Tier 1 Solar Panels: What Does It Mean? Solar panel tiers are broken down into a three-tiered system: tier 1, tier 2 and tier 3.
If you’ve spent time researching which solar panels to buy for your home or business, you have almost surely come across the term “tier 1 solar panels.” This can often be a bit of a confusing term for buyers. In this article, we discuss the difference in the solar panel tiers, what they mean, and what they do not mean.
Are Tier 1 Solar Panels the Best on the Market?
Solar panel tiers are broken down into a three-tiered system with solar panels rated as either tier 1, tier 2, or tier 3. Many people would naturally assume that tier 1 solar panels are the best on the market in terms of performance and efficiency. However, this is not necessarily the case.
While tier 1 solar panels may certainly be among the top performing, their tier 1 status does not guarantee this. The reason is that the tiered system was not designed to evaluate overall quality of a solar panel. Instead, it was created to evaluate the financial status of the company that produces it.
Tier 1 solar panels are intended to recognize companies that are typically in good financial standing while also instituting some practices that tend to produce better performance. However, the primary metric is predictions of financial stability. Thus, while a tier 1 solar panel can be among the best on the market, it is not a guarantee while a tier 2 solar panel may be competitive in different metrics of performance.
What is the Purpose of the Solar Panel Tiered System?
It may seem surprising that a tiered system was created with the importance being placed on financial stability of solar panel producers rather than performance. After all, isn’t performance the most important factor? While solar panel performance is extremely important, the reality is that financial stability is as well.
This is because solar panels are long term investments. When you purchase an automobile with a warranty, you assume that the company producing it will still exist in a few years to honor that warranty. The principle is the same with solar panel producers. However, people are far more familiar with car companies than solar panel companies.
Additionally, solar panels are a much longer-term investment than a vehicle. When you purchase a solar panel system, you want it to last for several decades. You will also typically receive a warranty of 20 or more years. Thus, knowing that the company will still exist in order to honor the warranty is important. This is the overall goal of creating the tiered system.
What Do the Different Tiers Mean?
As we’ve noted, there are three major tiers in this system. Tier 1 solar panels are those that meet these requirements:
• Five or more years of solar panel production
• Publicly traded or have a stable balance sheet
• Fully automated production
• High degree of vertical integration
• Significant investment in brand marketing
• High reputation for quality and service
Some of these things like automated production tend to produce higher quality panels. However, most metrics are clearly created to evaluate financial performance and commitment to the industry.
Tier 2 solar panels are much easier to define. They include businesses that have been in production for less than five years as well as those that do not produce their own solar cells. Instead, they tend to source their cells from other companies, typically tier 1 solar panel companies. A tier 2 company does not necessarily make bad solar panels. In fact, they could be on par with tier 1 companies.
Tier 3 companies are those who only participate in the assembly process. They do not source their own solar cells. They, along with tier 2 companies, are more likely to use human production lines rather than automated ones as well.
Do Tier 1 Solar Panels Guarantee Financial Performance?
While being listed as a tier 1 solar panel suggests that it is highly likely that a company will be around for years to come, it is not a guarantee. For example, SunPower, a tier 1 company, stopped manufacturing solar panels and is at risk of filing for bankruptcy.
Additionally, the tier rankings can vary on a quarterly basis. This means that a tier 1 company may fall out of the rankings based on its performance. Finally, it is important to note that the tiers correspond to solar panel companies, not specific solar panel lines. A tier 1 company may produce many different solar panel lines, some that are much better than others.
Should I Care About Solar Panel Tiers?
Solar panel tiers are worth considering because they should theoretically be a good predictor of if a company will exist in 20+ years. However, it should not be the only thing that is considered in your decision.
You should hesitate from automatically refusing to consider tier 2 companies just because of their tier status. Doing research about company history and service is important. Additionally, we would argue the most important thing to consider is the specifications and performance of individual solar panels.
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