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Solar Smart

Want to Go Solar?

When it comes to going green, especially utilizing solar energy, California leads the nation. Our solar industry is booming. It’s never been easier or more affordable to go solar. If you’re considering installing a residential solar energy system, there’s important information you need to consider so you can be “Solar Smart.”

Is Solar Power Right for You?

  • How Long Do You Plan to Stay in Your Current Home?

    It will probably take a number of years to recoup in energy savings the money you’ll pay for your solar system. As a result, if you’re thinking about moving within the next five years, you should carefully evaluate whether installing a solar energy system is a good idea right now.

  • Determine Your Current Use and How Much Your Electricity Costs

    Determine how much electricity you use each year, and how much you pay for each kilowatt-hour (kWh) from your current electricity provider. Also determine the breakeven point, when the money you save every month will equal the cost of the system.

  • Which Way Does Your Roof Point?

    Make sure your roof is oriented toward the southern (including southwestern and southeastern) sky, and isn’t shaded by trees or other obstructions that could limit the amount of energy your system can generate.

  • How Old is Your Roof?

    If your roof is less than seven years old, you might want to put solar off until it’s time to re-roof, so you can get the full worth of your current roof. The cost to remove and then put back a solar energy system when a roof needs replacement may be more than the money you’ll save by going solar.

Solar Isn’t Free

Although the sun is free, paying for a home residential solar energy system isn’t. The cost of a new solar system typically ranges from $15,000 to $35,000, depending on how many KW of electricity the system can produce, as well as the specific installation costs.

Also, some financing programs require that you pay off your solar system loan before you can sell or refinance your home.

Many of the solar-related complaints that consumers file with CSLB involve a lack of specificity of contract terms, or the use of complex terms that were not fully explained, or the glossing over of potentially important issues when a contract was signed.

Do your homework and make sure you fully understand the different financing options, so you can choose what’s best for you. Also, be sure to shop around and get bids from at least three licensed contractors.

Your Financing Options

The three most popular financing options are:

  • Buying

    You purchase your solar system with cash or a loan. Financing can be traditional home improvement loans, as well as other programs where payments can be added to either your property tax or utility bill. Common names for these type of financing programs are PACE, HERO, CHEEF, or REEL.

    Pros
    • The system may increase the value of your home.
    • You receive all tax credits and other available deductions and incentives.
    • You get all the electricity produced by the system at no additional cost, except for costs associated with maintaining and repairing the system.
    Cons
    • You’re responsible for the system maintenance and all repairs.
    • If you use one of the alternative financing options, your annual property tax or utility bill will increase, sometimes substantially, since the cost of financing the system is paid through additional taxes or fees on your property.
    • You’re out of luck if the system can’t produce enough electricity to pay for itself.
    • Some financing programs may charge above-market interest rates, may place liens against your property, or may require that the solar energy system loan be paid off prior to selling or refinancing your home.
    Things to Remember
    • Make sure that you have control over the payments being made to the contractor. Don’t allow your financial institution to make loan payments to your contractor before the work is performed. This places you at risk of having the contractor quit before completing the work, while leaving you responsible for paying for a system that you have not received.
    • Make sure you get mechanics lien release forms signed by your contractor, subcontractor and/or materials supplier(s). Otherwise, you run the risk of possibly having to pay twice if the general contractor fails to pay any subcontractors or materials suppliers who completed work on your home. Lien release forms are available on the CSLB website.
    • Make sure you get all sales pitches and claims regarding the benefits of solar energy system installation, especially those related to expected savings and power that will be produced, in writing. Verbal claims are difficult to prove.
    • Read the contract to make sure you understand what you’re agreeing to before signing.
    • Effective January 1, 2017, California law requires a financing estimate and disclosure document to be delivered to you before you sign up for one of the property assessment programs noted above (PACE, HERO, etc.). That document includes: a description of the products and costs, financing costs, an explanation to the homeowner about making payments via the property tax bill, and a notice regarding the potential requirement to pay the remaining balance of the assessment upon sale or refinance.
    • Be sure that you have received and read this disclosure document prior to signing any property assessment authorization or contract.

