What is a “Tier 1” solar panel? Tier 2 or 3?

By Jeff Sykes on

When purchasing a solar system, the quality of the components to be used is frequently a key consideration. However, differentiating one brand from another may not be so simple, especially in the case of solar panels, of which there are hundreds of brands on the Australian market.

The terms ‘Tier 1’, ‘Tier 2’, and ‘Tier 3’ are often heard with regard to solar panel manufacturers as a way of distinguishing the wheat from the chaff. This article takes a look at what these terms mean in practice and how they can help you to make a decision about going solar.

Understanding tier ranking systems

‘Tier rankings’ are systems through which organisations – usually financial analysis & investment firms – classify the ‘bankability’ of particular solar panel products. They are generally intended for investors in medium to large-scale solar projects, but in Australia they are commonly referred to when sales people talk to residential solar customers.

There are a few things that you should know about tier ranking systems from the outset:

  • There are a number of different tier ranking systems – but Bloomberg compiles the list which Australian solar companies refer to most frequently. Though largely similar in general thrust, their criteria do differ, and a Tier 1 manufacturer that makes one list will not necessarily be Tier 1 on another’s list.
  • Tier rankings are about panel manufacturers, not the panels themselves – Panel manufacturers may offer a wide range of panels ranging in quality from premium to budget. Just because you’re getting panels from a Tier 1 manufacturer doesn’t mean that you’re not getting old or relatively low-quality product.
  • Tier ranking lists are not ordinarily available for free to the public – Your installer may have access to one of these lists (either because they subscribe to reports or because they managed to get their hands on it otherwise), or they may not. So if a company tries to sell you a solar system saying that the panels they use are ‘Tier 1’, you may have no way of verifying this independently. Ask the installer which company the tier ranking list is compiled by, and to prove it to you using third-party materials (preferably the original, current tier ranking report).
  • Tier rankings usually put a lot of weight on large-scale projects and who financed them – If you’re considering solar panels for your roof, you may not necessarily care if the manufacturer’s products have been used in solar farms, or how many banks were willing to put money up to help fund their construction – but that’s often what tier rankings are based on.
  • Tier rankings also put significant weight on manufacturing capacity – Manufacturers who achieve ‘Tier 1’ status are usually among the largest manufactures in the world.
  • Tier rankings are not a direct guarantee of quality (but they’re a pretty good indicator of it) – The companies that compile tier ranking lists do not actually test any panels themselves – instead, they basically rely on banks to tell them indirectly which manufacturers have the most investment-worthy panels. So when it comes to applying tier rankings (which are developed mainly for industrial investors) to the small-scale, residential market, the reasoning goes something like this: “If these panels are good enough to get financing to be installed en masse across several gigantic solar farms, surely they’ll be good enough for my roof.”
  • Tier rankings may not take into account things that are important for Australian customers – One of the biggest questions concerns warranties: Does the company have a head office in Australia which can quickly and seamlessly handle your warranty claims (in the unfortunate event that you have a problem)? If they’re overseas, replacement may be onerous and take a long time.

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What makes a Tier 1 solar panel? (An example from Pike Research)

The pyramid below provides a glimpse into the world of how panel manufacturers are ranked into tiers 1-3 by Pike Research (now part of Navigant Research). We should emphasis that this is only one system for raking panel manufacturers, but it’s a handy example because of the chart’s layout. Most installers will most likely refer to Bloomberg’s ranking system.Solar panel manufacturer Tier rankings

Click to Enlarge. (Source: Pike Research)

In Pikes’s system, Tier 1 manufacturers represent only a small slice (2%) of the total number of manufacturers on the market, but a number of factors set them clearly apart from Tier 2 and Tier 3 manufacturers.

