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Concerns raised over stability of solar industry in California

Posted at 11:02 AM, Apr 07, 2022

SAN DIEGO (KGTV) -- Rooftop solar panel installations are surging across San Diego County, but despite the demand, the collapse of two major solar companies is causing some consumers to question the stability of the industry.

“I’m looking at 20 (solar) panels on the back of the roof,” said San Diego resident Eric Willis.

For Willis, installing solar panels on his home just made sense.

"In sunny San Diego, it seems like the right thing to do,” he said.

So, back in 2019, after seeing an advertisement, he called the national solar company Petersen-Dean.

Willis said members of the team came out and checked the attic, the roof, and the electrical box. He said the electrical box did need an upgrade.

"Once we got the proposal, we had to put X number of dollars down for them to get started," said Willis, who explained that he put the costs on his credit card and then crews got started with the electrical panel.

"Literally days after the box was inspected, the company went Chapter 11,” he said.

In June 2020, Petersen-Dean filed for bankruptcy. Court documents showed the company estimated its liabilities were between $10 million and $50 million.

Willis said he paid $20,000 to Petersen-Dean.

“That's a lot of money,” he added.

At the end of 2021, San Diego-based Sullivan Solar closed leaving many customers with no money and no solar.

“I'm really disappointed,” homeowner Kevin Hanks told ABC 10News in October 2021. “I paid the $45,000 for the roof. Sullivan didn't pay for the roof to the roofer, and now I have to pay $45,000 again.”

The Solar Industry in California

Sullivan and Petersen-Dean, two major solar companies, shut down in less than two years. With rising costs for products and transportation, along with supply chain issues, ABC 10News wanted to know why.

"Closures are rare,” said Bernadette Del Chiaro, executive director of the California Solar and Storage Association. “There are over 2,000 contractors in the state of California to install solar. So, we mourn the loss of any one of them, but it is rare. That said the competition is fierce and the margins are thin."

Del Chiaro said the association represents close to 1,000 residential solar companies across the state. She said the majority are small businesses that are facing increased costs, red tape, and a constant threat of changing regulations.

"It's a bit of a tale of two cities in a way,” she said. “We are seeing increased interest in solar, but we are also seeing increased pressures and challenges to run and operate a business in the state. This is everywhere from just more hassles of red tape to permitting, to dealing with the utility to interconnect people’s systems as well as a lot of pressure to change important policies like net metering. This can lead to a lot of problems for small businesses."

Del Chiaro said competition works to the consumer's benefit, most of the time. There are more than 60,000 people that work in the solar industry.

“One-point-four million consumers have gone solar in California, and so it is by and large an incredible and safe investment,” Del Chiaro said.

Solar across the country

That matches a recent study from the Solar Energy Industries Association and consulting firm Wood Mackenzie.

"2021 was another record-breaking year for the solar industry,” said Michelle Davis, principal analyst at Wood Mackenzie. “We predicted that was going to be the case and continue to have record-breaking years in the solar industry going forward.”

The report found that in 2021, across the country, the residential market saw 30 percent growth with more than half a million homeowners installing solar.

However, the report says supply chain constraints will have a major impact on overall installations this year.

“Installations in 2021, meaning actual capacity that became operational, was a lot less than the industry was expecting,” Davis said. “In the last six to 12 months, supply chain constraints and delays with things like getting equipment on time or being able to purchase equipment isn’t always available when developers expected it to be … has been quite a challenge. The number of projects, particularly in the utility segment have either been delayed into subsequent quarters or have been canceled outright. In addition to that, there were a number of policy and trade-related issues that cause a lot of uncertainty in the industry. If there’s anything that’s problematic in an industry, it’s when conditions are just uncertain.”

Protections in California

In the event of problems, California created the Solar Energy System Recovery Program in 2021.

It's designed to get money to homeowners who paid for solar but it was never installed, there was poor workmanship or fraud or they're out money because of a contractor's actions.

According to the Contractors State License Board: “AB 137 established the Solar Energy System Recovery Program, a $5-million appropriation to CSLB from the state’s General Fund. Of those funds, $4 million is available for restitution and, if needed, up to $1 million is allocated to pay for CSLB administrative costs. Any homeowner who used a licensed or unlicensed contractor after Jan. 1, 2016, to contract for the installation of a solar energy system on a single-family residence who can demonstrate to CSLB a financial loss or injury as a result of specified acts may be eligible for restitution from the fund.”

According to the state, 75 claims have been received as of March 2022. Of those, 12 claims have been approved for more than $190,000 total and are being submitted to the state Department of Consumer Affairs for check issuance. Most of the pending claims are waiting for additional supporting evidence, such as a CSLB-paid industry expert inspection to establish the value of work performed and/or the cost to perform correction and complete work.

The state says they currently have received 29 Sullivan Solar claims and paid about $187,000 to Sullivan Solar claimants.

"There are sometimes folks where there's errors or sometimes when folks go out of business,” said California State Sen. Monique Limon. “It's not always fraudulent issues, it's just folks go out of business that's what happens in the corporate business world. We want to make sure though that those consumers are not left to foot an entire cost."

Limon is the lawmaker behind Senate Bill 757, which adds consumer protections within the industry. She said the goal was to try and remedy challenges seen across the state.

"I think when people see that $190,000 has gone to help consumers, I definitely think that's a plus, but you know it's a hard one because you also don't want to see a huge number because that means there are more individuals that need help. we really want to make solar work the right way possible,” Limon said.

Additional Help Available

If consumers have exhausted different avenues to continue the project or don’t qualify for funds, there are other options.

Depending on the industry, consumers can have recourse under the law.

“Industries are regulated by state agencies and those agencies can require that business to have insurance or a bond in some instances and that information has to be on file to have a license for the company,” said the University of San Diego School of Law professor Joe Villasenor.

He said consumers can try to get recourse against the insurance or the bond company.

In the case of workmanship and warranties, Villasenor said there are avenues beyond the initial company: “This is another one where it kind of depends on the warranty agreement itself. You know there’s a labor component that’s covered and sometimes there’s the actual parts that have been manufactured by another entity that’s covered. So, if it’s a situation where a part needs to be replaced, that might be honored by the manufacturer component of the warranty. So it’s still possible to get that portion covered even though the business that did the installation is no longer in business. It’s also possible that the manufacturer may want to assist the customer in getting an affiliate to complete the work and to bring the product up to the warranty.”

The state Contractors State Licensing Board says before starting a project consumers should get at least three contractor bids and references, and check out, in person, each prospective contractor’s recent similar projects. They should also, ask whether your contractor carries general liability insurance for employees in case accidental damage occurs during the project, and workers’ compensation insurance for employees and pay no more than 10% down or $1,000, whichever is less, among other things.