Breaking: American Solar Direct Files for Bankruptcy

The growth of home solar has been unstoppable in recent years. According to the Solar Energy Industry Association (SEIA), solar sales nearly doubled in 2016, with more than 14 GW installed. For many, the projections for stellar growth in rooftop solar and other sectors of the industry seemed unshakable.

And nothing speaks more to that growth than the cost of home solar installations. In 2016, the cost related to those rooftop gems dropped 29 percent, says SEIA, which notes that a drop in hardware sticker prices helped lead the way to cheaper prices overall.

But while the cost of solar has been plummeting, there have been troubling indications for several years now that the home solar sector may not be as resilient as say, the community sector. Since 2011, more than 100 solar-related companies have shut their doors, either restructuring, selling or going out of business altogether.

Plus, a running list on GreenTechMedia from 2015 indicates that the turnover is by no means limited to solar installers. Parts manufacturers face their own challenges, with falling prices impacting the industry across the board and industry advances making it hard for others to keep up. Consumers however, notice it most when the installer they have contracted with doesn't turn up to finish the installation and won't answer the phone.

Still, it was the most recent spate of failed solar installers that made us ask: Is the problem a vast divide between what companies are promising consumers and what (they find later) it costs to run the business? Is it profit projections vs. profit reality? Or is it an indication that home solar is really unsustainable?

To get a sense of the problem, TriplePundit delved into the history of some of the most recent and largest installers that have called it quits. We bent an ear to what they said when they sent out their press announcements and took a look at what solar analysts feel is really the issue. Lastly, we took a speculative look at one company that earlier this year was struggling, but felt it had "positive momentum" to overcome until it went off the radar altogether.

Calling American Solar Direct

Most of the solar installers that have unfortunately landed on the list of company closures have been forthright, letting their customers know that there would be contract changes on the horizon, whether it meant an outright sale, a bankruptcy or a shifting of corporate priorities.

But according to Mel Burns, executive director of energy concierge services at MyDomino, that's not the case with American Solar Direct, which gained a great reputation after it burst on the scene in 2009 and disappeared earlier this year without a whisper. MyDomino, based in Oakland, networks with consumers to help them with their clean energy concerns.

"In 2014 they were like gangbusters. They were one of the fastest growing solar companies and now, poof! they're gone," said Burns. "They really [went] off of the radar very quickly and without notice."

And it was that lack of head's-up and follow-up that caught the attention of two solar customers, whose well-honed experience in research told them that something was amiss when their new solar installer not only didn't finish the job, but didn't file the paperwork to get paid by the loan company. Paul SanGiorgio is a physicist [his wife, Jen Boynton is the editor-in-chief of TriplePundit.]

"I totally understand if they are going out of business that they don’t really care about my side paneling or fixing the electrical panel," said SanGiorgio, but it just seems totally bizarre that they have shown zero interest in actually getting paid for the work that they did."

According to SanGiorgio, the couple reached out to MyDomino last September when they decided they wanted to install solar panels on their home. At their request, MyDomino sent a list of companies that had been screened and had been operating in the SanGiorgio's geographic area. The SanGiorgio's reviewed the choices and eventually settled on American Solar Direct.
"[American Solar Direct] sent some people out to look at our roof and make sure our roof was OK. They gave us the final OK sometime in October or November. So we signed the contract and they started doing the work."

But the couple soon found that the process wasn't going to be as straight-forward as it looked. SanGiorgio said the construction crew responsible for upgrading the electric box and installing the panels would turn up without the right contractor to do the work, with the wrong equipment, or with no equipment at all. In January, some three months after signing the contract, the installers announced the job was ready to be approved by a local inspector.

That's when the SanGiorgio's discovered that in order to install a new, higher grade electric panel, the installers had torn off some of the siding on their house presumably just before the record winter storms had set in, leaving the insulation exposed to rain and erratic temperatures. According to the city inspector, they had also failed to waterproof one of the electricity boxes, a requirement before the city would agree to OK the work.

