assistance. Orphaned solar systems are a problem in the solar industry. Estimates suggest that Australia's nearly one million systems, or about one-third of all, are orphaned.

Consumers can protect themselves from this issue by carefully researching the manufacturer and installation company before purchasing a solar system.

Why do solar companies go bankrupt and leave orphaned systems?

Our Australian consumer law is fascinating because it has some aspects that are unique to Australia. For example, a solar inverter manufacturer sold you a lesser-known cheaper inverter with a 10-year product warranty via an installer. But, unfortunately, after six years, the inverter stopped working. When you ring up to learn how to get this product fixed, you find out that the solar company has gone bankrupt and is not in Australia anymore. They don’t have any office or representation left.

However, Australian consumer law says that the remaining 4-year product warranty obligation goes back to the solar installation company that initially took your money and installed the PV system for you.

inverter exploded installed from solar company gone bankrupt
Installers must uphold the responsibility of their solar warranty

So this installer who initially recommended that inverter is now stuck with that product warranty responsibility for the next four years. This is because the manufacturer has left our jurisdiction and has wiped their hands off their duty.

Maybe the installer suspected that this inverter was too cheap to last ten years, and they expected this moment and were ready to move. Or they are an unsuspecting victim of a moral manufacturer. Either way –  it’s the installer that now has to repair your inverter – or so you think.

Is the Australian consumer law clause a good thing for solar?

So this consumer law clause sounds really good because the consumer seems protected – no matter what. There’s only one big BUT…

Let’s say I am an honest, hard-working solar installation company. I turned over a few million dollars a year and sold  900 to a thousand of those inverters in good faith. The issue is now that most of these units have started to fail. With a significant circuit solder fault and burnout soon after year 6 of installation, they have a 10-year warranty.

I am one of Australia’s largest solar sales companies, with famous endorsement people, low prices, and lots of fanfare, and we sold a lot of cheap crap solar. We installed it poorly, and we knew this moment was coming. So we are prepared and already have two replacement solar companies waiting to be registered and to start all over again with poor-quality products and extended warranties.

Now the installer meets with their accountant to assess the risk of all these inverter failures. One of these is worth 1000 dollars. I got close to 1000 of them out there. Most of them will fail before the 10-year warranty expires.

There’s a potential liability of $1 million in product alone and another $500,000 in replacement labour coming their way, and it looks like it’s not even the installer’s fault.

So those solar companies who worked with large numbers of this inverter brand will look at their ability to absorb such a significant outlay of $1.5 million dollars in transferred warranty liabilities.

What happens next?

Their accountant will recommend that they wind the solar company down and go bankrupt. Then, a few weeks later, an old solar company disappeared, and a new one on the same premises was born. Sometimes with a very similar logo, similar marketing, and a similar name.

So the consumer law, whose intent was to give us consumers strong protection. It has caused many solar companies to go bankrupt, or liquidate deliberately.

Solar companies in the industry have gone bankrupt

In the solar industry alone, since 2010, over 800 solar companies have left the industry.

Nearly 1 in three solar systems (close to 1 million) are in the industry known as an orphaned solar system. This is because the panel or inverter manufacturer and the solar company go bankrupt. Unfortunately, this means the decade warranties the customer received with their system purchase are worthless.

So this Australian consumer law doesn’t necessarily give your solar that extra security that it appears to provide you with. But it, in many cases, meant that solar businesses had to find a way to leave the industry and come back another way.

So hopefully, you picked an inverter or panel brand that is in Australia long term, committed to the place, and honours their warranty. Then you don’t have to worry about this particular issue.

One way to avoid this issue or minimise the risk is to pick a solar company that has been around for a decade or more and one that only uses quality equipment. We at Your Energy Answers have vetted the industry for precisely such companies.

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