Like most contracts, home solar contracts can be filled with all kinds of terms, language, and details that the average person might not be familiar with. A good solar installation contract is designed to protect both you and your solar provider, so it’s important to understand the various sections and what they mean.
To understand your solar power contract and make sure you get what you deserve, you can start by learning a few basic terms. Pay special attention to any language that connects you with the installation company, and outlines what you can expect the company to do for you.
This guide is designed to provide a clear walkthrough of what you should know before signing a rooftop solar energy contract.
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What Is a Solar Power Contract?
A solar contract is a signed agreement between a person and a solar power installation company that clearly outlines every part of the solar panel installation process, including the steps before, during, and after the actual installation, and who is responsible for each.
The details of the solar energy contract will differ depending upon how you intend to pay for your solar panel installation. Homeowners who pay for their panels upfront with cash, or through a solar loan, will see something different than someone who signs a solar lease or solar power purchase agreement (PPA).
Core Elements in a Solar Energy Contract
While solar contracts will differ by provider and project, most of them contain a certain amount of shared verbiage and content.
The basic principles of a solar panel installation contract are listed below. To understand how they apply to your home and your finances, you should read through each section carefully.
1. System Overview
The System Overview should outline the important details or specifications for your solar energy system, such as:
- The number and type of solar panels
- Inverter specifications
- Manufacturer warranty for panels and inverter
- Where panels will be placed on your roof
- Panel wattage (how much power your system can produce under the best conditions)
- Ancillary equipment and parts
- Battery storage (if applicable)
2. Financial Overview
The Financial Overview will cover the money-related details, and may include some or all of the following:
- Cost of materials
- Cost of labor and installation
- Summary of upfront costs
- Permitting and inspection costs
- Estimated cost savings over the system’s life (currently a 25-year average)
- The annual solar output in kilowatt-hours (kWh)
- How you are paying for the system
- Whether it’s a fixed rate or adjustable rate
- Tax credits and tax incentives
- Rebate information
- Other solar incentives
Note: If you get a loan through a third party, the specifics of that arrangement likely won’t be mentioned in your solar contract. Therefore, make sure you carefully read over the separate loan contracts of your financing options to ensure you understand everything involved before you sign your solar contract.
3. Installation Overview
The Installation Overview is often a step-by-step guide that outlines everything you could expect after signing the contract. There are multiple steps required to complete a solar panel installation. Your solar installation contract should include crucial details about what happens and who is responsible for each, such as:
- Permitting
- Installation
- Interconnection
- Approximate Install Date
Interconnection and Inspections
Before your solar panel installation company can begin work on your roof, they have to get construction and/or electrical work permits from the city or county where you live. Then, the installation company has to contact your local utility company to get permission to connect your solar power system to the electrical grid. The act of connecting your solar panel system to the electrical grid is called interconnection.
Solar permitting and interconnection requirements can be complicated, and difficult to understand. A truly helpful solar panel installation company should oversee the process for you, and organize inspections as needed. If your system fails an inspection, your installer must fix the issue(s) before interconnection with the grid can occur.
4. Energy Production and Savings
The point of your solar power system is to generate electricity so you can reduce the amount you draw from the utility grid. This section of the contract should outline your average estimated energy production, or how much power your panels can produce. It may also include your annual home electricity consumption before installing solar.
If your solar panel system comes with a battery storage system, you’ll likely see information about energy storage capacity, net metering or time-of-use rates, and more.
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Electric Details
Most contracts will include an overview of what you can expect your annual electricity usage and annual solar output to be. This helps to ensure that you have the right system size for your needs. The key factors that are used to determine system size include:
- Your family’s energy consumption habits
- The size of your home
- The efficiency of your home appliances
- Whether or not you plan to buy new appliances or an electric vehicle in the near future
Savings
Some contracts also contain a snapshot of expected average monthly electricity savings, or your estimated monthly utility bill once your solar panels start producing power. Your actual savings will vary based on multiple factors, including:
- Your energy consumption
- The amount of sunlight your solar panels receive
- Metering programs and electricity rates in your area
- Monthly service charges or fees
- Changes in electricity rates over time
5. Billing Overview
The Billing Overview section of the contract should explain the billing relationship between you and the utility company. If you live in a deregulated state like Texas, with third-party retail energy providers, that information will be explained.