SanGiorgio said the representative from American Solar Direct who was present at the inspection promised that if the inspector would sign off on the job, he would run over to Home Depot and buy a tube of calk and "come right back." The inspector accepted the promise and signed off on the new solar panel array.

"And that’s the last time I ever saw anyone from American Solar Direct," said SanGiorgio.

According to both SanGiorgio and Burns, it was also the last time either of them heard from the company.

Burns said her first solid indication that American Solar Direct may have gone under was a phone call from Sighten, a solar quoting platform that is an essential component to large-scale solar installations. Sighten had called to let her know that the company seemed to have disappeared from the network and was no longer using their services.

"That's a telling sign,"  said Burns. "They had been a large-volume player." Burns said it would have been virtually impossible for the company to operate without using the quoting platform.

Since our interviews with SanGiorgio and Burns, TriplePundit has learned that American Solar Direct has filed bankruptcy, adding its name more officially to those companies that couldn't compete with an aggressive market climate. According to its Chapter 7 filing, the company owed between $10 million and $50 million and by the time it called quits on June 2 had less than $60,000 in assets.

That kind of disparity between liabilities and assets is a familiar scene these days that has been played out repeatedly over the home solar landscape, where both new and seasoned solar companies, driven by the demand to corner the market and as Burns puts it, reach "the holy grail of grid parity" compete with unsustainably low prices and promises of record-speed installations.

Home solar: The list may not be finished

The names of failed home solar companies these days read like a who's who of solar fame: Sungevity, Solyndra, SunEdison, Verengo, HelioPower, One Roof and Vivint, some of which were forced into bankruptcy, and some of which had the better fortune to be acquired by hopeful companies, spell a troubling picture for an industry that has garnered the interest of investors and the excitement of homeowners who see affordable payments as a way to beat the increasing costs of the electricity grid.

Comments left on Glassdoor by Sungevity employees are as telling as the reasons that other companies have given for their downfall. According to Sungevity employees, cash management procedures and lack of foresight contributed to why a successful, name-brand solar company ended up being sold off for assets. The same story could be heard from its competitors like mega-giant SunEdison, which later found itself  under investigation for overstating its worth.

But from Burns' point of view the issue is even simpler. It has to do with managing how much you charge against how much you really need to pay your overhead.

"Nine years ago, [the cost of solar] was roughly $8 or $9 a watt," explained Burns, who began made her career in clean energy working for Sungevity when if first launched. Today that cost is around $3 to $4 a watt. "That's a 60 percent drop. That's wonderful.That’s really triggered the solar explosion and made it possible for a lot of people to get solar [for whom] that was never possible before."

Except the overhead hasn't shrunk or kept pace, said Burns. That new, basement floor price must still pay for hard costs -- solar panels, inverters, etc. -- and soft costs -- labor, installation, design and a staggering list of in-house expenditures, government taxes and permits that now all must be met with lower revenue.

"Can a 60 percent drop in price still pay for all those things?," Burns asked.

As far as MyDomino is concerned, Burns said, the closure of American Solar Direct is a wake-up call for an industry that fervently believes in clean energy, but also relies on its partners to be transparent. She said she is taking the time to study and learn as much as she can about what caused American Solar Direct and others to become insolvent.

"I still believe in residential solar," Burns reassured adamantly. "It is still going to do well. It is still going to have great growth. But it is in a period of transition." And that transition may entail a few more years of growing pains.

As to the SanGiorgio's, they are still waiting for American Solar Direct -- or someone in its stead -- to bill their loan company. SanGiorgio said the loan company won't start the payments until they receive a bill from the installer, which so far has been unreachable.

"As far as I can tell, it has basically stopped functioning," said SanGiorgio, who echoed Burns observation that the company's bidding price and lack of operational management may have had a role to play in the company's fate, like so many before it.

"I don’t know why, but they [were] not bidding well and they [were] not organizing their projects well and this is the end result: They are going out of business."

Flickr images: brian kusler; Russell Neches; Wayne National Forest.