Recent solar industry shakeup shines light on what works and what doesn’t

When we look back at Solar Power World’s Top Residential Contractors 2022 we see names like Titan Solar Power, Infinity Energy (CA), Sunny Energy (AZ), Sigora Solar (VA), and Sunworks (UT). Back then, these installers were in the top 20 nationwide (based on kW installed), accounting for ~5% of all US residential solar projects that year. 

Since that list was published, all five have gone out of business. And that list doesn’t even include former industry giant SunPower, which declared bankruptcy in August and has been delisted from the Nasdaq exchange. 

It’s easy to forget the solar industry is relatively young, at least when compared to more established trades, such as HVAC, roofing, electrical, or plumbing. However, every industry – not just those involving solar panels and construction – experiences growing pains. Fluctuating consumer interest, changing technical standards, and evolving government regulations can quickly toss sand in any industry’s gears. And to be fair, corporate mismanagement, unethical sales tactics, and a short-term focus on profits can have the same impact, too. 

Over the last three years, EnergySage has talked with 1,000+ contractors across the country and picked up on clues that help distinguish between a business poised for long-term success and one that may struggle and ultimately fail. Spoiler alert: it rarely has to do with annual sales volume. 

Rather, it’s about prioritizing long-term excellence over short-term profit. By taking a more strategic approach that embraces diversified offerings, consumer education over aggressive sales tactics, and the adoption of industry best practices, companies are better able to navigate the industry’s ebbs and flows, turn customers into advocates, and stand apart from bad actors. 

Despite the recent loss of some of the nation’s biggest residential solar companies, the sun continues to shine and more residential meters are spinning backward. Although the residential solar market is down in 2024 compared to 2023, the industry still installed 1.3 GWdc of rooftop solar in Q1 this year. The vast majority of installers we surveyed also expected to grow in 2024.

So why are some solar companies going out of business while others are succeeding? For some, it has been a combination of factors. Changes to net metering in some states, combined with lingering high interest rates, softened consumer demand in 2024. Plus, running a small business is simply hard; nearly half fail within their first five years, according to government statistics. 

What’s unfortunate is when companies fall victim to problems that are within their control. If you’re a sports fan, think of them as unforced errors. They can include inaccurate system designs, under-trained sales teams that result in high cancellation rates, or an internal failure to understand financial obligations with leases or power purchase agreements. When demand is strong, installers can paper over problems caused by these types of unforced errors. When market conditions soften, however, those errors come back to hurt.

We’ve found that many successful installers offer a diversified portfolio of complementary services, such as roofing, electrical work, or general contracting. Not only does this help insulate them from market fluctuations, it allows them to provide additional value to homeowners and grow strategically.

We also believe that the industry should educate consumers before being sold, especially considering solar is complicated, expensive, and a 25-year investment. Time and time again, we see examples of installers selling and not really educating customers. A lack of homeowner understanding of what they’re buying quickly turns into buyer’s remorse, bad reviews, and negative industry sentiment. Meanwhile, installers who take the time to educate customers may not max out sales volume in a single year, but end up with happier customers who become solar advocates and drive future business.  

We also see strong success among those who have a NABCEP certification. Although a homeowner might not know what this certification means, the rest of the solar industry does. It means installers have taken the time to learn best sales practices, completed courses on solar and battery installation, and are part of a community of installers who self-regulate.

In our opinion, NABCEP provides the framework needed to guide continued industry growth, and build consumer trust. Property owners are making a major long-term financial commitment when they invest in a solar system. As the industry continues to grow, so will the calls for additional layers of regulations. NABCEP offers a type of internal self-regulation and demonstrates that the industry is serious about protecting consumers and weeding out bad actors.

When a high-profile installer goes out of business, it causes ripples – both good and bad – for the entire industry. The companies left behind have to work that much harder to reassure prospective and existing customers about the long-term viability of the industry and benefits of the product. But the failures also open up opportunities for other companies to step up, help homeowners with orphaned systems, and build goodwill. We also get to learn from the failures and figure out how to be better as an industry. 

It continues to be a great time to be in the solar industry. Utility rates continue to climb, making the economics of solar even more attractive. Property owners increasingly want sustainable, reliable, renewable energy. More states are incentivizing residential solar installations. And the technology keeps improving. By keeping a customer-first approach, diversifying offerings, prioritizing long-term success over short-term profit, and embracing best practices this industry will continue to grow and mature for years to come.

By: Erik Holvik, Associate Director of Business Development at EnergySage

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