SunPower is bankrupt. Competitors see opportunity

It’s hard to pinpoint precisely the beginning of the end for SunPower.

There were early signs of trouble. The residential solar giant ran into some technical problems last October, when it had to reissue more than a year’s worth of financial statements. Then just two months later, a subsidiary breached a credit agreement, causing shares to plunge and analysts to speculate about whether the once-dominant company was experiencing a cash flow problem. 

The company hung on for a few more months before having to significantly restructure in April. That included winding down its direct installation business, which had long been a core function of the company. And in mid-July, it circulated a letter to dealers with the news that it would no longer offer lease or PPA sales.

Then yesterday SunPower announced it had filed for Chapter 11 bankruptcy protection and agreed to sell some of its business to a competitor. The company will lay off more than 350 employees.

Complete Solaria will purchase three business units for $45 million in cash in a deal that is expected to be finalized in September. And SunPower is already on the hunt for buyers of its remaining assets, according to executive chairman Tom Warner. Once any additional sales are complete, the company will liquidate whatever remains, and wind down operations.

Complete Solaria CEO T.J. Rodgers was an early equity investor in SunPower, and has long been a clean energy firebrand, rejecting the reality of human-induced climate change and loudly proclaiming his skepticism of relying on government subsidies.

Rodgers connected early with SunPower founder and long-time CEO Dick Swanson, in their Stanford PhD program in the 1970s. He recognized the enormous potential for scaling Swanson’s high efficiency solar cells and personally invested in the company, which went on to become a global force and make him millions. There from the start, he stuck around until the end, cleaning up what is ostensibly still valuable — even after a rough several years for residential solar and for SunPower specifically. 

“This acquisition will strengthen our position in the market and put more muscle behind our commitment to driving the future of clean, reliable energy,” said Rodgers in a statement.

The market’s toll  

SunPower’s downfall has come amid a difficult moment for the residential solar industry. Two of the main causes were high interest rates and low demand — thanks in part to California’s net metering (NEM 3.0) overhaul that led to a dramatic 80% drop in solar installations, even as storage attachments grew. 

Zoë Gaston, principal analyst of U.S. distributed solar for Wood Mackenzie, said that SunPower’s bankruptcy given these factors is “not entirely surprising,” especially given the continued churn in the residential solar sector. Titan Solar, another once-giant solar installer, also declared bankruptcy earlier this summer.  

“While some installers and state markets are experiencing growth, fueled by momentum in the third-party ownership market, there has not been the same level of seasonal uptick in residential solar demand this year,” Gaston said, adding that Wood Mackenzie is anticipating a 14% national contraction in 2024, “with downside potential.”

Other residential solar companies — like competitor Sunrun — have managed to hold on, partly by embracing energy storage. And in SunPower’s wake, they see opportunity.

Just hours after the bankruptcy declaration, Sunrun reported on its own earnings call that the company’s overall revenue was down 11% year-over-year, but more significant losses were forestalled by a 152% jump in storage installations that offset the 35% decrease in solar installations. CEO Mary Powell stated definitively on that call that the company’s pivot from being a residential solar company to being “storage-first” is paying off faster than expected.

Powell also touched on SunPower’s demise, which she said “presents an opportunity for Sunrun to…gain share in a financially disciplined and measured way.” And she doesn’t just mean that in terms of market share and reputation; Sunrun is already speaking with, and in some cases onboarding, many of SunPower’s former dealers. 

Despite the problems in residential solar, Powell said that Sunrun is expecting near-term growth in its new homes segment, thanks in part to its hire of two SunPower veterans in July.

She also acknowledged that SunPower’s absence will mean opportunity for Sunrun competitors as well, “especially new entrants in the financing segment eager for volume.”