Before signing a solar contract, check six things: the price and payment terms, the system details, the warranties, the installation process, what happens if you sell, and how to cancel. If you can't find one of them in the contract, ask before you sign.
A solar contract can run 20 pages or more, and most homeowners skim it. Here's what to look for in a solar contract, in plain English. If you want a refresher first, here's how a solar escalator works.
Take your time before signing a solar contract
A good solar company will give you time to review the contract at home. If someone pushes you to sign the same day, that's a red flag. Read your solar contract start to finish, and ask questions about anything you don't understand. It's a long-term investment, so a few extra days is nothing.
Solar lease, PPA or loan: what kind of contract is it?
Start by knowing which kind of solar contract you're looking at:
- Solar lease: you pay a monthly payment to use the system. The company owns it.
- Power purchase agreement (PPA): you pay for the solar energy the system makes. The company owns it.
- Purchase with cash or a solar loan: you own the system. You'll sign a solar installation contract with the installer, plus a loan agreement with the financing company if you borrow.
Leases and PPAs often include an escalator, which raises your payment every year. Here's how a solar lease and a PPA differ.
1. The price and payment terms
A well-written contract shows exactly what you'll pay and when. Look for:
- System cost and cost per watt if you're buying, so you can compare quotes fairly.
- Any upfront payment and when it's due.
- Your monthly payment for a lease or PPA, and the escalator rate. A good contract shows your payment for every year, not just year one.
- Loan terms if you're financing: the rate, the length and any fees.
Pay close attention to the escalator. A 2.9% escalator roughly doubles your payment over 25 years, and a 3.5% escalator is high enough to deserve a closer look. If a salesperson said your rate is "locked in," check the contract. Often only the percentage is locked, while the payment keeps climbing.
2. The solar panel and system details
The contract should list the system size, the solar panel and inverter brands, and the estimated annual production in kilowatt-hours. Compare that energy production to your annual electricity use from your utility bill. A system that's too small leaves you buying more power from the grid.
With a lease or PPA, look for a production guarantee. It protects you if the system makes less solar power than promised, since your lease payment doesn't drop when the panels underperform.
3. The warranties
Most solar contracts include a few different warranties. Know what each warranty covers and for how long:
- Manufacturer warranty: covers the panels and inverter themselves. This is usually a product warranty plus a performance warranty that promises the panels keep most of their output for about 25 years.
- Workmanship warranty: covers the installer's work, like wiring and roof penetrations. Terms vary a lot from company to company.
- Roof warranty: covers leaks where the panels are mounted.
Read the exclusions. A warranty with a long list of exceptions may cover less than it sounds like.
4. The installation process
The contract should explain who handles each step of the installation process:
- Pulling the building permit from your town
- Interconnection with your local utility, the approval to connect your system to the grid
- Scheduling and a rough timeline for the solar installation
- Who pays if the panels have to come off later for roof work
Also check that the installer carries general liability and workers' compensation insurance. That protects you if something goes wrong on your roof.
5. What happens if you sell your home
Most leases and PPAs transfer to the buyer, who has to qualify and agree to take over your payments, escalator included. Check how the transfer works, whether you'll pay a fee, and whether you can buy out the contract instead. An owned system can add value to the house, but a lease is a contract the buyer has to accept.
6. Cancellation and disputes
Many home solar contracts give you a three-day cancellation window after signing, often because of federal and state rules for sales made in your home. Find the deadline and how to give notice before you sign, not after.
Also look for an arbitration clause. It means disputes go to an arbitrator instead of court. That's common, but you should know it's there.
Understanding your solar contract: key terms in plain English
Solar contracts are full of jargon. Here are a few key terms you'll see:
- Escalator: the yearly percentage your lease or PPA payment goes up.
- Production guarantee: a promise about how much energy the system will make.
- Interconnection: the utility company's approval to connect your system to the grid.
- Buyout: paying off a lease or PPA early to own the system.
- Arbitration: settling disputes outside of court.
Comparing more than one offer? Here's how to compare two solar quotes with different escalators.
Not sure what your contract says?
Send it to Mark. He'll walk through it with you and find you an option with no escalator.
Mark, review my quoteFAQs About Solar Contracts
Can I cancel a solar contract after I sign?
Usually, but only for a short time. Many home solar contracts include a three-day cancellation window. The contract should spell out the deadline and how to give notice, so find it before you sign.
Can I negotiate a solar contract?
Often, yes. The price, the escalator and some terms can move. Ask for every option in writing before you commit to one.
Is solar power a good long-term investment?
It can be, if the contract is fair. The same solar panels can be a great deal or a poor one depending on the price, the escalator and the warranties, which is why the contract matters as much as the equipment.
Should a lawyer review my solar contract?
For a 20 to 25 year commitment, it's not a bad idea. Mark isn't a lawyer, but he can walk you through the pricing, the escalator and the terms that affect what you pay.
About Mark Featherstone
Mark has been in solar for over 12 years, working at some of the biggest solar companies in the country, before co-founding Your World Solutions. His goal is simple: help homeowners get into solar deals that actually work for them, and make sure they understand every part of it before they sign.
This article is for general informational purposes only and isn't financial, legal or tax advice. Numbers and examples are estimates for illustration. Actual payments, savings, utility rates and contract terms vary and aren't guaranteed, and rates and program rules can change over time. Review your own contract and talk with a qualified professional before making a decision.