SunPower collapse reverberates from Silicon Valley to Wall Street

Once a leading global photovoltaic manufacturer and installer, SunPower was synonymous with the rise of solar energy. But the sun is setting on the California trailblazer.

The nearly 40-year-old company filed for Chapter 11 bankruptcy Aug. 5 after a series of strategic pivots failed to secure lasting financial stability, despite TotalEnergies' presence as a deep-pocketed parent company. SunPower plunged into a deepening crisis following California's December 2022 decision to slash rooftop solar compensation amid rising interest rates -- a combination that sent the largest US residential solar market into a prolonged tailspin that has claimed numerous companies.

No collapse looms as large as that of SunPower, which played a central role in the transformation of photovoltaics from a niche technology into the leading source of new US power generation. SunPower's fall is reverberating from Silicon Valley to Wall Street, where its Nasdaq-listed stock ceased trading Aug. 16 after almost 19 years.

"You just can't get a more quintessential made-in-California company than SunPower," said Bernadette Del Chiaro, executive director of the California Solar and Storage Association. "It's like seeing a giant sequoia tree fall down."

Founded in 1985 by Stanford University professor Richard Swanson, SunPower earned a reputation for its advanced monocrystalline-silicon PV technology, which set industry records for converting sunlight into electricity. The company's November 2005 IPO fueled an expansion of cell and module manufacturing capacity in the Philippines. A year later, SunPower announced its purchase of systems supplier PowerLight, forging a vertically integrated PV powerhouse.

With the wind in its sails, SunPower's stock market valuation soared to $12.53 billion in November 2007.

The company's ascent, however, was short-lived, initially undermined by the Great Recession. The solar industry then entered a period of equipment overcapacity and plummeting prices that posed a fundamental challenge for SunPower's high-efficiency, comparatively high-cost technology. Rising trade tensions between the US and solar giant China, along with inconsistent federal tax credits, only added to SunPower's headwinds, culminating in a series of reorganizations after Total SE in 2011 acquired a majority share of the company for roughly $1.4 billion.

By 2018, with pressures intensifying, SunPower exited its power plant and microinverter businesses. Two years later, it spun off of its core manufacturing arm, which continues to struggle as Maxeon Solar Technologies, though the companies remained close through a supply agreement.

The election of Joe Biden as US president in November 2020 breathed new life into a lighter SunPower, whose market value rebounded to over $9 billion in January 2021. But only months after Biden signed his marquee climate and energy bill, the 2022 Inflation Reduction Act, the California Public Utilities Commission adopted its sweeping net energy metering reform, NEM 3.0.

After NEM 3.0 took effect in April 2023, new on-site solar customers could no longer sell their surpluses back to the grid at high retail electric rates. Instead, a new "net billing tariff" tied compensation to the much lower cost that utilities would otherwise pay for power.

The market on which SunPower placed its final chips -- its seemingly reliable home turf -- imploded over the next year.

"There's a lot that went into SunPower's demise, but this is not a coincidence," Del Chiaro said in an interview. "What was the cause of death? I would argue to the cause of death being NEM 3.0."

'SunPower's missteps'

Still reeling from the PUC decision, SunPower in February raised up to $200 million in emergency capital and secured more than $300 million in project financing commitments. But that did not stop the bleeding.

SunPower laid off 1,000 workers in April. Ernst & Young resigned as its auditor in June over concerns about SunPower's financial statements. The SEC is also auditing SunPower's accounting. In mid-July, the company told solar dealers it was pausing new leasing, power purchase agreements, shipments and installations.

"SunPower has faced a severe liquidity crisis caused by a sharp decline in demand in the solar market and SunPower's inability to obtain new capital," Matthew Henry, SunPower's chief transformation officer, said in a bankruptcy filing.

Industry participants and experts agree that net metering cuts and interest rate hikes were a devastating one-two punch, especially for a company so highly focused on California, but some analysts say poor strategic decisions put the company out of position and exposed.

"The roots of this go back a ways," Joe Osha, an equity research analyst at Guggenheim Securities, told S&P Global Commodity Insights. "What SunPower had an opportunity to do and failed to do in time was to focus the business on what they were good at."

SunPower was too slow to get out of manufacturing its own inverters and panels and developing solar farms, he added.

"By the time they did finally get to being a residential solar developer, they had ceded a lot of that space to Sunrun and Sunnova," Osha said. Trying to sell an expensive platform with Maxeon panels "was the wrong strategy."

SunPower was not prepared for this combination of a tougher market and competitive pressure, Osha said.

"What finally pushed them over the edge was the financial situation got worse and worse," he added.

