Why Solar Companies Go Out of Business and The Impact on Customers
More than 750 solar companies (a recent list on the link below) on the ASIC website since 2011 are shown as closed, in liquidation, administrators appointed or proposed de-registration. It is estimated that these left millions of solar systems ‘orphan’, meaning that the system is unsupported by the initial installation company. Often the manufacturer of the inverters, solar panels etc don’t have an office in Australia. In many cases, other technicians are not keen to touch unfamiliar or sub-standard systems. Hence, it’s difficult for ‘orphan’ system owners to get any support or claim warranty.
How then, would you pick a solar company to go with from the thousands available?
The very high number of failed solar companies is mind-boggling. Why have so many solar companies left the industry while the industry has been booming? Our research and various feedbacks suggest that the reasons include:
Many solar companies got in trouble due to a number of consumer claims for faulty equipment or installation.
As per the Australian Consumer Law, the install company themselves is responsible for the make good costs. Often faulty equipment or problematic installations surface within a relatively short period. Some operators might decide that it’s cheaper to go bankrupt than fix too many of these problems.
Unsound financial fundamentals: For large contracts that can go on for months, there may be instances where financing is required by the solar company to cover payments for equipment before the next milestone is reached to trigger a payment. Weak financials could make solar companies vulnerable to cashflow problems.
- Greed - Some companies are willing to do what it takes to rack up sales at the expense of business sustainability and customer’s satisfaction
- Fierce competition putting downward pressure on margin. A couple of project cost variations may threaten the profitability of the solar company.
- COVID has driven some solar companies to the wall. If they have large overheads and not flexible enough to pivot, then they may not survive.
picture from https://smallbusiness.chron.com/
A recent big shock is the demise of Todae Solar, who had been in business 17 years and installed hundreds of megawatts for large commercial clients and risen to top place in the commercial and industrial league tables.
We do know that a very large percentage of Australian businesses have proven or believe in the benefits of solar. But, how can you minimise your risk when choosing an installer? Here are a few suggestions:
- Comprehensive due diligence on technical, project and customer service capabilities
- Track record and background checks
- Diversification – if you are putting solar on multiple sites, then using more than one solar company would mean you are not putting all your eggs in one basket.
P.S. Please find attached our new brochure with our expanded services to help you choose the best installer.
https://www.ecogeneration.com.au/big-end-solar-installers-bend-with-the-times-as-sun-sets-on-todae/ https://www.lgenergy.com.au/faq/buying-a-solar-system/how-many-solar-installation-companies-have-left-the-industry-in-australia https://www.lgenergy.com.au/uploads/download_files/ec99d1b8b63219c2c049b4b0594d25b9ccc8e0d5.pdf