    Read the bill that enacted these new requirements (LINK)

  • Leasing

    You can lease a solar energy system for a fixed term (typically 20 years), during which time you’ll make fixed monthly payments (which may include an escalator clause) to the solar company while receiving the electricity the system produces.

    Pros
    • Little or no upfront costs
    • Ideally, you would pay less for the energy produced by the system over the term of the lease than you would have paid for the same amount of energy from your current electricity provider.
    • Solar company is responsible for system maintenance and all repairs.
    Cons
    • Since the solar company owns the system, they receive all tax credits and available deductions and incentives.
    • Selling your home during the term of the lease can become challenging. For example, solar energy system leases often require the homeowner to buy out the lease at a pre-determined price set by the solar leasing company before selling the home, or the person purchasing your home will have to agree to assume the lease. Some home buyers are reluctant to do that.
    • At the end of the lease, the solar company can remove the system if there is nothing in the contract that permits the homeowner to purchase the system at the end of the lease.
    Things to Remember
    • Check the contract to see you’re able to purchase the solar energy system after a certain amount of time.
    • Make sure you get all sales pitches and claims regarding the benefits of solar energy system installation, especially those related to expected savings and power that will be produced, in writing. Verbal claims are difficult to prove.
    • Read the contract to make sure you understand what you’re agreeing to before signing. Watch out for language in any contract that allows the company to place a lien on your home or accelerate payments (all payments become immediately due under the contract) if you miss a payment or fail to meet a contractual obligation.
  • Power Purchase Agreements (PPAs)

    The solar company installs the system at no cost to you and sells you the power it generates at an agreed upon rate.

    You agree to allow a company to install and own a solar system on your home, and you purchase the electricity produced at a pre-established price per kWh (often with an escalator clause). As with a lease, the company gets the tax benefits, and the sale of your home can become more challenging.

    Pros
    • Little or no upfront costs
    • You may be able to purchase the system outright during the terms of the agreement.
    Cons
    • You may be required to pay for all energy the solar energy system produces, even if you don’t use it.
    • Since the solar company owns the system, they receive all tax credits and available deductions and incentives.
    • Selling your home during the term of the agreement can get more challenging. For example, these types of agreements often require the homeowner to buy out the contract at a pre-determined price set by the solar company before selling the home, or the person purchasing your home will have to agree to assume the contract. Some home buyers are reluctant to do that.
    Things to Remember
    • Think of a PPA’s escalator clause like you would a variable rate home mortgage that goes up every year. Check to see if the solar company offers a fixed rate instead of a variable rate. Unlike an escalator clause that changes from year-to-year over the life of the contract, a fixed rate, much like a fixed-rate mortgage, would remain locked-in for the entire life of the PPA.
    • Make sure you get all sales pitches and claims regarding the benefits of solar energy system installation, especially those related to expected savings and power that will be produced, in writing. Verbal claims are difficult to prove.
    • Read the contract to make sure you understand what you’re agreeing to before signing. Watch out for language in any contract that allows the company to place a lien on your home or accelerate payments (all payments become immediately due under the contract) if you miss a payment or fail to meet a contractual obligation.

Other Things to Remember

  1. Check the License First

    There are thousands of licensed contractors in California who can legally install photovoltaic solar energy systems because they hold one or more of the following license classifications:

    Generally, solar sales representatives must be registered with CSLB as Home Improvement Salespeople (HIS) unless the sales negotiation is initiated by the prospective buyer at or with a general merchandise retail establishment that operates from a fixed location (a storefront operation). Click here to see the other limited exceptions to who must be registered as HIS.

    Do not use a contractor who is not licensed to perform solar work.

    Click here to check a contractor’s license or HIS registration status.

