Everything you need to know before buying solar panels for your home

If you want to use solar energy in your home, you have several options. You can buy or lease a system or sign an energy purchase contract. The option you choose can affect the amount of money you spend in advance and during the life of the system, the possibility of obtaining certain tax breaks and your obligations at the time of selling your home. Before assuming a commitment, evaluate the company, the product, the costs and their obligations.

If you feel tempted to buy or rent solar panels for your home, seduced by the promises of saving energy, before making a commitment, evaluate the company, the product, the costs and obligations, recommends the Federal Trade Commission.

 

Everything you need to know before buying solar panels for your home

This federal agency gives you a series of recommendations whether you decide to buy or rent the panels. Both options involve making a purchase or sale contract for at least 20 years. 

What happens when you put solar panels in your home to produce energy is that you buy less electricity from the power supply company.

It is not that you are not going to pay anything to the electricity supply company for your light consumption, but according to the Department of Energy, most houses with solar panels get at least 40% of the energy through this system.

The amount to continue paying for electricity depends on the energy produced by your panels and the amount you consume in your home.

Credits in your taxes?

If you buy solar panels you could receive credits in your taxes or other financial incentives that offset the initial cost. 

If you decide to rent the solar panels, you may have lower monthly fees, but the credits and incentives are taken by the company that owns the system.

 

Does solar energy suit me?

To determine this, first check your electricity bill to see how much you consumed last year and how much you paid. Notice which part corresponds to the measured electricity or kilowatt hours and how much to the distribution costs. Although when installing the panels you reduce electricity consumption, you will continue paying for distribution or administrative costs. 

Perhaps before deciding to make a major purchase of solar panels, it is convenient for you to find out how to reduce the consumption of electricity in your home and make sure you have insulation against extreme temperatures.

Analyze how long you plan to live in your home. Solar panels are designed to remain installed in your home for at least 20 years. Find out the impact the panels will have at the time you want to sell your home.

If you buy solar panels, you could pay with a home equity loan or get financing through the installer, a bank or a financial company. You may be able to access a state or local financing program to repay your loan through your property tax bill.

If you are looking for a loan, ask how much you will pay in advance, the annual interest, how the payments are calculated, if the monthly installments are fixed, and if the lender can establish a pledge in guarantee on your house or mortgage.

Nelson Santiago of Consumer Action, a consumer advocacy organization, gives basic advice to those who plan to buy or rent solar panels,  any promises made by sellers or the company that remains in writing. 

 

Solar power options

If you use a solar panel system – also called a photovoltaic or PV system – to produce energy, you buy less energy from the power supply company and enjoy the benefits of renewable energy. The Department of Energy says that most houses with solar panels get at least 40% of the energy from the solar energy system; That percentage varies depending on each house. The possibility that solar energy meets all your energy needs will depend on the amount of energy your system produces and how much energy you consume.

If you buy a solar panel system, you may qualify for tax credits or other financial incentives that offset the initial cost. If you lease the system or have an energy purchase contract (PPA), you can pay less in advance and the monthly fees may be lower, but you usually cannot receive tax credits or other incentives – as they will be obtained by the company that owns the system. Even if you buy or lease a system, or have an energy purchase contract, you will probably have to continue paying a portion of the energy you consume to the local power supply company.

Is solar energy the right choice for you?

If you are thinking about using solar energy in your home:

• Start by checking your electricity bill to see how much energy you consumed during and last year and how much it cost. Note that part of the total bill corresponds to “measured” electricity or kilowatt hours (kWh) and how much corresponds to other concepts such as distribution costs. Even if you reduce the amount of kilowatt hours you buy from the power supply company, you will still have to pay the fixed service charges, such as distribution or administrative costs.
• Evaluate how you use energy, and look for ways to reduce electricity consumption in your home. To reduce your energy needs, maximize the  energy efficiency  of your home and your home appliances and make sure your home is  properly insulated  against external temperatures.
• Consider how long you will remain living in your home. A solar system for residential use is designed to remain installed in a house for at least 20 years. In general, contracts for the lease of a system and those for the purchase of energy are also long-term, some last 20 years. If you think you could move within that period, find out the effect of installing a system when you want to sell your home. Ask the solar company what are the rules applicable to the transfer of the contract to the new owner after the sale, and confirm that what they say is the same as stated in the contract.
• Calculate the size of the solar energy system you need to meet your average energy consumption. Find out about the variety of products available in your area that best meet the energy needs of your home. The Department of Energy has an individualized calculation tool   where you can enter your address and system details to calculate how much energy it will produce.
• Solar energy systems use one or more alternators to convert direct current (DC) electricity from solar panels into alternating current (AC) electricity, which is what you use in your home appliances and in outlet connections or outlets. The amount of energy that is obtained from a solar panel system depends on the following factors:
  • The average annual amount of hours of direct sunlight without shade your roof receives.
  • The decline (angle), age and condition of the roof of your house, and the orientation with respect to the cardinal points.
  • The size and power of your system.
  • Environmental factors such as snow, dust or shadow that can cover the system.
• Contact your power supply company to find out what the options are for homeowners who produce solar energy. Your power supply company may use “net measurement” which is a type of arrangement that pays or credits you for the excess energy produced by your system during the day and that returns to the power grid.
• If you are part of a homeowners association, find out if you need to get their approval before installing the system.

How to buy a solar energy system

If you buy solar panels, you pay the cost of the complete system. The costs vary depending on the size of the system, but usually the panels can cost as much as a medium new car. You could pay your system with a home equity loan, or get financing through the installer, a bank, a credit union or a financial company. You may have a state or local financing program, such as a program for clean energy users, for example the PACE program, which allows you to repay a loan through your property tax bill. If you are looking for a loan , ask the following:

How much will you pay in advance?

