One of the largest residential solar installers in the United States, SunPower, announced in a letter to dealers last week that it will no longer support new leases or purchase agreements, nor will it support new installations, which means it is essentially no longer accepting new customers. The company's stock price plummeted by about 75% last week, marking the worst-performing week on record. This week, the stock price rebounded slightly, closing at $0.94 per share on Tuesday local time, but it could still trigger the Nasdaq "one-dollar delisting" mechanism. Currently, analysts from research firm GLJ Research and Mizuho Securities have both downgraded their ratings to "sell," with target prices of $0 and $0.5, respectively.

Miao Zhongquan, a senior researcher at the State Grid Energy Research Institute's Energy Internet Research Institute, told First Financial Daily that SunPower's business stagnation will directly affect major manufacturers in its supply chain, especially equipment manufacturers, and it is not ruled out that the latter may go bankrupt as a result.

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SunPower has also invested in several solar energy companies, among which Renova Energy stated in a letter to customers last week that, affected by this matter, the company will temporarily halt all operations in California and Arizona.

Roth Capital in the United States said that SunPower's predicament may benefit other large solar companies such as SunRun and Sunnova, but it may also further shake up the residential solar market. After all, if the company goes bankrupt, its financial situation will be subject to rigorous scrutiny. Other sources said that if lenders review SunPower's financial situation and determine that the business model of the industry has collapsed, it is likely to affect the loans of other companies in the industry.

Miao Zhongquan stated: "The plummeting stock price of SunPower is not just a problem with the company itself; it actually reflects a certain inevitability in the development of the U.S. photovoltaic industry."

The Fed's fault?

SunPower, established in 1985, is one of the oldest solar panel installation companies in the United States. However, in recent months, bad news about the company's operations has been continuous.

In December last year, SunPower was suspected of breaching credit agreements for failing to provide its third-quarter results on time. In February of this year, the company was warned by Nasdaq for failing to complete its quarterly financial report on schedule. In April, the company stated that it needed to restate its financial performance for nearly two years, and subsequently replaced its CEO and COO. Documents from the U.S. Securities and Exchange Commission (SEC) in July showed that the company is facing an SEC investigation.

In fact, it's not just SunPower; since last year, U.S. solar energy companies that were once advancing rapidly under the Biden administration's incentive measures have experienced a wave of bankruptcies.Ros Securities stated that by the end of 2023 alone, over 100 residential solar dealers and installers in the United States declared bankruptcy, which is six times the total of the previous three years. The agency anticipates that at least another 100 related companies will go under.

New energy finance analyst Pol Lezcano said: "Solar companies have invested heavily in operational costs such as sales and marketing, making solar panels more expensive for homeowners. As interest rates rise and states change the compensation formula for homeowners selling power back to the grid, customers are buying fewer solar systems."

The cost of purchasing and installing residential solar systems in the United States is not low. According to Forbes, the average cost of installing a 6kW solar system in the United States is $18,604 (approximately 135,000 RMB). Despite a 30% tax credit, most homeowners need about 8.5 years to recoup their costs.

The U.S. residential solar industry is heavily reliant on borrowing: most households opt for loans, leases, or power purchase agreements to reduce upfront costs, while solar companies, unable to quickly recoup their investments, depend on borrowing to cover the costs of installing and maintaining systems. The Federal Reserve's prolonged high interest rates have led to increased borrowing costs, diminishing the appeal of installing solar to save on electricity costs for users and causing cash flow issues for solar companies.

Policy changes are also one of the main reasons for the bankruptcy of many U.S. photovoltaic companies. Take California, home to the largest solar market and SunPower's headquarters, as an example. In April 2023, the state introduced the Net Energy Metering (NEM) 3.0 policy, which significantly reduced the compensation for homes and businesses selling excess solar power back to the grid, extended the payback period for solar investments, and dampened the enthusiasm for purchases.

A report released in June this year by the Solar Energy Industries Association (SEIA) and research firm Wood Mackenzie also showed that in the first quarter of 2024, the United States added 11.8 GW of solar capacity, accounting for 75% of the new generation capacity added to the U.S. grid. However, this growth was mainly driven by utility-scale demand, with residential solar capacity additions shrinking by 25% year-on-year.

Miao Zhongquan stated: "The development of the U.S. photovoltaic industry in recent years is the result of strong policy incentives. In terms of the solar industry itself, the United States does not have a significant comparative advantage globally, whether in terms of equipment manufacturing or grid-connected power generation."

New Variables

The upcoming U.S. elections also bring new variables to the development of clean energy in the United States.

The Biden administration has been vigorously promoting the development of clean energy, including rejoining the Paris Agreement, introducing the Inflation Reduction Act and the Bipartisan Infrastructure Law, which involve multiple aspects of climate change and clean energy, and passing the largest climate investment in U.S. history, amounting to $369 billion.Former U.S. President and Republican presidential candidate Donald Trump's stance on climate change and clean energy can be said to be vastly different from the current administration. Trump, who once called climate change a "hoax," withdrew the United States from the Paris Agreement during his first term, encouraged the development of fossil fuels, and repealed some carbon reduction policy bills.

Miao Zhongquan stated: "If Trump takes office, it is clear that the Biden administration's substantial stimulus investments in new American energy, especially in the fields of wind and photovoltaic energy, will definitely need to be adjusted, and there may even be reductions or cessation of funding for cutting-edge research projects in the field of wind and photovoltaic new energy. Administrative restrictions on the development of oil wells and natural gas will definitely be lifted."

At the end of June, a spokesperson for Trump's campaign team revealed to the media that if Trump wins the presidential election again in November, he will withdraw the United States from the Paris Climate Agreement for the second time. On July 18, at the Republican National Convention, where he accepted the presidential nomination, Trump stated his energy policy by saying: "I will immediately end the destructive inflation crisis, lower interest rates, and energy costs. We will drill, baby, drill!"

Previously, Trump had indicated that if elected, he would "on the first day" halt offshore wind energy projects, end the "electric vehicle mandate," and issue a presidential order to prohibit ESG investments.