  2. Shop & Compare

    Get competing bids from at least three contractors, and research those you are considering. Ask for and check their references.

  3. Do the Math

    Don’t rely on a contractor or salesperson’s promises. Use all specific cost figures in writing, your current power costs, and your electricity usage to determine if solar makes sense for you. There are cost calculators available online to assist you. (See links in More Solar Resources section below) If you are considering a lease or PPA, make sure you understand any escalators that will increase the costs over time.

  4. Get it in Writing

    Once you select a contractor, make sure the contract you sign spells out everything you were promised, including all costs, the timeline for installation, and the exact equipment and number of panels to be used. Make sure the contract specifies that the contractor will pull all required building permits. If you were promised a minimum amount of power generation, be sure it’s written into the contract.

  5. Review the Contract Closely

    Take time to review the contract closely before you sign it. Look for any hidden costs that were not disclosed. Make sure the contract explains how potential problems (maintenance, warranty, dispute resolution, etc.) will be handled.

    For lease and PPA contracts, beware of excessive cost escalators; and read what happens if you want to sell your home, if you want to exit the lease early, or if the equipment does not perform as promised.

  6. Ask Questions

    Don’t hesitate to ask your contractor questions about the contract and the proposed installation. A good contractor will be happy to address concerns now to avoid misunderstandings later.

  7. Don’t Rush

    Do not be pressured into making a rash decision. The solar market in California is very competitive, and there is no need to rush into signing a contract. If you have second thoughts after signing, California law allows you to cancel the contract without any penalty within three business days. To avoid problems, do not allow construction to begin during this three-day rescission period.

More Solar Resources

Below are links to additional resources to help ensure you make informed decisions about what can be considered a complex investment. This is not an all-inclusive list, but is a great place to start.

While CSLB does not endorse these materials, the information linked here is provided by local, state, and federal agencies, public-private partnerships, or nonprofit groups.

Have we missed anything? Drop us an email and let us know how we can make this page better or send us suggested links to add to this list.

Solar Energy Basics (U.S. Department of Energy)

This is an overview of various solar technologies, including solar photovoltaic and solar water heating.

Solar Electricity Basics (Energy Upgrade California)

This is an overview of a basic solar installation, including how panels work, and related costs.

Guide to Solar Lingo (U.S. Department of Energy)

This is the U.S. Department of Energy’s handy glossary of solar terms.

Federal Trade Commission’s (FTC) Solar Power for Your Home Guide

This is the Federal Trade Commission’s guide that takes you through the important things to consider when thinking about solar.

Filing a Claim with FTC

This is where you go to file a complaint with the FTC. This is particularly helpful if you receive unwanted telemarketing calls, or think a company’s product doesn’t live up to its advertising.

National Utility Rate Database

This is a database where you can find current electricity rates in your area.

Consumer Solar Checklist (Interstate Renewable Energy Council)

This is a checklist of questions consumers should ask when considering a residential solar energy system.

Go Solar California (California Energy Commission / California Public Utilities Commission)

  • Solar Calculators

    This links you to a number of different online calculators that provide estimates of costs, paybacks, and electricity production for solar energy systems.

  • California Solar Initiative Incentive Calculators

    These calculators provides an estimated system size and incentive amount of a solar electric system.

  • Net Energy Metering Information

    This helps you understand how you sell power back to your power provider if your solar energy system produces more electricity than you use.

A Homeowner's Guide to Solar Financing – Clean Energy States Alliance/U.S. Department of Energy

This guide to financing options includes helpful checklists of questions to ask.

Clean Energy Financing (Center for Sustainable Energy)

This is an outline of some financing options available, including “Go Green Financing” and “Property Assessed Clean Energy” (PACE) financing.

California Hub for Energy Efficiency Financing (CHEEF)

This provides information on a public-private partnership among state agencies, utilities, and lenders. The financing program is administered by the California State Treasurer’s office.

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