The remnants of what was once Australia’s largest independent rooftop solar installer, SolarShop, have finally been sold – to Melbourne-based Premier Solar – completing a salutary tale about how not to run a clean energy policy in this country, and possibly also how not to manage a business in response.

The Adelaide-based SolarShop has been the biggest victim, so far, of the boom-bust scenario caused by ill-considered rooftop solar policy measures, driven by political vanity and a basic lack of due diligence – the most recent is Queensland-based firm Solarcore, which was placed into administration last week. Those most at fault are the former NSW Labor government, for its absurdly generous feed-in tariff (which has probably stuffed any prospect of a sensibly struck national tariff for good) and for not keeping tabs on the bill, and the federal Labor government for taking bad advice (mostly from a utility that might have known better) in the structure of the solar multiplier – which had the added impact of effectively putting a freeze on the deployment of large-scale renewable energy projects.

SolarShop collapsed in dramatic circumstances in September when its principal bankers took fright at the state of its inventory management and its working capital, an issue that had arisen after the dramatic policy pirouettes and bloody mindedness of the new NSW Coalition government, and appointed James Shady, a partner at Ferrier Hodgson, as receiver.

The sale process attracted a huge amount of interest. It is thought that 70 expressions of interest were lodged, including from the large energy retailers, other independents, and some private equity outfits. As many as two dozen were allowed into the data room. Premier, a relatively new and fast growing business in its own right, won out against some much larger rivals.

The business, which had revenues of more than $150 million at its peak, is much reduced, but around 60-70 employees have moved across with the new owners – about one third of the workforce at the time of the original company’s collapse. No indication of the selling price has been released, or of the return to creditors. Secured lenders were owed around $13 million, while unsecured creditors were owed around $15 million.

It seems SolarShop had a couple of attributes that made it particularly attractive to would-be buyers. One was its extensive network across the mainland states (although the NSW business had all but disappeared, and the Victorian business was also much reduced), its strong position in commercial scale projects (Alice Springs, Flemington, and a South Australian desalination plant) which is of particular interests to Premier Solar, and its finance offering to solar PV customers.

When approached on the issue, Shady says that the fate of SolarShop was typical of what can happen when a business grows too fast. “The industry is going through a rapid expansion phase. We’re involved because of management mistakes early in life cycle rather than industry petering out.”

The solar industry has long lamented the government policy flip-flops that have made life difficult for managers and for lenders. Shady agrees: “Governments need to be very careful. They need to consider if they are going to artificially inflate demand.” He says its great to create a new industry, but it has dramatic consequences when the policy proves unsustainable. Similar results had been produced in the solar hot water industry and even managed investment schemes.

SolarShop's former CEO, Tony Thornton, in May this year complained of the same issue, noting his company experienced seven changes to policy in just a few years, often to measures that the industry had not wanted implemented in the first place. "We have been a significant beneficiary of the government decisions out there and we have suffered as well," he said at the time. "But our ability to influence government policy is very limited. SolarShop has been on the record through most of those policy positions as saying too generous, we argued against the five-times multiplier. The size of the tariffs reflected as much the egos of the politicians as it does everything else."

The end result is that the installation industry is now increasingly dominated by the large utilities, who have the balance sheets and deep pockets to ride over the troughs and peaks of the industry. The decline of the multiplier, and the absence of any mandated tariffs for energy exports, means that – particularly in NSW – households have little motivation to install anything bigger than a small 1.5kW system on their roofs, a trend borne out in recent data that shows the size of the average rooftop system has fallen from more than 2.2kW to around 1.5kW. That, too, suits the large energy retailers, because it means that their customers can have a shiny trinket on the roof but still be dependent on the retailer to deliver the bulk of their energy needs.

And in the US ....

On this latter note, it was interesting to hear from Jeff Lyng, who helped design the progressive 30 per cent renewable energy standard in the US state of Colorado. Lyng said the standard was fiercely resisted by industry and energy utilities, who spent nearly $100 million in a campaign against the bill.

But within a few years, Lyng says, these same utilities are enjoying the benefits of distributed generation and energy efficiency standards – reduced investment needs in generation (one gigawatt gas plant has been put on ice), and a planned $150 million transmission line has also been deferred.  Around 968MW of energy efficiency savings have been estimated over the next 5 years, and around 100MW of solar PV has been installed.

Lyng, now director of markets for energy consultants Opower, says the cost of the renewable energy incentives is capped at 2 per cent of the total cost of energy, although the benefits of rooftop PV have been calculated at between 8c to 14c/Wh (an interesting conclusion given the debate around the “fair value” of solar rooftop energy in NSW and elsewhere in Australia). The standard includes a carve out that guarantees 3 per cent of the state’s energy must be sourced from distributed energy, half from retail sources.

Follow @gilesparkinson on Twitter