One of the largest residential solar installers in the U.S. appears to be on the cusp of failing, the latest sign of the troubled industry’s struggles.
SunPower, which is backed by French oil conglomerate TotalEnergies, said on July 17 that it would no longer be supporting new leases or power purchase agreements, which means it is essentially not acquiring any new customers. The company also said in a letter to dealers who sell its systems that it could not support installation of panels that had been delivered but not yet installed.
“This is a meaningful, incremental negative for the company,” Philip Shen, managing director at Roth MKM, wrote in a note to clients.
The company’s announcement follows months of turmoil. Last December, SunPower said it might not be able to continue as a going concern because it breached a key term in a credit agreement. The company then said in February that it needed additional time to complete its quarterly financial statement; the Nasdaq later informed SunPower it was out of compliance for not filing its forms in a timely fashion. SunPower also acknowledged that past financial reports “should no longer be relied upon” because of accounting errors. On July 3, SunPower reported that Ernst and Young, its independent accounting firm, had resigned on June 27. Later filings indicated a disagreement between the two companies over an audit.
The company’s shares were trading at 72 cents on Monday, down 98% from their peak in 2021.
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SunPower is one of the top five or 10 residential solar installers in the nation, according to Pol Lezcano, an analyst at BloombergNEF. Its struggles also highlight why the residential solar industry is struggling in the U.S., Lezcano says. Solar companies are spending huge amounts of money on overhead, including sales and marketing, which makes panels more expensive for homeowners. As interest rates rise and states change compensation formulas for what homeowners can make selling power back to the grid, customers aren’t buying as many solar systems.
SunPower’s business sheet reflects those challenges. The company made $14.8 million in 2019; it lost $200 million in 2023 as its operating expenses doubled, Lezcano says.
In the meantime, solar salespeople have been overcharging for systems and keeping the difference, says Walid Halty, a former solar salesperson who now runs a company, Monalee, designed to sell solar without salespeople. It’s one reason systems can be overpriced, Halty says, offering less of an inducement for potential customers to save much money by switching to solar.
“You could sell it for as high as the homeowner would say yes to,” Halty says of his days in the solar industry. “It’s almost as if you get a $20,000 car and the dealership can sell it at $40,000 if they want.”
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Another source of SunPower’s troubles: Solar companies rely heavily on borrowing to stay afloat. That’s because many solar companies offer lease products that allow consumers to put little money down up front. To pay for the cost of installing those systems and maintaining them, solar companies need to borrow cash.
But SunPower’s financial disarray likely made it difficult for the company to find lenders, Lezcano says. “The fact that they have not been able to have financial audits and verified financial information,” he says, “has made it impossible for them to raise financing in the capital markets.”
Roth, of MKM, sees SunPower’s struggles as a potential positive for other big solar companies like SunRun and Sunnova. But there’s also a chance that SunPower’s troubles could further shake the residential solar market. If it falls into bankruptcy, its financials will be closely examined. And lenders who look at SunPower’s books and determine the industry’s business model is broken may be hesitant to lend to other companies in the field, according to an industry insider not permitted to speak publicly on the matter.
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Homeowners with SunPower systems already installed will not immediately be affected by the recent news, Lezcano says. If the company goes bankrupt, other companies could take over management of owners’ systems. But in some cases in which solar companies have gone bankrupt, consumers are still waiting, sometimes with broken systems, to find out what comes next.