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If you want to use solar power for your home, your options include buying a system, leasing a system, or signing an agreement to buy solar power. Before you agree to anything, know what you’re getting. Depending on the option you choose, you might get certain tax breaks or need to take extra steps before selling your home. Never deal with a power or home repair company that pressures you for a quick decision, tells you to sign a contract without time to review, or asks you to pay in cash.

Is Solar Power Right for You?

There’s plenty to consider before you decide whether solar power is right for you. When you use a solar panel system — also called a photovoltaic or PV system — to produce power for your home, you won’t have to buy as much electricity from the utility company, and you get the benefits of renewable energy. Depending on how much power your system produces and how much power you use, you’ll probably still be buying some power from the local utility.

Before you decide to use solar power, and whether you’ll buy or lease a system, or sign a power purchase agreement (PPA), here are questions to ask:

  • Are you likely to save money on your bills? Look at your utility bills and add up the amount of “metered” electricity or kilowatt-hours (kWh) of energy you used in the last year. Also look at the other costs you pay for the utility’s fixed charges, like delivery or administrative costs. When you use solar power, you don’t pay for as many kilowatt-hours, but you’ll still pay the utility’s fixed charges.
  • How will things work with your utility company? Contact your utility to see what arrangements it makes with homeowners who produce solar power. Your utility may use “net metering,” which gives you credit for excess power your system makes and returns to the grid.
  • How long do you plan to stay in your home? A residential solar system is designed to stay on a home for at least 20 years. If you think you might move within 20 years, find out how buying and installing a system, compared to leasing a system or signing a PPA, might affect your ability to sell your house.
  • Do you have to get homeowners’ association (HOA) approval? If you have an HOA, find out if you have to get its approval to install a system.

Choosing a Solar Power System and Installer

The size of the system will depend on your average energy usage and your home’s characteristics and location. The Department of Energy’s customizable calculator can help you develop an estimate of how a system would work on your home. The amount of power you get from a solar panel system depends on

  • the size and strength of your system
  • the average number of hours of direct, unshaded sunlight your roof gets annually
  • the pitch (angle), age, and condition of your roof, and the direction it faces
  • environmental factors like snow, dust, or shade that may cover the system

When you’re looking for a company to install a solar power system for your home, consider the company’s experience, costs included in the bids, and whether the system design is the right size for your home.

Research companies

  • Ask friends, family, and neighbors for recommendations.
  • Check out a company’s history with your state and local consumer protection agencies and your state contractors licensing board. Ask if the company has the licenses, certificates, or bonding required by your state, county, and city. For example, your state may require an installer to have an electrical contractor’s license.
  • Find out what other people say about a company by searching online for its name and the words “complaints” or “reviews.”

Get bids

Compare detailed bids from several companies. Bids should have specific details in writing about the system, including

  • its size and how much power it’s expected to deliver
  • the full cost of installation, including any building or electrical permit fees
  • whether there’s a guarantee it will produce a certain amount of energy
  • what warranties apply to the equipment (like the panels and inverters that convert solar panel output so it can be used with your home’s electrical network) and the installation workmanship

Compare ongoing costs

When you own a system, you’re responsible for maintaining — or paying someone to maintain — the panels and equipment, unless the seller includes that in the contract. Your equipment may be covered by a manufacturer’s warranty for the initial period you have it.

Paying for a Solar Power System

When you buy, rather than lease, a solar power system, you pay the entire cost of the system when it’s installed. The cost depends on the size of the system. There are different ways to pay for your system or lower its cost.

Tax credits and other benefits

If you buy a system, you might be eligible for federal, state-specific, or local tax credits, or other incentives that aren’t available if you lease a system or have a power purchase agreement. Your utility company may give you credit for the power your system returns to the grid, depending on local rules.

Renewable energy certificates

If you buy a system, you might be able to get renewable energy certificates (RECs) related to the electricity your system produces. A REC is a document that proves your system generated a certain amount of renewable energy. You might be able to sell or get credit for RECs related to the electricity your system produces.

Have a home business? Keep in mind that if your home business has solar panels and sells away all its RECs, it loses the right to tell customers it’s using renewable energy.

Loans and special financing options

A solar panel system can be financed through a traditional home equity loan or financing arrangements with a bank, credit union, or finance company. Or, if your state is one of the few that participates in a Property Assessed Clean Energy (PACE) program, a solar panel contractor or home improvement company may offer you PACE financing.

