Tier 1 Solar Panel? Solar Farms Explained (Costs vs Income)

However, that is not the case.

To help you understand Tier 1 meaning and how the term relates to solar farms, this complete guide explains how tier 1 solar panels are indicated and how that rating is determined.

What Is Tier 1 Solar Panel?

Commonly perceived as a rating for solar panels, the Tier 1 rating actually refers to solar energy companies. It is assigned by Bloomberg New Energy Finance (styled as BloombergNEF or BNEF).

Managed under the Bloomberg banner,¹ BNEF is an independent research, analysis, and insight service that offers data and information on sectors such as energy, transport, and commodities.

BNEF categorizes these ratings for solar companies into a single Tier 1 list. This means that when you are browsing solar companies by their BNEF rating, you will not find any Tier 2 or lower categories.

This is where it gets more interesting: Instead of referring to the quality of the solar panels that these companies produce or outlining what does a solar panel do, BNEF Tier 1 rating highlights the respective company’s overall business and investment status.

To elaborate on this further, BNEF Tier 1 rating quickly tells you whether a solar company has provided modules to large-scale projects such as solar farms and if it completed those projects through financing by major banks.

With that in mind, you can now easily understand what the BNEF Tier 1 rating means for solar companies.

What Does the BNEF Tier 1 Rating Mean?

The BNEF Tier 1 rating outlines solar panel companies that have:

• Provided their own products to at least 6 different projects of over 1.5 megawatts (MW) capacity each.
• Have received non-recourse financing from 6 different commercial banks for such projects.²
• Have completed these business transactions within the past two years.

BNEF follows this approach to set solar companies apart by their bankability or the possibility of banks trusting the operation of these companies, mainly to offer BNEF clients the ability to invest in potentially-stable businesses in the clean energy industry.

Due to this reason, BNEF also strictly outlines that the Tier rating assigned by it is not to be taken as an endorsement of quality, but as a potential of bankability.³

This means that when you are shopping around for solar panels or investing in solar farms, you should not take a manufacturer’s Tier 1 solar panel rating as a sign of quality or performance for their photovoltaic (PV) or solar modules.

Instead, you should only determine it as a reference point to understand if the company has conducted major business transactions in regard to solar installations and renowned banks.

Solar Panel Tier 1 Meaning: Does It Explain the Performance of the PV Module?

The solar panel tier 1 rating does not refer to solar panels but to solar companies.

As a result, it does not explain the performance of PV modules that are produced or manufactured by solar energy companies.

What the BNEF Tier 1 rating does explain is the bankability of the manufacturer who is making PV modules or solar panels in the clean energy industry.

Since the BNEF criteria for Tier 1 module manufacturers refer to the overall business transactions that the respective solar energy companies have performed, this provides you with an idea of the following points.

• Deducing if the company manufactures its own brand products.
• Learning if the company has handled multiple large-scale projects of over 1.5 megawatts (potential solar farms).
• Knowing if the company has received non-recourse financing for such projects from various major commercial banks.
• Determining if the company can potentially be a major player in the clean energy sector.

With that being said, certain external factors that are not explicitly associated with the BNEF tier rating can still help you determine the potential performance of the company’s PV modules or solar panels.

While these are only circumstantial factors, they can help you steer clear of investing in bad actors in the industry.

It is because it’s safe to assume that any solar energy companies that have provided modules to different large-scale projects offer reliable products that commercial clients or solar farms trust with their needs.

The requirement for these companies to support these projects by using their own brand or manufactured products gives you further confidence in their overall capability.

Additionally, non-recourse debt from commercial banks refers to financing where the lender can only pursue the primary collateral and no additional assets to recover their losses.⁴

As a result, it gives Tier 1 solar companies the presumptive status of holding a stable financial strength that lets them take advantage of beneficial lending agreements.

Because banks perform their due diligence before approving such lending opportunities, this also heightens your confidence in the respective solar company.

When put together, this can indirectly help you assume that the solar panels or PV modules made by these companies offer a higher level of performance than those that come from manufacturers without a Tier 1 rating.

Why Does Tier 1 Rating Matter for Solar Energy Companies?

BNEF is a highly reliable source of insights for industries including but not limited to energy, transport, and commodities. Besides being operated by Bloomberg, which is a highly reputable source of business news and analytics, the research service also holds major clients that use its data for shaping their strategy in the sector.

By getting a BNEF Tier 1 rating, solar energy companies get a sought-after status in a highly competitive industry. It is because a Tier 1 rating by BNEF outlines that:

• The company is able to produce large quantities of in-house PV modules or solar energy products.
• The company has helped build various solar projects or solar farms through its solutions.
• The company has gained the confidence of multiple major banks.

These distinct signs of assessment help solar energy companies stand out of the crowd and present their operations as potentially successful opportunities for investors. This appeals to those who are trying to build or enhance their portfolio in the solar or clean energy industry.

In turn, solar companies are able to grow their operations on the back of the Tier 1 rating among other factors.

While the BNEF Tier 1 rating is meant for investors and solar companies should handle it as such, many of them simply put Tier 1 solar panel on top of their products or brand introduction.

This can be a misleading practice that has the potential to misguide regular consumers such as those looking for complete solar systems for personal or business use.