Net Metering
One of the best ways to increase your savings with solar panels is through net metering programs, if one is available in your area. When you install solar panels, there could be times you generate more electricity than your home needs. With net metering, you can send that excess generation back to the grid for credit from your utility company on upcoming electric bills.
6. Warranty and Maintenance Information
The Warranty and Maintenance Information section provides a detailed overview of coverage for your solar panel system. You should thoroughly review this document so you know exactly what is covered before, during, and after the installation. For example, if one of the panels breaks during the installation process, you need to know whether or not the warranty covers that.
Also, you need to know what to do if your system needs repairs or maintenance in the future. Examine the contract for details about the complete warranty document.
7. Legal Provisions
This section outlines specific conditions that could cover you and/or the solar installer. For example, you might find circumstances such as:
- Waivers: You give up your right to claim something with a waiver. Check your contract to ensure there aren't any waivers you don't agree with. If there are, you should try to amend the contract before you sign, or refuse to sign the contract.
- Termination: This section outlines all the reasons you can legally terminate your solar panel contract. Note that there is likely a deadline after which you can no longer opt out. Make sure you fully understand the termination provision before signing the contract.
- Cancelation: This section outlines the reasons and terms for cancelation. For example, the contract may state that it can be canceled if either party does not live up to their end of the bargain. This could mean that the installer does not do the job as required, or that you don't do something you were asked to complete. Reimbursement may occur on either side, depending on the circumstances for cancellation.
- Arbitration: In this provision, you agree to bring in a mediator and try to settle issues outside of a court setting. If something goes wrong during the installation process, your contract might demand that arbitration be tried before going to court.
How to Evaluate Your Solar Contract
When you look at your solar contract, you should be evaluating it to see if everything works for you. It is essential that you understand what is in the System Overview, Financial Overview, Installation Overview, Energy Production & Savings, Billing Overview, and Warranty & Maintenance information. If you can't understand what is being said in each of the sections, then it is not a clear contract, and you should not sign it.
As long as you understand the different sections, you can use that knowledge to compare contracts from different solar companies to see who gives you the best offer. Keep in mind that the upfront price should not necessarily be the only deciding factor. You should examine the various details of the solar power system to see if they meet your home’s electricity needs, and provide the benefits that you’re looking for.
Also, we recommend you take the time to review what is and isn't included in the warranty and maintenance contract. Solar panels can last for 25 years or more! Make sure that you have the coverage you need for the long-term health of your system.
Remember: You are the one buying the solar panel system, so you want to choose the best fit for you. If you have any questions about the contract, reach out to the company and ask. If they cannot give you a clear and sufficient answer, move on to another company.
Don't ever settle for incomplete or insufficient answers simply because you like the price. A solar panel system is a significant investment, and you want to find the best fit for your family and home.
The Importance of Understanding Your Solar Contract
If you want to take your home to the next level by installing solar panels, it’s important to understand your solar panel installation contract. You want to have clear expectations going into the process, to ensure you receive the best service for your needs so you don't end up feeling like the company took advantage of you.
Installing solar panels and powering your home with renewable energy is great because you can save money and help the planet, but a poor experience with your installer can ruin those benefits.
When reviewing your solar contract, look thoroughly at each section and ensure you understand everything that is being said. If you don't, clarify it with the installation company. If they can't explain it to you, move on to another company. Also, make sure you fully understand all the legal provisions in the contract so you don't end up blindsided.
If you want to work with an established solar installer that puts your interests first, talk to Palmetto today. You can get started with our Free Solar Design and Savings Estimate tool to see how solar panels would look on your roof, and find out how much you could save every month.
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Cory O'BrienSenior Director - Growth MarketingCory brings over 8 years of solar expertise to Palmetto, and enjoys sharing that knowledge with others looking to improve their carbon footprint. A dog lover residing in Asheville, NC with his wife, Cory graduated from UCSB. If you run into him, ask him about the company he founded to rate and review beer!
