Bankruptcies and closures rock residential solar in last year

In an era of unprecedented federal support for U.S. solar installation, the residential PV market has encountered economic hardships and policy roadblocks resulting in a rash of closures among contractors. Commercial solar warranter SolarInsure reported that there were more than 100 bankruptcies and closures in 2023 alone, including several large installers that were operating nationally or in multiple states.

While large-scale solar is carrying the country to another record-breaking year for overall installation, the residential market is struggling to stay afloat. Smaller contractors are navigating higher interest rates for project financing, soft costs for projects are mounting and a utility policy shift in California, the country’s leading solar state, is devastating its once thriving residential market.

Fresno-based solar installer Energy Concepts

The California Solar & Storage Association (CALSSA) reported that California has lost 17,000 solar jobs since April 2023, when the California Public Utilities Commission (CPUC) implemented updates to its net-metering policy. Policymakers said NEM 3.0 was devised to encourage more energy storage adoption on solar projects to provide more resilience to California’s electrical grid. Instead, it has reworked its net-metering system based on an hour-by-hour time-of-use rate that has cut energy export compensation by 70 to 80%.

The state was expected to lose 22% of its solar workforce by the end of 2023 because of it.

“I don’t even recognize my home state,” said Bernadette del Chiaro, executive director of CALSSA. “This is not California. This is not who we are. This is not how we have traditionally done things for 20 years. We have been, really, the prime example of how to do policy well, how to make long-term investments that provide certainty for industry and consumers alike.”

Industry analyst Wood Mackenzie predicted in January 2022 that the NEM 3.0 updates could cut California’s residential solar market in half by 2024. CALSSA advocated against the net-metering shift, predicting a similar outcome for the California market. Now, its residential installers are considering their options as this new net-metering regime reduces the number of homeowners able to afford a solar project.

“There’s always cycles, there’s always hurdles and curves down the road, but nothing like this. Nothing. This is a brick wall that got put in front of us,” said Carlos Beccar, marketing director of Energy Concepts, a residential solar installer in Fresno.

Energy Concepts has installed solar technologies since its founding in 1992, starting with thermal solar water heaters and transitioning to PV 15 years ago. In 2023, the company laid off 50% of its employees, citing NEM 3.0 as the primary cause. Energy Concepts’ installation numbers have reduced to about 25% of where it was in 2022, and that includes some of the projects the company sold as customers rushed to be included in NEM 2.0.

“2024 is starting to look very grim in terms of projections … We think that the industry is going to probably pick back up a little bit. But it’s hard to say,” Beccar said. “I don’t think the rebound is going to bring us anywhere near where we were last year or this year [2023], even.”

CALSSA surveyed its residential installer members and found that the companies staying in business have diversified and leaned on other internal services like roofing, mostly ceasing solar installation. Other contractors are leaving California entirely for states with friendlier solar policy. Energy Concepts is now bidding on projects left behind by contractors that have fled the state.

These company closures will also result in orphaned solar systems for customers. Fulfilling warranties and performing maintenance on abandoned solar arrays is an existing and complicated issue within the industry that could increase as more contractors close their doors.

“We’ve seen this happen before, but never at the scale that we’re about to see,” del Chiaro said. “It’s a huge problem. Hopefully their systems are interconnected and energized and nothing goes wrong, and if something does go wrong, the manufacturer steps in and honors the warranty. But there are going to be a lot of customers that are left hanging because their project never got built, or they’re going to struggle if something goes wrong.”

Since California was a trailblazing state for solar installation, it has been a testbed for renewable energy policies, and del Chiaro said legislators in other states are already citing NEM 3.0 as rationale for limiting net metering.

“For them to use this excuse, this moment, to get rid of their net-metering policy is just ridiculous, but it’s also unfortunately something that we also warned California lawmakers about — not that they should make California policy decisions with other states in mind, but that they need to be aware that their leadership works both ways,” del Chiaro said.

This past summer, the compensation rate for net metering in Indiana dropped by 70%, phasing out from a policy passed in 2017, according to The Herald Bulletin. Southeast utility Duke Energy is implementing a net-metering plan with similar language to NEM 3.0 in North Carolina, compensating commercial customers for the “value of electricity at that time,” according to NPR station WFAE 90.7.

But the net-metering saga in California continues. The CPUC passed a policy in November that will change how properties with multiple electric meters are compensated for energy exports. Solar built on schools, apartment buildings and other multi-metered properties will no longer directly offset utility bills. Instead that energy will be sold to utilities at lower rates, according to a CALSSA press release.

“It’s incredibly ironic as California policymakers travel the globe, touting California’s climate leadership, that we’re in such dark times in California — the hotbed of solar,” del Chiaro said. “We’re in these incredibly dark times and the damage is starting to spread across the country.”

This story is part of SPW’s 2024 Trends in Solar. Read all of this year’s trends here.