When you get PACE financing, your county or state doesn’t lend you the money. Contractors or home improvement companies that sell solar panels and other energy efficiency improvements offer PACE financing, and a property tax lien is placed on your home. You repay the lien by paying an extra amount every time you pay your property tax bill. You must pay your property tax bill — with the extra amount included — on time when it’s due to avoid default and foreclosure. Some mortgage contracts may not let you add this type of lien to the property. That could be because a property tax lien for PACE financing takes priority over your home mortgage — which means, if you go into default or foreclosure, the PACE lien gets paid off before your mortgage does.

When you shop for a home equity loan or consider PACE financing, ask:

  • What will I pay up front?
  • What annual percentage rate will I pay?
  • How are the payments calculated?
  • Will the payments change during the financing term?
  • Is there a balloon payment?
  • For how long will I pay?
  • Will a lien be placed on my home or system?
  • Do I have a right to cancel this financing? What’s the deadline for cancelling?

PACE financing is different from a traditional home loan. A company offering PACE financing should be able to answer these questions:

  • Will my mortgage company let me add the kind of lien that PACE financing will place on my home?
  • Can a PACE lien affect my ability to refinance or sell my home?
  • Are there fees for early payoff of PACE financing?

Leases and Power Purchase Agreements

You might have the option to get solar power by leasing a system or signing a PPA. When you lease a system or have a PPA, you don’t own the system. That means you can’t claim RECs and aren’t eligible for tax credits or financial incentives. Those go to the system’s owner.

Solar power system leases

If you lease a solar system, a company installs the system on your house, and you sign a contract to use it. Typically, these kinds of contracts are long-term — some last 20 years. During that time, you’ll use all the power the system produces, which means you’ll probably buy less power from your utility. If the system produces more power than you need, and your utility uses net metering, the utility might credit your account for power the system returns to the grid. Your contract may say your monthly lease payments can increase over time. The leasing company will probably be responsible for system maintenance. After your contract ends, the company must remove the system and put your roof back in its original condition. But depending on your contract, it may be difficult and expensive for you to end a lease agreement before the end of the term.

Power purchase agreements

If you choose a PPA, a company installs a system on your house, and you sign a contract to buy power the system produces. These long-term contracts can last 20 years. Unlike leases, you’re not paying to use the system, and you don’t automatically get all the power it produces. Instead, you’re buying the power the system generates, at a price the PPA provider sets. Some PPA providers may charge you a lower rate for power because they get the tax credits and incentives.

Compare bids

Before you lease a system or sign a PPA, get detailed bids from several companies. Bids should give specific details about the system in writing, including its brand, size, and performance. Use the Department of Energy’s customizable calculator to estimate how much energy a specific system will produce at your home. 

A company may show you a comparison of what you might pay for energy over the next several years with and without using its system. It may estimate how much electricity rates will rise annually and suggest that you’ll pay less for energy if you use its system, because you’ll buy less power from the utility. But it’s hard to predict future utility rates because they can be affected by many factors.

For each bid, compare:

  • costs, including installation and monthly fees
  • the minimum power the provider says a system will produce, and what happens if the system doesn’t produce that amount
  • the warranties and repairs included, and how long they last
  • what happens if you need to repair your roof after the system is installed

Review the contract terms

Before you choose a company and sign a contract, check that the terms match what the company’s ads, proposals, and salespeople told you about:

  • how long the contract lasts
  • how much you’ll pay per month (with a lease) or per kilowatt-hour (with a PPA)
  • whether payments will increase, when they might go up, and by how much
  • whether you must pay any other costs or fees
  • whether the contract guarantees a minimum level of power, and how the company will pay if the system doesn’t produce the minimum amount of power
  • who’ll do maintenance and repairs, and whether you have to pay for them

The contract also should say:

  • who will get the tax credits, other incentives, and any RECs related to the system
  • what you must do to keep the contract in good standing, like paying your bill by a certain date, or notifying the company if you plan to sell your house
  • whether there are early termination fees or other charges if you want to end the contract early
  • if you can renew your lease or PPA, buy the system, or have the system removed when the contract ends, and how much those options cost

The contract might affect your options when you sell your house. For example:

  • Does it let you move the system to your new home? What will that cost?
  • Are you allowed to transfer the contract to the buyer? Do you have to send the company written notice before you transfer the contract?
  • Will the buyer have to meet credit requirements or pay any fees before taking over the contract?

Report Problems

If you have a problem with a system you bought, try to resolve it with the company first. If you’re not satisfied, report it to

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