When deciding on going solar there are many different options and scenarios you need to understand before making any final decisions. Therefore, learning all you can about how solar contracts work, as well as their associated issues, will help you make an educated decision about which solar option is best for your particular situation. If you don’t, you could end up making a long-term commitment that doesn’t fit with your long-term goals costing you a significant amount of money in the long run.
Here are the different areas of the solar arena you need to consider before signing on the dotted line.
Solar Company Warranties
There are three common types of warranties that might be offered with a solar PV system.
1. Product Warranty
The product warranty covers the panels and some of the other components of your system. Most manufacturers offer a 25-year warranty on their panels which means if anything happens to them, the affected part(s) will be replaced at no charge. However, most solar panels will last much longer, even as many as 40+ years. One caveat to this is the inverter and other power optimizers which generally carry a shorter warranty period. For lower grade inverters, the warranty is generally about two years. And for higher grade inverters the warranty is usually between 10-15 years.
2. Workmanship Warranty
The workmanship warranty covers any labor and installation related issues. Workmanship warranties will vary greatly depending on the company. However, most workmanship warranties will range between two and ten years with 10 years being the most common.
3. Performance Warranty
A performance warranty is for the solar panels energy production, which is based on an average number of years. For example, a common performance warranty will generally guarantee 90% production for 10 years, and 80% production for 25 years. All solar panels lose a small amount of production each year, so this is not uncommon.
Solar Payment Options
Understanding the different types of solar payment options and their associated contracts is one of the most important aspects of deciding on which one is right for you. Therefore, you should spend a significant amount of time learning about your options before making any decisions. And always make sure every detail discussed is clearly written in your contract.
Outright Purchase, Finance Option or Energy Efficient Mortgage
An outright purchase is a solar PV system you pay for with cash or via a home equity loan, etc. and is always your best bet. However, if you don’t want to go that route, a third-party solar loan is another option to consider. Many solar companies work with preferred lenders who are familiar with the green energy sector and are willing to offer financing for such services. However, some solar companies don’t, in which case you would have to acquire your own financing. Or, you could check into getting an energy efficient mortgage to finance your solar panels.
Solar Lease or Power Purchase Agreements (PPA’s)
Solar leases and PPA’s are very similar. These work much like renting anything else. The solar company owns the equipment and you rent it to receive the monthly benefits which amount to a reduced utility rate. These are very popular because oftentimes they don’t require any money down and there are no associated upkeep or maintenance costs.
A word of caution though, opting for a solar lease is something you need to thoroughly understand before deciding on which route to go. Many people have been duped into a solar lease because they didn’t really understand what they were getting into. So please take heed and do your homework prior to signing a contract. However, with that being said, a solar lease/PPA is the perfect option for some, so please don’t take this warning as a non-recommendation for choosing a solar lease.
- Solar Lease. With a solar lease, you will receive a fixed monthly rate (rent) or lease payment. This rate is based on the estimated amount of electricity your system is anticipated to produce in exchange for using the solar company’s system.
- Power Purchase Agreement (PPA). A power purchase agreement is slightly different from a lease because instead of paying to rent/lease the PV system, instead, you agree to purchase the power that’s generated by the solar company’s system based on a set per-kWh price.
Important Factors Regarding a Lease/PPA Option
Most lease/PPA options don’t require any money down, have no installation costs and don’t require the homeowner to perform any maintenance. Therefore, you can’t have a solar PV system installed and start saving immediately. Additionally, when you choose a lease/PPA option the company who installed the system is the one who retains all incentives and rebates. This is how they are able to offer you a system at no cost.
Solar energy rates can be between 20-30% lower than traditional utility electricity costs. However, the price paid for solar electricity generally increases annually at a pre-determined rate; therefore, you’ll have to factor this into your savings equation while making sure this pre-determined rate is clearly stated in your contract.
In some leases, if you put money down, usually between $1,000 and $3,000 you will receive a lower monthly payment, a lower per kWh, and avoid any annual increases. Additionally, at the end of the lease, which is usually either 20 or 25 years, you could be offered the option of extending your contract or having the panels removed at no cost to you.
Tax Credits and Rebates
The tax credits and rebates on solar PV systems vary significantly from state to state with some states not offering much of anything at all for installing a solar PV system on your home. However, in several states, the tax credits and rebates are so significant that they will, in many cases, pay for the majority of your system making it much more affordable than you might think. Therefore, you will need to check into what the state incentives are for any given state for more details. However, California has some very generous solar incentives available.
Other Things to Consider
Here are a few more things to consider when trying to decide whether or not a solar PV system is right for you.
Solar Equipment Monitoring
Most solar PV systems come with one or more monitoring options. Online monitoring is the preferred option as it allows you and the solar company to monitor your system’s energy production and usage online from your Smartphone, tablet or PC. But not all solar companies offer both production and usage monitoring options; therefore, you will need to confirm this with your chosen solar company.
System monitoring is also important in the event of any malfunctions because if there is any type of error, the solar company will be notified immediately and be able to repair the problem before you lose too much money and energy savings due to long periods of downtime. The only issue with monitoring is who pays for it. Therefore, be sure you inquire about who pays for the monitoring before you make any final decisions.
Moving Options and Issues
It’s important to find out who pays the moving costs should you need to have your panels moved to replace your roof. Not all solar companies offer this service. If they don’t, you’ll have to find a qualified electrician or builder who is experienced in moving solar panels. And, in this case, if any of the panels are damaged during the move, they will generally not be covered by the manufacturer’s warranty.
Are the Warranties Transferable?
You should always ask the solar company you’ve chosen if their warranties are transferable to the new owner should you decide to sell your home. Just keep in mind the new owner will have to qualify for that solar system just like you did.
Another issue you should get in writing is who pays for any damages done to your roof, home and/or property during installation should they occur. Especially if the solar company doesn’t use an in-house technician and/or roofer to assist with the install.
When signing (up to) a 25-year contract, you want to make sure the solar contractor you’ve chosen will be around long enough to honor their warranty and to handle any repairs, etc. Therefore, you should inquire about how long they’ve been in business and check their Better Business Bureau rating. This will give you a sense of their reputability and how they handle any customer service or repair issues. Additionally, many solar installers are certified, and the company accredited, by the North American Board of Certified Energy Practitioners (NABCEP) which is helpful, but not a requirement.
For more tips on improving your home’s energy efficiency, check out the Green Living section on our blog.