US SEC Initiates Investigation Against Tesla Over Disclosures Linked To Solar Tiles

In a move widely seen as an acknowledgement of the complaint by a former Tesla employee, Steven Henkes, the US securities regulator, Securities and Exchange Commission (SEC), has initiated investigations into the allegations on Tesla, for failing to notify its shareholders and the public about fire risks associated with its solar panel systems. The investigations centre on risks with its solar panels, sold by Solarcity, the firm it acquired in 2016.

Disasters caused by solar fires, understanding, preparedness, mitigation of losses now appears to be a mainstream topic of discussion in the solar industry. International Renewable Energy Agency (IRENA), in its report on ‘Future of Solar Photovoltaic’ too recognises the increasing fire hazards caused by solar PV systems in many countries, including United States, Germany and Japan.

The US already has more than 2 million solar installations after a bumper 2020-21. The issue of fire safety has been a rising concern. Solar fires are happening despite professional companies following compliance with current safety codes.

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There were 56 recorded solar system fires in 2018 across all installs, the most recent year of reported data, which is up 36% from the 41 recorded in 2017. In 2015, the first year when data was received from US Fire Administration, there were 25. Since 2015 the Fire Administration has recorded 155 fires caused by solar installations, with 84 being residential systems and 71 being non-residential. Specific incidents linked to Solarcity installations are not available.

While Tesla has faced questions earlier on its automated driverless systems and more, this is the first time a formal investigation has been launched by the securities regulator on the issue of non-disclosure.

Henkes had claimed in his complaint that Tesla, over several years, failed to disclose a variety of safety risks associated with rooftop solar panels from its SolarCity division. Henkes, who worked as a solar field quality manager for Tesla, filed a whistleblower complaint in 2019. He was fired in 2020 and sued Tesla, alleging he was dismissed in retaliation for raising safety concerns.
The former employee had contacted SEC in 2019 after the automaker allegedly ignored his pleas to notify consumers and regulators about the safety issues with its solar panels.

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According to the lawsuit, more than 60,000 residential customers were affected by the issues Henkes documented in his complaint.
Retail major Walmart too, in 2019 had raised safety concerns around Tesla’s solar panels. The retail chain sued the company after its solar panels led to seven store fires. While the matter was mutually settled between the two companies, it was alleged by Walmart in its complaint that Tesla regularly sent inspectors who “lacked basic solar training and knowledge.”

It also asserted the company’s panels were plagued by visible defects. Tesla’s solar panels at the Amazon Warehouse had also caught fire in the same year. Now, the last week again saw 20 solar panels on the roof of an Amazon fulfilment center in Fresno, California catch fire. While the official cause of the fire has not yet been released by officials, the State Fire Marshall has ruled the fire as accidental. The fire, which caused an estimated $500,000 in damages, is the second such rooftop solar system fire to occur at an Amazon facility in as many years.

The SEC investigation into Tesla might focus on whether it suppressed information, but the broader issue of safety linked to solar power systems will remain. Firms in the business have stressed that these are usually very safe, and in most countries today, follow fairly well established norms to ensure safety. However, in a booming market with a premium on expertise, mistakes will happen, and firms will need to be vigilant about the issue to ensure perception remains unaffected.