This blog is written in response to an article written by Alison Potter on behalf of Choice Magazine – February 2019 edition.
“Thousands of solar systems in Australia have been ‘orphaned’ by solar companies that have shut shop” reports Alison Potter.
It has been estimated that there are 600,000 orphaned solar systems in Australia. Out of approximately 1.9 million systems installed, the number of orphaned solar systems represents approximately 31% of all systems. That figure is HUGE and it needs to serve as a BIG wake up call for consumers. For me, that figure makes perfect sense because I understand the business model of most of these ‘pop up’ online National solar companies.
These National solar companies that sell solar systems on slim single figure margins (ref the 24 panel $4,400 & under deals you see on TV, in the paper and online) have NO intention of being around to warrant and service your solar system in the long terms. Their business model is RETAIL only. Their business model is about offloading as many solar systems as they can in as short a period as possible. Low margin > High turnover. As was evident by the recent liquidation of Euro Solar. (see my article on fake reviews) Companies like this that sell tens of thousands of systems have a very simple business model. When the going gets tough – they liquidate!
There is no consequence for doing this in Australia and it actually offers a great solution for these savvy companies. You see, companies like Euro-Solar (and there are dozens that have since filled its shoes – including a phoenix operation of Euro-Solar) can make exorbitant promises on warranties which are only enforceable by the ACCC while the company is in operation. When a company liquidates, warranty promises mean nothing. There is literally nowhere for the consumer to go to enforce a workmanship warranty claim. A liquidated company wipes clean any liability exposure they have.
I would say (and this is purely a guess) that 3/4 qtrs of these 600,000 orphaned systems are linked to companies like Euro-Solar that deliberately liquidated.
The margin a solar company makes on the sale of a solar system must include the cost incurred of honouring your warranty obligations. The longer the stated ‘workmanship’ warranty the higher the proportion of margin attributed to this cost, and make no mistake – the cost can be significant. Companies like us who are accredited as ‘An Approved Solar Retailer‘ offer an ‘all of system’ 5-year warranty. That warranty includes the full operation of the solar system, all the workmanship provided and all the products supplied. We have to honour that warranty even if the supplier of the parts/components used is no longer trading and we cannot ourselves makes a warranty claim! A company that does not factor in the cost of providing free call outs for a period of 60 months either has no idea how to run a business or deliberately does not factor in the warranty service cost.
It is estimated that the GPM on these sub $4000 systems (24 panel) is under 10% – even when factoring in their cheaper products and that these companies buy directly from overseas (see my article on warranty risk) and assuming an estimated $400-500 profit per sale, just two call-outs over 5 years might soak up all this profit!
Make no mistake, the 600,000 solar systems that are currently orphaned will more than double within a couple of years. Anyone who is buying a cheap solar system from one of these National ‘pop up’ solar companies are effectively buying a solar system with no warranty. You may like your chances at playing Russian roulette, and hope that your solar system has no issues over the next 5-10 years – but the reality is that you live in Australia, and Australia has extreme weather and very hot temperatures. Electronics and high temps don’t usually like to mix, nor does electronics and water. Severe weather, storms, power surges – you name it, can knock your solar system offline. Just ask any solar electrician who has been in the industry for over 5 years. Problems can occur and if they do – you want to know that you can call on the retailer who sold you your system to inspect your solar system under the workmanship warranty promised.
There are very simple steps that you can take to reduce your risk.
- Buy local. If you buy local then you are trading with a company (hopefully) where you can pop down and see their operation. If you buy online, well you could be dealing with someone sitting in their underpants on a home computer! You need to know that the company that you are buying from is a well-established bricks and mortar business operation.
- Check out the company ABN or business name > click here, and see how long they have been in business or if there are any insolvency notices
- Look for reviews, articles or comments online. Google Reviews are the best (less likely to be fake) – see my article here.
- Make sure that any quote you get, includes a set of company terms and conditions.
- Make sure that you can cancel your contract (before installation) with a full refund.
- Make sure that the company that sells you the product buys the product here in Australia from an official distributor. I wrote an article on this click here. That way, if the solar company goes into liquidation, you will still be covered by the product warranty. Ask for proof
- Choose a company that does not sub-contract out the installation. In-house electricians will be more accountable for their workmanship and your solar system will be installed to a higher & safer standard.
- Choose a company that only operates in a fixed location. Think about it, would you buy a new air conditioner unit from a company 500km away? – would you get a refrigeration & AC tradesperson who lives in Brisbane to install your air conditioner in Coffs Harbour?
- Look for a CEC Approved company with a local presence that has been around for a while. See my article here.
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