  • First of all, they are vertically integrated, meaning that they don’t simply assemble solar panels using other companies’ products, they manufacture their panels from the ground up. This means that they control the production process for everything from the silicon cells to the modules frames and ultimately panel assembly.
  • Tier 1 installers invest heavily in research & development (R&D) and continually innovate in order to improve their products and processes.
  • Tier 1 installers also use highly automated manufacturing techniques that are conducive to a standard level of quality, while (in many cases) saving money on manufacturing costs at the same time.
  • Finally, at least 5 years’ history producing solar panels is the other criterion for being considered Tier 1 for Pike Research. Having been around for at least this amount of time in what is a relatively young industry is testament to a company’s commitment to its own longevity as well as to its customers, and is indicative of the likelihood that that company will still be around in 20+ years’ time to service its warranties.

Tier 2 solar panel manufacturers

Manufacturers that Pike ranked as Tier 2 are the ‘middle ground’ between Tier 1 and Tier 3, comprising about 8% of the market. Although they have been producing panels for longer than Tier 3 manufacturers (2-5 years), they still invest relatively little money in R&D compared to Tier 3 manufacturers. Robotic automation does not always play a major role in their panel production lines. Many Tier 2 manufacturers doubtless have Tier 1 aspirations, but may not have the wherewithal or experience to yet make the cut.

Tier 3 solar panel manufacturers

Tier 3 manufacturers comprise the bulk of the market (90%), according to Pike Research, but have the least experience. Their operations are limited to assembling panels using components manufactured by other companies (i.e. no R&D operations of their own), and their production processes are highly reliant on manual labour. With the solar manufacturing industry already having gone through at least one large-scale ‘consolidation’, is not unreasonable to think that many of these companies will not be around in the next few years as the industry consolidates. Choose wisely!

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© 2017 Solar Choice Pty Ltd

Jeff Sykes
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Comments

  1. I had a salesman selling me 24 gcl panels and 6kw sungrow inverter for $9990 do you think this is a good deal, im in lismore and there has been some bad businesses people coming out since we have had that major flood and we cant afford to be ripped off nor anyone else in lismore just need to know where getting good panels and inverter for the money we are paying. Thanks kerrie lismore

    1. Hi Kerrie,

      $9,990 would seem to be on the high side for a 6 kilowatt (kW) system with those components. As reference point, the average price for a 5kW system in Sydney is only about $6,100, where a premium system (which the system you’ve mentioned is not) would be about $8,150. Prices might be on average higher in Lismore than Sydney, but not so dramatically, I would imagine. You can check out more recent solar system price data for Australia’s capital cities here.

      If you want to compare quotes from installers in Lismore, simply fill out the Quote Comparison Request form on this page – you’ll instantly get product & pricing info from a range of installers.

      Best of luck with your solar system.

    2. I am from the U.S. so I do not know the pricing in Australia. When you say materials, is that only the solar panels (modules) and Inverters and does not include the roof mounting materials and the electrical materials? I teach DIY home solar installation here in the city of Fontana and city of Rialto in California. You may ask me anything about home solar installation.

      Romeo Lampa

  2. Further to your article on Tier 1/ 2 /3 panels. Is my understanding correct that you are solely referring to the manufacturers viability – ie likelyhood of being around to honour their long term warranties – as opposed to the relative quality and reliability of the panels themselves.

    1. Hi Confused,

      Yes, you are correct. We are looking into developing a more consumer-focused tier ranking system ourselves in the near future, however. Stay tuned.

  3. The best Polycrystilline Vs best Monocrystalline panels. You badly need to update your article with current effeciencies and throw in Thin film as food for thought with the extreme high efficiency in all conditions, sun angle but extra expense.

  4. Hi, I am keen to have electricity panels on my roof but know almost nothing about them, so I would appreciate your comments.
    I have been quoted $9730.00 for a 2.5kW system comprising 10 GCL-P6/60250 panels matched to a Sungrow SG3/4/5KTL-M inverter, what are your thoughts?
    Location is the Coffs Harbour area.