Osha attributes about 80% of SunPower's downfall to the company itself.

"It's been a challenging market, but look, Sunrun and Sunnova are still in business, and if anything, they're ta. So, I think some of this was simply due to SunPower's missteps," he said.

SunPower was less effective at diversifying its product portfolio and revenue streams "to cope with a new landscape in California," added Alex Kaplan, principal market analyst at Commodity Insights.

Sunnova and Sunrun have made major investments to become "home energy managers," he said, pointing to their subscription-based energy management software platforms with solar-plus-storage offerings.

"SunPower did not make those investments and lazily remained a simple financier and supplier for its dealer network," Kaplan added, "which isn't a successful business model in the new California market when you rely on less-economic stand-alone solar and singular transactions."

Pavel Molchanov, managing director of renewable energy and clean technology at Raymond James & Associates, also sees the bankruptcy as more specific to SunPower than the market.

"It was simply too difficult to recover from some of the prior management team's decisions, particularly vis-à-vis the balance sheet," Molchanov said in an Aug. 6 client note. "SunPower's travails are emphatically a company-specific issue and should not be seen as a comment on the underlying demand for US residential solar."

'Nobody is sitting pretty'

Del Chiaro, of the California Solar and Storage Association, emphasized that the PUC's "draconian" net metering reform has hit the entire California rooftop solar industry, not just SunPower.

"Everyone has been destabilized by this," she said. "I'm hoping SunPower is the last big one to go, but nobody is sitting pretty right now in California."

The California Solar and Storage Association estimates that NEM 3.0 is responsible for the loss of 17,000 jobs and has set the rooftop solar market back a decade. Despite stimulating a higher percentage of battery-backed systems, in line with regulators' intent, energy storage volumes would have been much higher had the overall solar market remained stronger with a more moderate net metering reform, according to Del Chiaro.

SunPower's dealers are now facing more turbulence.

"All of them are going to be touched by this in a negative way," Del Chiaro said.

"This bankruptcy comes at an interesting time because the two largest platforms out there, Sunrun and Sunnova, are both very focused at this point on showing that their businesses can generate cash," Osha added. "And so, what that means [is] if you are a newly orphaned SunPower dealer, and you were kind of pounding on the door at Sunrun or Sunnova, you're not necessarily going to get in."

People power SunPower's legacy

Del Chiaro sees SunPower's lasting legacy in the gigawatts of panels it has placed into service as part of the industry's launch, as well in the people who have been a part of the company. Some SunPower alums have gone on to lead other solar enterprises, like tracking specialist Nextracker Inc., whose leadership team is stacked with former SunPower executives, including CEO and co-founder Dan Shugar.

"You can shake up corporate structures ... but you can't really knock this industry down," Del Chiaro said. "At the end of the day, people are going to demand real solutions, and the kind of solutions that solar energy provides are just unmatched."

One of the most influential SunPower veterans is vying for several pieces of the company's remaining assets in the US Bankruptcy Court for the District of Delaware.

Complete Solaria, a Utah-based company led by former SunPower Chairman T.J. Rodgers, is first in line to acquire SunPower's Blue Raven Solar installation business, its new-homes unit and its non-installing dealership network for $45 million as stalking horse bidder. The offer will also assume some liabilities, including up to $7.2 million for SunPower's new-homes business.

Upon filing for bankruptcy, SunPower listed $2.01 billion in debt obligations. Any unsold assets — totaling $1.2 billion entering 2024 — will be liquidated.

Rodgers, the founder and retired CEO of Cypress Semiconductor, attended Stanford with Swanson and takes credit for having saved SunPower in 2001 with a $750,000 personal check. Cypress later went on to become SunPower's corporate parent in 2002, leading the company to its 2005 IPO before spinning off its solar subsidiary in 2008.

Complete Solaria, which is rebranding itself as Complete Solar, intends to supercharge its growth with Blue Raven and Core Energy Group, which was a July acquisition. The company is working with former SunPower CEO Tom Werner, who is now executive chairman, on the details of a financial plan, Rodgers said during an Aug. 14 earnings call with analysts.

A hearing to consider the stalking horse motion is set for Aug. 29, with deal closing anticipated by late September.

If the bid is approved, Rodgers foresees the combined company generating roughly $100 million in revenue per quarter. The Complete Solar CEO, who also sits on the board of microinverter and battery supplier Enphase Energy, said he plans to leverage that relationship, too.

"We expect to have a company that integrates very quickly, has shared values and takes advantage of the tailwind in the solar market," Rodgers said. "I think we've gone through the ugliest time. I think it's time to turn on."