Solar scams, also known as Go Bust or phoenixing scams, have been a recurring issue in the solar industry, leaving customers in difficult and unsupported situations.
Some companies offer solar packages with cheap and low-quality equipment, resulting in system failures after a short period. As warranty claims increase, these companies often become insolvent or declare bankruptcy, leaving customers without the promised products or support.
Approximately 30% of solar installations in Australia are considered "Solar Orphans," where the original installing company and importing manufacturer is no longer operational, leaving customers with no recourse for service or warranty claims.
To avoid falling victim to these scams, customers should thoroughly research solar companies, read customer reviews, and seek advice from reliable sources before committing. If the system is very cheap - please be careful and research the situation a little more.
What is the Go Bust solar scam in Australia?
The Go Bust solar scam has happened many times within the solar industry, as it has in other sectors such as construction.
Installing solar is a long-term investment costing several thousands of dollars and is expected to last over 25 years with low maintenance costs. Products are offered with extended warranties and, in many cases, now 25 years for solar panels and 10 years for solar inverters and batteries. Consumers are buying solar systems with the promise and expectation of long-term reliability and backup support from the original solar company for the system’s life.
The Go Bust solar scam, also known as phoenixing in the solar business, refers to a scenario in which a solar company intentionally falls bankrupt or ceases operations. Leaving customers who have paid for solar installations or services in a challenging situation. Customers may lose their investments due to not receiving the promised products or services, but instead getting a cheap inferior product with poor install quality.
How often does this occur?
It has been common for companies to enter the industry and offer solar packages, often using cheap solar panels, inverters and equipment from product manufacturers that do not have an Australian presence or history of providing support for service or warranty. These systems are often marketed as premium quality exclusive products at an affordable price to the consumers who buy them.
They can also be sold as cheap systems to sell vast volumes of systems quickly. This poor-quality solar system starts to fail after a few years. The solar scam company finds that they need support from the manufacturer to cover the warranty issues of panels or inverters and finds that the increasing number of failures becomes a liability for them and costs them real money.
The company owners usually made good profits in the early years. But now the many warranty-related calls mean they are unable to cover the costs of servicing these claims and looking at making a loss. That’s now the time to pull the plug and this is how the solar scam is carried out.
The company becomes deliberately insolvent and goes into bankruptcy. Often the directors and owners of these companies can start up a new business under a new ABN and company structure, have no responsibility or liability for the liabilities of the old company and start the whole process again selling dodgy solar equipment.
Recently company directors have to be registered for a director-specific number partly to make it possible in the future to identify serial bankruptcy directors and hopefully stop the practice in Australia.
What happens to the customers of these deliberately go-bust solar scams?
Customers who trusted the company and made financial commitments based on the promised solar installations can be devastated by such solar scams. While not all victims of solar scams, it is estimated that close to 30% of solar installations in Australia are “Solar Orphans”. That is, the company that initially installed the system is no longer in operation, nor is the equipment manufacturer. So the customer cannot call them if they have any service or warranty requirements.
To avoid such solar scams, thoroughly investigate and assess any solar firm before entering into an agreement or making payments. If a solar system promises a $3000 return per year and the system costs $6000 and is supposed to last 25 years, please do not be greedy – such a deal is too good to be true.
Look for credible organisations with a track record of success, read customer reviews and ratings, and consider talking with professionals or getting advice from reliable sources. Furthermore, it is prudent to thoroughly study contracts and payment terms to verify that safeguards are in place to protect your investment and give redress in the event of company collapse or breach of contract.