In early 2014, the Chinese National Energy Administration declared that China is aiming to derive less than 65 percent of its energy from coal. This goal would be unattainable for other nations, but since Chinese manufacturers lead the world in the production of solar panels, China has easy access to an enormous supply of inexpensive product. China has been in the top spot as the world’s largest manufacturer of solar panels since 2008, and since 2011 it has produced the majority of global photovoltaics per year, increasing the production capacity to 26 gigawatt. By way of example, California reached the 1 gigawatt production threshold in 2012, which is estimated to power 750,000 average American homes.

Even with the latest efforts by the United States to increase tariffs on solar panels made in China, which was intended to increase the price of the Chinese-made product, it will be years before U.S. manufacturers will be able to catch up to their Chinese counterparts. It is expected that Chinese solar panels will maintain their stronghold in the U.S. market – as of 2013, 31 percent of all of the solar panels sold in the United States.

Critics of the Chinese-sourced solar panels express their concern with the quality and safety of these products. The Chinese government heavily subsidized this market to encourage new manufacturers to enter the space. With the proliferation of new companies, the concern remains that as companies try to cut costs to be more competitive, some may take shortcuts that will impact quality and safety. When considering the rapid increase in solar panel–generating capacity over the past 10 years – with nearly all of the overall capacity being installed in 2012 alone – any significant problems with the Chinese-made solar panels may not become apparent in the near term. While all solar panels degrade and generate less electricity over time, substandard panels will underperform and fail at a much faster rate. With close to half a million homes and businesses in the United States equipped with solar panels already, the economic consequence of a potential consumer fraud/class action claim cannot be overestimated.

We have seen several legal websites already soliciting complaints of solar panel failures, product defects and failure to provide megawatts as promised. It would therefore be prudent for manufacturers and installers as well as wholesalers and retailers to review, with the assistance of counsel, their risk management approach and insurance coverage concerning solar panels.