Due to this reason, it is important that you understand the reasoning behind the BNEF Tier 1 rating and make informed decisions while browsing products or investments related to PV modules. This can help you learn how to find a reliable solar power company or clean energy investment opportunities.⁵

Are All Solar Companies Categorized by the BNEF Tier System?

The BNEF tracks clean energy businesses worldwide. In turn, any solar companies that are able to fulfill the criteria set for Tier 1 suppliers can be categorized as Tier 1 companies.

But since the conditions are specific, and apply to companies that have fulfilled multiple projects of over 1.5MW with non-recourse financing from multiple banks in the past two years, not all solar companies are categorized by the BNEF tier system.

The BNEF also only has a single Tier system. This means that there are no Tier 2 or Tier 3 solar companies as categorized by the BNEF.

If you see any company that is marketing itself or its solutions as being BNEF Tier 2 or Tier 3, it is a red flag that outlines you should stay away from such providers at all costs.

Tier 1 Solar Panel: Do You Need To Consult the Tier System When Choosing Solar Panels?

When choosing solar panels for your residential or commercial use, you typically do not need to consult the BNEF tier system. There are multiple reasons for that.

Firstly, the BNEF tier system is not a scale to measure the quality of solar panels but the business health of solar energy companies.

Secondly, it is not meant for consumers but is a reference point for investors.

With that being said, getting your solar panels or complete solar systems from a BNEF Tier 1 company does give you the assurance that you are dealing with a vendor that has sufficient experience, capabilities, and investor trust.

However, you should also look at other more direct factors for judging product quality including but not limited to reviews, testimonials, and the time spent in business by a solar company.

This is a more reliable way of making your purchase instead of simply looking for a Tier 1 solar panel.

What Are Solar Farms?

Solar farms are large-scale installations of PV or solar systems. They are called farms because of the fact that there are several of these systems present on a plot of land or flat surface area.

These systems are known to conduct the essential aspect of taking in the light that is provided by the sun and turning it into electrical energy. After it does that amazing and wonderful process, it will then carry that over to consumers.

This is due to the research and design that took place over the years.

These solar farms are known by other terms as well. These terms can range from solar power stations to solar power plants.

BNEF Tier 1 solar energy companies are typically responsible for a large portion of products found on these solar farms. At the same time, it is possible to find products by those firms that seek to climb to this tier level.

Solar farms can also be community-powered through crowdfunding to provide clean energy to local properties in addition to traditional energy sources.⁶ Of course, there are businesses and individuals that may have the means to set up their own solar farms.

Can Anyone Invest in Solar Farms?

Is it possible to start investing in solar farms? Of course!

There are roundabout ways to do this and more direct paths as well. For instance, it is possible to invest in solar companies that install panels and that may undertake these projects.

At the same time, remember that there are direct options available as well. It is essential for you to see if there are regulations in your area with regard to investment criteria and other matters.

What Is the Average Solar Farm Cost vs. Income?

The average solar farm cost vs. income depends upon a variety of factors. These aspects include but are not limited to:

• Land size
• Land location
• Environmental conditions
• Expected energy production
• Quality of PV modules

However, you can use a solar farm income per acre calculator to get a general idea.

Is It Better To Buy a Tier 1 Solar Panel Instead of Tier 2?

The BNEF Tier 1 rating refers to the bankability of solar companies instead of the quality of their PV modules or solar panels. BNEF also only has a Tier 1 list.

There are no BNEF Tier 2 suppliers or panels available.

How Do You Judge the Quality of Solar Panels?

You can judge the quality of solar panels through actions such as looking for reviews on the product, ratings for the manufacturer, and overall time in business spent by the vendor. It is also important to remember that cheap is not always better and expensive is not always high quality.

You should do a comprehensive analysis of solar companies and their offered products before choosing them.

Is It Possible To Find Replacement Parts of a Solar Panel?

Almost all solar panels sold currently have a lifespan of 20-25 years.⁸ This means that you may not need to find replacement parts of a solar panel that you have installed for a long time.

However, if your solar panel is damaged physically, you may find replacement parts from the manufacturer depending on where the damage is and if the part is replaceable in the first place.

Is It Better To Invest in Solar Farms or Solar Stock?

As investment opportunities, both solar farms and solar stock provide you with distinct advantages. Typically, the returns from solar farms are more stable, while solar stock can give you the opportunity of generating a higher income.

Established solar farms investment offerings are typically difficult to get into, while solar stock brings the possibility of income fluctuations. By assessing similar factors, you can make an informed decision about which option works better for you.

Do Solar Panels Degrade Over Time?

Most of the current solar panels have a lifespan of 25-30 years.⁸ But after this time, they may start showing issues such as minimal to no energy production.

You can discuss solar panel efficiency over time with your solar panel vendor at the time of purchase.

After Learning What Does Tier 1 Solar Panel Rating Mean, You Can Browse Your Investment Opportunities With More Confidence

Learning about Tier 1 solar panel meaning provides you with a clear understanding of the BNEF rating and what it means for solar companies.

You can then use your new knowledge about Tier 1 solar panel rating to make better investment decisions.

Frequently Asked Questions About Tier 1 Solar Panel