The residential solar industry is often referred to in the United States as the “solar coaster,” as it has gone through peaks and troughs of customer demand, business profitability, and investment.
SunPower, one of the largest and oldest solar companies in the United States, has taken its last dip after announcing bankruptcy and delisting from the Nasdaq Stock Exchange. Once valued as being worth billions of dollars, SunPower’s stock fell more than 99% from its all-time high valuation, in 2007.
The company provided homeowners with rooftop solar, energy storage, and electric vehicle (EV) charging. It operated a dealer network in which small businesses could operate as sales agencies while SunPower handled installations, or could be installer-dealers with SunPower providing equipment procurement services. For many years the company was also a leading solar cell and module manufacturer and it was active in the large-scale project segment. The production business was spun out to form separate company Maxeon in 2020. On Aug. 12, 2024, SunPower said that it would be delisted as a publicly traded company.
Industry troubles
US residential solar had its strongest years during the Covid-19 pandemic, capping a broader trend of homeowners making improvements to their properties. Then, as post-pandemic inflation set in, the federal borrowing rate was raised and, along with it, loan terms increased, making it more expensive for homeowners to invest in solar. With a more expensive solar array, tightened budgets at home, and a prolonged return on investment, homeowners began to balk at the financial prospects of solar.
That loss of value was worsened when, in late 2022, the California Public Utilities Commission approved its Net Energy Metering 3.0 (NEM 3.0) regime. The new regulatory scheme cut the rate utilities are required to pay to solar customers for electricity they export to the grid, by 80%.
The switch to NEM 3.0 led to a temporary boom among customers looking to secure legacy NEM 2.0 rates, and then a bust in California. “With loans expensive and incentives removed, Californian residential PV has been devastated,” wrote pv magazine Editor Tristan Rayner at the time. “By late 2023, rooftop solar installations had fallen 80%, driving more than 17,000 layoffs – 22% of the industry.”
California represents about half the US residential solar market, so the hit to businesses with a strong presence in the state, including SunPower, was deeply felt. Solar installers in California are still adjusting to NEM 3.0, which now makes battery energy storage an essential part of any solar project to capture bill savings value for customers. Although the inclusion of a battery increases the sticker price of home solar, it adds benefits such as backup power. Solar installers with a strong focus on their battery offering are expected to fare better than those without.
SunPower’s struggles
For SunPower, problems began to mount about a year after the passage of NEM 3.0, as the regime’s negative effect on demand became clearer and “higher-for-longer” interest rates became a reality.
In December 2023, the company released a letter warning investors that the business was struggling to remain viable. The stock price fell 40% during December 2023.
The fear was sparked by a technical default on debts owed by the company. In October 2023, SunPower announced it would restate its third-quarter financial results due to an inventory reporting error related to one of its subsidiaries. Being late with financial reporting placed SunPower in breach of the key terms of several of its credit agreements, leaving the company exposed to lender demands for immediate repayment.
SunPower stated that the breach of credit terms could lead to lenders demanding immediate repayment of more than $65 million of debt, causing the company to express doubts about its ability to keep operations running. SunPower said it was trying to secure a waiver with its lenders and, without one, it could lack funds to support day-to-day operations.
On Dec. 8, 2023, the company received a waiver that saved it from technical default and provided access to $75 million in funding. SunPower was given until January 19, 2024 to shore up its finances or to secure another waiver for the $65 million debt it would otherwise have been obligated to repay.
At the time, an analyst told Reuters that the company stood a good chance of securing a waiver as its problems essentially resulted from a technical issue. Roth Capital Partners warned, however, that if SunPower failed to secure a waiver it could face a “cascade” of cash flow challenges, leading to constraints for its dealers.
SunPower – Maxeon
Cash flow
Not long after the warnings were issued about cash flow in US residential solar, negative headlines began appearing.
In February 2024, publicly traded installer Sunworks filed for bankruptcy following a 29.5% decline in quarterly revenues, year on year, for the third quarter of 2023, led by a 44.5% decline in residential PV business. That came after major installer Sunrun had posted a loss of more than $1 billion in the previous quarter.
In April 2024, SunPower announced it would close several business units and cut 1,000 jobs – just over a quarter of its workforce. The company announced plans to wind down its residential solar installation locations and the closure of its direct sales unit. “While we worked hard to avoid this outcome, the market has been slower to recover than we initially expected,” said Tom Werner, principal executive officer. The company said it would still operate its new homes business division.
Further struggles
In June 2024, another major US installer, Titan Solar, said it would close its doors. Founded in 2013 in Arizona, the company was among the largest residential solar installers in the nation, with tens of thousands of installations across 16 states.
Titan Solar had grown quickly through its Solar Dealer program, a network of partnerships with sales organizations that sold Titan services while the company focused on installation. The partnership was based on a pricing model in which Titan charged a fee for completing projects and dealers retained the balance as sales commission.
“Despite these achievements, the company faced criticism over its business practices, workmanship, and customer service, leading to numerous negative reviews and legal disputes,” said Ara Agopian, CEO at residential solar insurance provider Solar Insure. The insurance business said a reliance on third-party dealers for sales created a layer of separation between Titan and its customers, leading to communication gaps and an inconsistent service experience.
Solar Insure said that while Titan’s dealer-network business model was lucrative, it proved to be a double-edged sword. The sales organization dealers’ primary motivation was to maximize their commissions, said Solar Insure, which sometimes led to aggressive sales tactics and overselling of systems without adequate consideration of customer needs.
“This disconnect between sales promises and installation realities further strained Titan’s resources and customer relations,” said Agopian. “As economic conditions tightened and borrowing costs increased, the financial pressure on both Titan and its dealers intensified, exacerbating cash flow issues and operational inefficiencies.”
Final days
By July 2024, SunPower’s share price had suffered a 70% decline as it became clear the business was unlikely to survive. At that time, the company said it would stop countersigning new agreements and would be unable to support installation services for shipments that were in transit or had already been delivered.
On Aug. 6, 2024, the company officially declared bankruptcy. “SunPower has faced a severe liquidity crisis caused by a sharp decline in demand in the solar market and SunPower’s inability to obtain new capital,” said Matthew Henry, SunPower’s chief transformation officer.
The company said it would sell its assets, including installation company Blue Raven Solar and its new homes unit, to Complete Solaria for $45 million. SunPower requested courts approve that deal by late September 2024.
“SunPower’s travails are emphatically a company-specific issue and should not be seen as a comment on the underlying demand for US residential solar,” said Pavel Molchanov, an analyst with financial services provider Raymond James.
Ohm Analytics reports that, industry-wide, the US residential solar market is about 20% down in 2024. For 2025 and 2026, Ohm has forecast modest 5% to 10% growth in the industry, suggesting that US home solar may have already hit the bottom of the most recent dip on the solar coaster.
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