What Happens to Solar Panels When Companies Go Bankrupt

In 2022, Christine Palmer and her husband decided to invest in solar panels after a door-to-door salesman convinced them of the cost savings. However, two years later, the panels remain inactive, and the installing company, Titan Solar, has abruptly shut down, leaving Palmer with a useless solar array on her roof.

Even if Palmer could find someone to fix the panels, Titan installed them in a way that violates the inspection standards in her town of Lindenhurst, Illinois. This means that a complete reinstallation would be necessary before the panels could be operational. Meanwhile, GoodLeap, the company that provided the loan for the panels, continues to aggressively pursue payment. Titan was supposed to attempt a repair on a Friday, but Palmer learned of their closure on Thursday night via Facebook. Her emails to representatives bounced back as undeliverable. “Our system has not worked for one hour,” she says, “and there is absolutely no protection for us.”

Titan’s closure on June 13 marked the largest solar installer shutdown, according to research firm Wood Mackenzie. However, customers like Palmer are not alone in their predicament. Thousands of customers from Pink Energy faced a similar situation when the company filed for bankruptcy in October 2022. This year, numerous other solar firms have also failed, including Infinity Energy, Solcius, and Kayo Energy.

“We essentially have a $70,000 roof ornament at this point,” says Jasmine Hendrickson, whose system installed by Pink Energy just a week before the company’s closure, has not passed inspection and is not connected to the electrical grid.

While the vast majority of residential solar systems function properly, even a one percent failure rate among the 4.5 million households with solar would result in 45,000 dissatisfied customers. Due to the largely unregulated solar industry, there are few safeguards for homeowners. In most states, anyone can approach you and attempt to sell solar panels, even without actually working for a solar company. (Solar companies outsource sales to entities known as dealer networks, which are essentially sales outlets.) These salespeople may promise a lack of electric bills, government tax incentives, and financial savings through solar, but by the time the panels are installed, the salesperson might have disappeared, and the installing company could be on the verge of failure.

Installers on the verge of collapse often resort to substandard work, according to Ara Agopian, CEO and founder of SolarInsure, which manages and insures solar systems, including around 10,000 “abandoned” systems due to installer closures. “The workmanship is not great when a company is about to fail,” he says.

Furthermore, some solar companies offered warranties for solar panels, guaranteeing repairs for up to 25 years, but did not set aside funds to fulfill these warranties and repair non-functioning systems, says Agopian. This means they are unable to fix the panels, and the cost of maintaining these systems pushes them towards bankruptcy.

Analysts anticipate even more solar bankruptcies this year, driven by high interest rates and changing policies regarding compensation for solar power, leading to decreased consumer enthusiasm. Wood Mackenzie projects a 14% decline in residential installations this year.

Even if the bankruptcy rate slows, some industry experts believe a significant number of homeowners will be stuck with solar panels on their roofs. When customers sign a solar lease or power purchase agreement (PPA), the solar company agrees to cover panel removal at the end of the lease, typically after 20 years. However, large companies like SunRun assume that 90% of customers will renew their agreements and retain their panels, according to research firm Muddy Waters. (Muddy Waters is shorting, or betting against, SunRun’s stock.)

Muddy Waters argues that this promise is unrealistic, as by the end of 20 years, most homeowners will need roof replacements, and the solar panel technology will be obsolete. They estimate that SunRun will incur $668 million in system removal costs at the end of leases and PPAs, and that the company has not allocated funds for this. (In a response to Muddy Waters, SunRun maintains that their “assumptions, estimates, and disclosure are market-appropriate.”)

The notion that large companies are not factoring in the cost of panel removal is plausible, according to Pol Lezcano, senior associate at BloombergNEF. Big companies use their cash “to originate and sell new systems,” he says. “I doubt they are planning to have cash aside to remove panels when contracts expire.”

Some homeowners have attempted to handle repairs and removal themselves, including Johann Bowman. His 83-year-old uncle purchased $110,000 worth of solar panels from Pink Energy in 2021, but a faulty component in the installation led to a non-functional system. Bowman began contacting electricians and solar companies to find someone to fix it.

The first three companies refused to touch the system due to Pink Energy’s involvement, he says. The fourth company quoted $50,000 for the repair, which Bowman deemed excessive. “He told me, ‘Without me, you’re dead in the water,'” Bowman says. He eventually contacted a fifth company, which managed to get the system operational for $2,500. However, it still does not generate the output promised by the salesman to his uncle. His uncle’s house, Bowman notes, is heavily shaded by trees, and the salesman should never have signed up the house for solar in the first place.