Is big solar in big trouble?

Another day, another big solar company teetering on the edge of bankruptcy.

Sunnova Energy has been in the headlines throughout the first few months of 2025: In February, the company laid off nearly 300 employees. In March, it saw a sharp drop in stock and issued a warning to investors about the uncertain future of its business.

If Sunnova closes its doors, it’ll be the latest in a string of large residential solar companies to do so. The trend started with SolarCity, which announced troubles in 2016 and was acquired by Tesla. In 2022, Pink Energy closed; in 2023, Vision Solar; and in 2024, we saw ADT Solar, Titan Solar Power, and SunPower shutter their operations.

Longtime solar industry veteran Joe Marhamtati—who now co-owns solar software Sunvoy— said he hasn’t been surprised to see any of the national “big box installers” go bankrupt.

“They benefit from a lot of subsidies, and maybe that's one of the reasons that some of these larger publicly-owned companies think that they can go door-to-door, coast-to-coast. But, I don't think that business model is sustainable in the long run, and I think that's proving itself out right now,” Marhamati said. 

Marhamati isn’t the only industry expert unsurprised to see another solar giant announce troubles; we spoke to several analysts, installers, and solar business owners who shared the same sentiment. Now, we’re peeling back the curtain to figure out why.

Pol Lezcano, an analyst at Bloomberg New Energy Finance (NEF), said the major reason for the downfall of big residential solar companies in the U.S. is their fragile business structure.

“These companies have very, very expensive business models, and they’re running very, very thin margins. So, any slowdown in growth or any bad bets, any bad money spent, can essentially be detrimental for the company,” Lezcano said.

Lezcano explained that these large solar companies operate by raising two types of debt: corporate and nonrecourse. Corporate debt—like any other company—is used to fund internal operations. Nonrecourse debt is used when the company works with a third-party lender to borrow money upfront to fund the solar projects it sells to homeowners.

“Nonrecourse debt is always contingent on being deployed or not. So it’s just sitting there, and they can use it to deploy more systems, but it doesn’t affect their company’s solvency at the corporate level,” said Lezcano. “Most of the big solar companies have struggled from not having enough money in their coffers to repay some of their debt at the corporate level.”

To raise money at the corporate level, Lezcano said these companies have to scale into new markets and have a presence in as many states as possible—either with more locations or by partnering with installers who will work under their company name.

“To keep that running, you need a lot of overhead. And more often than not, the recurring revenues that are coming in every month, every quarter…they’re not enough to keep the machine going,” said Lezcano. “You really need to grow very aggressively for this to pay off.”

Lezcano explained that there are “no economies of scale” in the big residential solar business because each additional sale requires a big upfront investment, and the payment won’t come for months.

The time it can take to see a return on investment is another reason why big solar companies are struggling to survive. Unlike smaller companies, large residential solar businesses rely heavily on selling solar leases and power purchase agreements (PPAs) through third-party financiers.

To be clear, leases and PPAs aren’t always bad—they can make going solar easier and more accessible for more homeowners. But they’re typically not the best option for the homeowner (you’ll save less money in the long run) or the solar company selling them.

When homeowners pay for their solar panel system with cash or a loan, the solar company gets paid relatively quickly because the transaction stays between the homeowner and installer. But with leases and PPAs, a third-party financier is responsible for cutting the check, which means a delayed paycheck, according to Marhamati.

“I've talked to a lot of installers who have worked with a lot of companies like that—they don't get paid on time, and it impacts their business significantly. And that tells me that there's something unsustainable about the business model of some of those large publicly owned companies that are built entirely on financing,” Marhamati said.

Heavy reliance on third-party financing isn’t the only issue Marhamati sees with big residential solar; he also points to their third-party sales tactics. Marhamati says many of these companies outsource to contracted salespeople who are “largely unaccountable.”

“They'll often make deals with homeowners that can't be guaranteed, that can't be installed, that are impractical. And that is really bad for the business they work for, and it's really bad for the solar industry,” said Marhamati.

Solar panels are a complicated product, so it’s important to have sales representatives who are well-versed in solar technology or have quick access to employees who are. Instead, Marhamati says many of these companies have sales and operations essentially functioning as separate businesses, which means the salespeople don’t have access to the technical experts and are more focused on making a sale than on solar education.

“You're going to get substandard designs, and you're going to get substandard projects, and you're going to get a lot of angry homeowners,” Marhamati said.