    1. Hi Rob,

      That price is far to high for the system you’ve described (you can see recent average prices for Australia here).

      You can also compare quotes from installers in your area by filling your details into the Solar Quote Comparison request form to the right of this page – or give us a ring on 1300 78 72 73.

  5. How can you tell tier 1 panels from tier 2 or 3 panels just by looking at them from the street.

    1. Hi Roger,

      It’s not really possible to tell from a distance which panels are Tier 1 vs Tier 2 or 3 – rather, you’d need to have a look at the brand on the back of the panel. The thing that you usually can tell from a distance is the type of solar cell used in the panel – monocrystalline silicon solar cells are black, while polycrystalline silicon panels are a glittery sort of blueish colour (read more about mono vs polycrystalline panels here). These are the two most common types of solar cell technology, but you may also see amorphous silicon, which is a uniform blackish gray colour, out as many criss-crossing lines as the other two types.

      Hope this helps.

  6. Hi,
    Unfortunately it is very hard to find data about the increasing usage from solar panels (tier 1,2,3) in the private sector. Is it possible that you have any datas that show how the dement for solar panels increased and how many privat users have solar panels on their rooftop or in their garden?

    Thank you for your help,
    Gizem

    1. Hi Gizem,

      Unfortunately we’re not able to help you with this data, as we don’t have it ourselves and in any case it would be constantly in flux, changing year-by-year.

    1. Hi Anthony,

      Different organisations have different ways of determining which manufacturers fall into tier 1 or tier 2, so their lists vary. You can read about Bloomberg New Energy Finance’s tiering system here. Most of the organizations who put together these rankings do not release them in list form to the public, but manufacturers that have been notified of their ranking will generally bring it up when talking about themselves.

      Hope this helps.

  8. HI
    WHY is their a difference in prices for the same quality Tier 1 panels across Western Australia.
    I have had quote from 8.500 dollars for a 1.5 kw to 4100 dollars for a 3.74kw from different company’s.
    How am I supposed to agree on a product when I get told my products are the best!!
    cheers
    hope you email me with a honest answer soon.

    1. Hi Chris,

      When you pay for a solar system you’re not paying only for the panels–so I would say that what you’re comparing here is not so much Tier 1 vs Tier 1 panels, but rather one installation company’s pricing for a system vs another company’s pricing.

      Although it’s important to look for a Tier 1 panel (or at a minimum Tier 2), there may still be some differences between different manufacturers. That being said, the price difference does not need to be this large unless the panel option for the 1.5kW system is truly industry-leading and top-of-the-line (only a small handful of companies).

      I am inclined to say that the price difference between those two systems is bordering on absurd. On the whole, 1.5kW systems do tend to have a higher dollar-per-watt cost than larger systems, but there’s no reason for a 1.5kW system to have a higher absolute price tag than a 3.5kW system, as is the case here.

      As you’ve seen through experience, there is immense variability in the market, and some companies will mark-up their products more than others. As a customer, its important that you are well informed about what’s out there before making a decision. As it seems like you’re doing already, make sure you do your own independent research and ask the installation companies lots of questions!

      To help all solar shoppers make a well-informed decision, we publish a monthly article on the range of prices on the market in Australia’s capital cities–you can see the archive of these articles here. The data in these articles is compiled from installers in the Solar Choice network database, representing a cross-section of installers from across the country. Here you can check out the average, high and lower prices for each city in Australia for systems sizes 1.5kW 2kW 3kW 4kW 5kW and 10kW. This should give you a pretty good picture of what’s a reasonable price to pay for a system.

      Hope this helps, and best of luck going solar!

  9. I’m not sure but I think there might be a typo on this page.

    Under Tier 2 solar panel manufacturers
    “Many Tier 2 manufacturers doubtless have Tier 3 aspirations, but may not have the wherewithal or experience to yet make the cut.”

    That is incorrect. Tier 2 would aspire to be Tier 1 not Tier 2

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