Home Household Solar market oversaturation represents a major risk to households, expert warns

Solar market oversaturation represents a major risk to households, expert warns

by Tania Griffin

Due to ongoing loadshedding, high electricity prices, and a considerable decrease in the cost of solar systems over the past few years, more homeowners are making the switch to solar every day. However, elevated demand has resulted in more providers and installers entering the market, causing oversaturation.

Rein Snoeck Henkemans, CEO of Alumo Energy and a leading expert in solar, warns that this rush of new players in the industry has seen opportunists take advantage of unsuspecting households. 

“Over the past few months especially, we’ve seen a significant rise in calls from homeowners whose systems were installed by fly-by-night or ‘bakkie brigade’ service providers with little or no expertise in solar. However, these systems are usually installed incorrectly or use cheap, inferior components – which is why they were offered at a major deal,” he says.

“Then, by the time these systems inevitably malfunction or break down, the service provider has disappeared, leaving homeowners without recourse to seek repairs and get the right replacement parts.”

As a result, the consequences for the average consumer could be dire if they fail to do their research or choose reputable providers with credible track records.

“Not all newcomers or small or single-man operations are undependable, and many play an important role in the market. But there are few bad actors within the industry who are leaving homeowners to bear the cost of their mistakes and shortcuts.”

The effects of market oversaturation

Snoeck Henkemans explains that the current market oversaturation does carry some benefits for homeowners.

For example, greater demand may lead to lower overall prices for solar panels and systems, making solar more affordable and accessible. More market participants also means consumers have a wider range of options.

“Ultimately, however, the consequences of a massive influx of less-experienced installers are considerable. Inferior systems that have been incorrectly installed are bound to have a shorter lifespan and may need far more maintenance, driving costs substantially higher over time,” he says.

“The other issue is that when a solar installer goes under, homeowners can no longer claim on a workmanship guarantee and will have difficulties claiming their warranty. 

“Additionally, when Alumo goes out to perform an inspection in these types of cases, we often find that the previous installer used an inferior component or installed something incorrectly somewhere in the system, which serves to void the warranty.”

For the solar industry, oversaturation means most larger companies and smaller operations will see fewer overall sales and experience heightened competition. Intensified competition may then lead to lower profit margins as inexperienced installers drive down prices. 

At worst, a few disreputable installers may even resort to unethical practices to survive, damaging the industry’s reputation. This, yet again, highlights the importance of research for selecting an established installer with a record of providing excellent service, a quality product and long-term system maintenance.

Correcting market oversaturation in the coming years

According to Snoeck Henkemans, the market will correct itself in the next few years through a combination of three factors.

“Supply and demand will, inevitably, reach an equilibrium again, and prices will stabilise, which will benefit both the user and the installer. But as things stand, new entrants who want to make a name for themselves or are looking to make quick money are trying to undercut the competition by drastically under-pricing installations by providing substandard, low-quality solar systems,” he says.

“This said, the market is already catching on to this tactic. We are seeing a shift in the time homeowners spend researching an installer before committing to a long-term solar investment. And as homeowners increasingly turn to the more established installers, we are experiencing a second market correction, namely market consolidation.”

As supply continues to outpace demand, a growing number of less-invested installers are quickly exiting the market, allowing established businesses to regain market share. A few smaller installers will also probably merge to form a larger, more stable entity, which may also help stabilise the market further. 

Finally, Snoeck Henkemans adds that external influences such as regulatory changes, increasingly sophisticated technological innovations, and growing environmental sustainability concerns may also boost calls for the professionalism of the solar industry and decrease its vulnerability to opportunists. 

“The industry is in a precarious position right now, but there is always some turbulence early on in any new industry. It does seem like the wave is cresting, and we should return to normalcy quite soon. But as always, our recommendation to any homeowner seeking to install solar is to look into the provider or installer’s background, ask for testimonials, and consider whether they will provide proper long-term support after the system has been installed,” concludes Snoeck Henkemans.

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