In the last seven years, 615 solar companies have gone into liquidation. An even scarier statistic is 105; the number of solar companies that went into liquidation in 2018 alone. Sure, these figures are frightening. But for the hundreds of thousands of customers with no warranty, broken installations and no support, it’s a nightmare. So, why are so many solar companies going broke?
1. Lowering prices to win clients
The race to the bottom seems to get worse every year.
Many companies are bidding for work at a loss just so they can pay their staff and other overheads.
Rather than delivering quality, their focus has been volume of jobs, which has led to some of Australia’s largest installation companies going under in the past three months, including Energy Matters and True Value Solar. This means, when companies go into liquidation, their clients are often left with no warranties or support.
The other major trap is winning the bulk of work through tenders and request for proposals (RFPs), where an inevitable reverse auction leads to losses being made by the “winning” solar company.
2. Relying on Government handouts
The Government’s stance on renewables and government funding programs appears to change direction on a weekly basis.
Setting up a solar company that relies on premium feed-in tariffs, upfront rebates, and battery storage grants are very dangerous because when the legislation inevitably changes, the business model often falls apart.
3. Singular business model
A good financial adviser would encourage their clients to diversify their investments so that if one investment class drops then the majority of the portfolio may still grow.
The problem with solar companies is they put ‘all their eggs in one basket’, and when the solar industry sees a downturn or if power prices drop, the entire business could get dragged down in a very short period of time.
Without having complementary services that can sustain a company through a downturn in solar sales, it’s very unlikely the solar business will be around in the medium to long term.
For many solar companies, their key point of difference is that they sell “XX Panels with YY inverters”. In reality, the equipment is largely the same. So if every solar company installs “XX Panels with YY inverters”, then the next logical question is, “What price can you do for XX Panels with YY Inverters?”
Potential clients are seeking a lot more than just product specs for their purchasing decision, and yet most solar companies have no idea what these factors are.