Key takeaways
Tier 1 designation has nothing to do with the quality or durability of a solar panel.
Smaller solar panel companies can make panels that are just as good (if not better) than those of Tier 1 status and still not have the business volume to qualify as Tier 1.
A solar panel manufacturer can achieve Tier 1 status only by meeting strict financial criteria.
Bloomberg’s Tier 1 list is updated quarterly, so there is no guarantee that a solar panel manufacturer will remain on the list for the entire year.
If you’ve been shopping for a solar panel provider, you’ve probably stumbled across companies touting their Tier 1 panel rating. Most installers who have panels with the designation wear it like a badge of honor. But unless you’re well-versed in the solar industry, chances are you have no idea what it means or what organization decides who does and doesn’t make the Tier 1 list.
Tier 1 is a rating created by the BloombergNew Energy Finance Corp. (BNEF), a branch of the financial analytics giant Bloomberg devoted to renewable energy. Companies that make BNEF’s list do so not because of the durability or performance of their solar panels but because they’re judged to have a high degree of financial security.
While BNEF only makes its list of Tier 1 providers available to financial services professionals, knowing who’s on it also has value for homeowners shopping for solar panels for their homes. Tier 1 may not deliver a performance or endurance grade on equipment, but it can give homeowners an indication of which solar providers are most likely to honor warranties decades from now.
What is a Tier 1 solar panel?
The BNEF created the Tier 1 classification to identify solar companies that are financially stable. Bloomberg doesn’t assess the solar provider’s equipment or its services when determining the list; instead, it gauges the company’s bankability or how well the company meets a bank’s requirements for obtaining a loan. While a Tier 1 designation is a positive indication of how financially stable a solar installer is, it offers no rating of the production quality or durability of the company’s solar panels. Nor does it assess a company’s installation prowess or customer service.
Because BNEF updates its Tier 1 list quarterly, companies constantly go on and off the list. So, a Tier 1 company in the first quarter of 2024 may not be a Tier 1 company come the second. It depends on that company’s finances from quarter to quarter.
Criteria to become a Tier 1 solar panel
Whether a company makes the BNEF’s Tier 1 list is based entirely on a company’s ability to score certain types of loans from major banks.
Past solar financings
Bloomberg maintains a vast database of solar panel financing information, including the amount of money banks throughout the world loaned to various solar panel companies. Bloomberg looks closely at “non-recourse financings,” which are loans in which the bank can only use the company’s equipment as collateral (as opposed to its cash or other assets) should it default on a loan.
This type of loan is similar to a home mortgage in that a bank may foreclose on the home if the homeowner fails to pay. It can’t go after the borrower’s other assets, including investments, cash or other property.
A Tier 1 solar panel company that defaults on a loan and finds itself in financial straits could be booted off the Tier 1 list. “Manufacturers which have filed for bankruptcy or a form of insolvency protection, or are in default of major financial obligations as stated in court documents, are removed from the Tier 1 list until further notice,” according to Bloomberg’s methodology for the list.
Bloomberg records and monitors thousands of non-recourse financings made by solar companies and uses them to rate solar panel manufacturers. Boomberg’s rationale for using these types of loans to evaluate a solar company is simple. Since non-recourse financings are higher-risk loans for a bank (and, therefore, harder for a borrower to get), only the most financially stable solar panel manufacturers can procure them.
Business volume
One thing is certain: If a company wants to be Tier 1, it has to conduct a lot of business.? The BNEF requires solar panel companies to have completed at least six different financings of projects of at least five megawatts with at least six banks in the past two years to qualify for a Tier 1 rating.
To put that in perspective, five megawatts is the equivalent of more than 875 individual residential solar panel projects or a 20- to 40-acre solar farm. That limits Tier 1 status to large solar providers that do a lot of business with commercial clients and utility companies.
Solar panels on the Tier 1 list
One issue with Tier 1 listings is that Bloomberg doesn’t make them available publicly. Bloomberg sells access to the list to financial professionals as part of BNEF’s premium research service.
While you might find Tier 1 lists out there or see companies claiming to be on the Tier 1 list, there’s no way to verify this without access to BNEF’s premium research. The BNEF warns that versions you can find on the internet may not be accurate. Just because a company says its panels were Tier 1 at one point doesn’t mean the panels are still Tier 1.
Tier 1 vs. Tier 2 vs. Tier 3
You might see some Tier 1 solar companies classified as Tier 2. However, BNEF doesn’t keep an official Tier 2 list of solar companies. Tier 2 is the informal designation given to any company not included on the Tier 1 list. A “Tier 2” company may be excluded from the Tier 1 list simply because it doesn’t sell solar panels at a high enough volume to qualify for Tier 1.
These so-called Tier 2 companies — in some ways — may be better than Tier 1 companies in terms of what a homeowner is looking for in a solar panel. Tier 1’s criteria effectively limits the list to large companies, leaving out smaller ones that simply don’t have a high enough volume of business to be considered. Some solar installers produce solar equipment that performs just as well as equipment offered by a Tier 1 company. They simply aren’t big enough to be considered for that rating.
Do you need a Tier 1 solar panel?
There are a number of reasons to buy solar panels from a Tier 1 provider. I talked to two industry experts to find out more.
Pros
- Longevity: Tier 1 solar companies produce solar panels on a large scale with numerous commercial and power plant customers. They’ve also been fully vetted for financial viability by a variety of major banks. Roger French, a professor in the School of Engineering at Case Western Reserve University who studies solar energy, says this makes these large companies less vulnerable to market downturns. “If the company you bought your modules from is selling a large volume of modules, they’re more likely to be around in 20 years,” French says.
- Quality equipment: While the Tier 1 review process doesn’t involve any direct assessment of a company’s solar panels, Sequoya Cross, vice president of energy storage for Briggs & Stratton Energy Solutions, points out that companies that produce a high volume of panels have more experience building solar panels and hence produce a higher quality product. “Companies that are more financially solvent and are ranked to outlast their warranty have better track records and tend to have better manufacturing processes and are typically larger, more experienced companies,” Cross says. “Most of these brands have been producing solar modules for more than five years and have a high degree of precision in both their manufacturing and testing capabilities.”
- More likely than non-Tier 1 companies to be around to honor warranties
- Should have a more stable financial foundation
Cons
- More expensive: Homeowners can expect to pay more for Tier 1 solar panels, though Cross says the additional cost usually pays off in longevity. “They tend to be about 10?to 20% more expensive, but when you amortize that cost over the strength of the warranty it is well worth the small markup to know that the company will provide the technical assistance and support needed for the investment,” she says.
- Not bulletproof: While a Tier 1 rating may indicate that a solar company is more financially stable, that doesn’t mean it’s bulletproof. Tier 1 solar company SunPower, for example, filed for bankruptcy in August 2024. SunPower had been considered one of the world’s top solar installers.
- Tier 1 is a financial designation and doesn’t have anything to do with the quality of solar panels
Bottom line
It’s important to understand that Tier 1 wasn’t created to help homeowners choose a solar panel company. It’s a list designed to give the thousands of financial professionals who subscribe to Bloomberg’s data services insight into the financial viability of the larger solar panel companies in the industry.
However, Tier 1 status is something to pay attention to. It offers insight into the financial stability of a solar company, crucial given the lengthy warranties they offer on their products. And since Tier 1 companies do such a high volume of business, most offer solar panels that are more durable than smaller so-called Tier 2 solar panel manufacturers. That said, it’s also important to pay attention to other factors, including panel efficiency ratings, workmanship warranties and production warranties.