Angry homeowners are also more likely to share their bad experiences with others, which can damage the company’s—and even the solar industry’s—reputation. Some homeowners have taken their grievances to court; for example, a lawsuit alleged that Vision Solar pressured customers into contracts and misrepresented facts, among other things, before the company went bankrupt.

Lezcano said these big solar businesses have been “walking on very thin ice that can break at any time.” In recent years, several factors negatively affecting the solar industry have caused the ice to crack, making it harder—or impossible—for them to continue:

• Fewer solar installations: The number of home solar installations dropped in 2024 after years of rapid growth.

• Labor shortages: Labor shortages in key occupations needed for solar manufacturing and installation have halted solar growth.

• State incentives being phased out: Many states have lessened or phased out solar incentives (notably California’s switch from net metering to NEM 3.0).

• Uncertainty about the federal tax credit: The Trump administration has promised to repeal the Inflation Reduction Act, bringing uncertainty around the federal solar tax credit (ITC). The 30% tax credit on solar energy systems is currently the largest solar incentive for most homeowners.

• High interest rates: After years of historic lows, the Federal Reserve hiked interest rates to combat inflation, which made borrowing more expensive for customers considering solar loans.

These factors, coupled with an already fragile business model, mean it’s not an ideal time to be a big solar company.

Many national solar companies are going dark—but Marhamati says the future looks bright for smaller companies. He’s worked with hundreds of locally owned and operated businesses and says they’ve been thriving.

“Talking to solar installers every day who are regional with employee-owned businesses or locally operated businesses—they’re often growing. They’re doing well and taking market share from those big box installers,” said Marhamati.

He says these homegrown, vertically integrated businesses that believe in slow growth have “the only sustainable business model in the solar industry.” It certainly helps that they don’t have the large overhead costs and complicated uses of debt as the larger companies do, but Marhamati said it goes deeper than that.

“These local companies really care about their customers more than they do about shareholder returns,” Marhamati said. “These are quality solar installers that do good work, that do what they say they're going to do, that show up on time. And it's very, very rare that homeowners get stuck in a bad situation.”

Marhamati said that another reason to choose a local installer is to have easier access to the company after the installation.

“You want to be able to call them if something goes wrong. And over 20-30 years, something's going to go wrong, or you'll have a question,” said Marhamati. He’s even seen a local installer honor customer contracts after they closed their business.

“The owner-operator went out himself and made sure that those final contracts were made good for those homeowners. That alone should give people the perspective on the difference between working with a local company and a big-box company because a big-box company isn't necessarily going to do that.”

The differences between big and small installers 

Balkar Gill, co-owner of Nova West Energy in Fresno, California, believes larger companies are having a tough time because they become “overleveraged” in the number of deals they sign and are top-heavy on PPAs rather than catering to what’s best for the homeowner.

“Smaller-based companies, we listen to the customer and look at what they need, and then help them understand the different solar products that are available,” said Gill. “These larger guys are kind of a one-size-fits-all product, and that can often lead to trouble—which is kind of what happened,” said Gill.

Gill says most small installers are focused on solar education rather than sales, which means sometimes they have to tell a homeowner when solar panels aren’t a good financial option.

“It's really about being transparent, and that's where I think the smaller companies have a higher sense of integrity. We're not looking to sell everybody a system where it doesn't make sense,” said Gill.

Solar makes sense for many Americans, especially now that electricity rates are skyrocketing to historic highs. While residential solar installations decreased in 2024, analysts at Wood Mackenzie project a 9% year-over-year increase in 2025 and expect the market to more than triple over the next decade.

Marhamati said he believes the downfall of the solar giants will only help solar’s growth in America.

“There's going to be more people going solar because they'll hear more positive stories about their neighbors going solar. I think a lot of what's held us back is just horror stories in the solar industry—people being scared of the technology, scared of getting ripped off. Once those companies are gone, I think we'll see a booming and thriving industry built on locally operated businesses,” said Marhamati.

Bottom line: If you’re considering solar, don’t let the solar companies of days past scare you away. They’re not going out of business because solar panels aren’t a good product—they’re doing so because they’ve heavily relied on subsidies and third-party financing, which leads to delayed pay, expensive business models, complicated uses of debt, and shady sales practices. That’s bad for big solar, and it’s bad for their customers.