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Why so many Solar Companies Are Going Bankrupt

Tesla founder Elon Musk recently unveiled a new system of batteries for businesses and homes that he claims will “fundamentally change the way the world uses energy.” The solar industry of tomorrow has indeed seen a big launch in the 21st Century, and big companies like SolarCity have been paving the way toward a future where the energy of our nearest star can power the many needs of our planet. A lot of companies have jumped on board with great eagerness. However, many of the smaller solar companies have not fared quite as well, have quickly fallen apart, declared corporate bankruptcy, been disbanded or have been overtaken by larger giants.

As 2010 approached, one of the greatest challenges to solar companies was a sharp rise in manufacturing and pricing competition. That hit home strongest with Solyndra, who went bankrupt in 2011 even after striking a $535 million deal with the U.S. government.  Competitors overseas in China had developed manufacturing for a much cheaper rate and effectively killed the ability for American and European companies to affordably stay in the solar panel game. Abound Solar followed down the same road and folded even with its $400 million promise from the federal government.

When the industry damages were totaled, more than 100 European and American solar energy companies had declared bankruptcy from 2009-2014. Tariffs assessed to solar panel imports from China have now made it possible for some companies to bounce back. Nonetheless, the reality is that some solar companies are not seeing enough current payoff in the developing market. For those small businesses, corporate bankruptcy has been the best current solution to cut their losses.

The U.S. Small Business Administration (SBA) notes the importance of choosing the right bankruptcy option for companies like these struggling in the solar industry. Consulting with a lawyer is imperative for any business owner when filing for bankruptcy as the SBA suggests “it can also affect any plans you may have to reorganize or rebuild your business in the future.” For affected solar companies, the bankruptcy routes may include:

Chapter 7 – This is liquidation or the sale of available assets to cover outstanding debts, but has an asset limit.

Chapter 11 – When your business proposes a plan for recovery in the future. This will be the road to reorganization of debts, not a total discharge of debts.

Chapter 13 – Can be used in a sole proprietorship to file a repayment plan of outstanding debts, or for those individuals with too many assets to meet the chapter 7 requirements.

The goal of a clean energy future may actually be served by the failure of many of these solar companies. The solar industry has been flooded with a huge amount of solar panel products, but the demand for that product has not been adopted worldwide yet. And so, for many companies, manufacturing must halt until prices and / or demand increases.  You cannot have a successful small business if you have an oversupply of product with few actually making a purchase. That is the exact recipe for corporate bankruptcy.

The future of clean energy has been an inspiring prospect for many small businesses. The past few years have seen some decline in the number of struggling solar companies. Nonetheless, many are still quite vulnerable and will remain that way until we see a worldwide adoption of the value of keeping our planet clean and green. The Sun is ready to give as much energy as we are ready to harness and deliver, and that will take a focused strategy from every company that wants to survive the financial risk and gain a large piece of this emerging market.

Dheeraj K. Singhal
About the Author
I help people keep the things they want and get rid of the things they don't want. I have been a lawyer for over 12 years and there are few things I enjoy more then getting great results for the people that trust me with their legal problems.