What is the percentage rate that will be applied annually?

How are your payments calculated?

Will the amount of fees change over the duration of the loan?

Will you have to make a lump sum payment?

Can the lender establish a pledge in guarantee on his house or system?

Incentives and benefits

If you buy a system, you may qualify for credit for federal, state or local taxes or other incentives. The credit for the federal renewable energy tax for homeowners is equal to 30% of the cost of the system. This credit will expire at the end of 2016. The Department of Energy has information on specific state incentives for the use of renewable energy.

You may also receive other benefits for the installation of a solar energy system. Depending on the local net measurement rules, your power supply company may pay you the amount of energy your system returns to the grid. You may also be able to sell the extra electricity produced by your system or obtain credit for renewable energy certificates (REC). A renewable energy certificate is independent of the amount of electricity produced; It is a certificate stating that you generated a certain amount of renewable energy.

When a business, including a business operating in a residential home, which has solar panels sells all renewable energy certificates, it loses the right to tell its customers that it is using renewable energy. It is important that you consider it if you operate a business from home and want to claim that you use renewable energy.

Analyze the proposals

Compare the detailed proposals of several companies. The proposals should contain the specific details of the system, namely:

The expected performance of the equipment and the size of the panels.

The total cost of installation, including all charges for construction permits or necessary electrical work.

If the production of a certain amount of energy is guaranteed.

What are the guarantees applicable to the equipment (such as panels and power alternators) and to the labor of the installers.

If you own a solar energy system, you have to maintain the panels and equipment – or pay someone to do the maintenance work – unless the seller includes it in the contract. Maintenance could include the repair or replacement of the power alternator, or the occasional cleaning of the panels in case of low rainfall. Your equipment may be covered by the manufacturer’s warranty for an initial period.

The company

When you are looking for a company, ask for references to friends, family and neighbors. Check the background of a company at the corresponding state or local consumer protection agencies and before state boards that issue contractor licenses. Ask if the company you are considering has the licenses, certificates or guarantees required by the authorities of your state, county or city of residence. For example, your state may require the installer to have an electrician’s license. Also do a search on the internet by entering the name of the company and check what you find.

Contracts for leasing a system and purchasing energy

If you want to use solar energy but do not want to buy a system, you could lease a system or sign a contract to purchase solar energy. In both cases, you will have a solar energy system installed in your home. Usually, when you lease or sign an energy purchase contract you cannot claim renewable energy certificates and you are not eligible to access tax credits or financial incentives , because the recipient is the owner of the system.

Lease

If you make a lease or rental agreement, the company installs a system in your home and you sign a contract to use the system. The contracts are long term, some last 20 years. During that time, you can use all the energy the system produces, and it will probably reduce the amount of energy you buy from your electricity supply company. If the system produces more energy than you need and your electricity supply company applies the net measurement, the company may pay or credit your account for the amount of energy that the system returns to the grid. Your contract could establish a progressive increase in the amount of your monthly payment. The maintenance of the system is likely to be the responsibility of the leasing company.

Energy Purchase Contract

With a power purchase contract or PPA, a company installs a system in your home and you sign a contract to buy the energy produced by that system. The contracts are long term, and can last 20 years. Unlike what happens with the lease, you don’t pay to use the system, and you don’t automatically get all the energy the system produces. You only pay the amount of energy you consume, at a price set by the supplier of the energy purchase contract. Some energy purchase contract providers say they charge a reduced fee for energy because they get tax credits and incentives.

If you rent a system or have a power purchase contract:

Analyze the proposals

Get detailed proposals from several companies. Proposals must contain the specific details of the system, including its brand, size and performance. To calculate how much energy a specific system will produce, you can use the individual calculation tool of the Department of Energy.

A company could show you a comparison of what you could pay for energy over the next few years with and without the system. In this comparison you can calculate the annual increase that the rates of the electricity supply company will have, and they could suggest that you will pay less if you use your system because you will buy less energy from the electricity supply company. But as the electricity supply company’s energy rates depend on several factors, it is difficult to predict future rates.

Read the proposals carefully. Compare what they say about:

Costs, including installation fees and monthly payments.

The minimum amount of energy a system will produce, and what will happen if the system does not produce that amount.

What will happen if there is a power outage that affects the system installed on the roof?

The guarantees and repairs included and their validity.

What will happen if you need to repair your roof after installing the system?

Read the contract

Before choosing a company, read the contract. Check that the terms of the contract match what the ads and proposals say and what sellers told you. Be clear about the following:

Duration of the contract.

What you will have to pay per month (with a lease) or per kilowatt hour (with an energy purchase contract or PPA).

If you will increase the amount of your payments throughout the contract. If so, find out when and how much they will increase.

If you have to pay some other costs or charges.

If the contract includes a “performance guarantee” and how the company will pay you in case the system does not produce the minimum amount of energy.

Who will provide the maintenance and repair service, and if any charges will apply for those services.

In the contract you must also say:

Who will receive tax credits or other incentives related to the system.

Who will keep the renewable energy certificates generated by the system.

What should you do to maintain the validity of the contract, for example, pay your bill on a certain date or notify the company if you have plans to sell your home.

What will happen if you want to end the contract early? Will you be charged for early termination or any other charges?

What will happen to the system when the contract ends? Can you renew your lease or energy purchase contract? Can you buy the system? Uninstall it? How much does each of these options cost?

If you sell your house

Find out if the contract will have any effect on the possibility of selling your home. The provisions of the contract:

Are you allowed to move the system to your new home? How much will it cost?

Are you allowed to transfer the contract to your home buyer?

Do they require you to send a written notice to the company if you want to transfer the contract to your home buyer?

Do they require the buyer to meet the credit requirements or pay some charges before assuming the contract?

If you think that a company’s product is not up to what your advertising says, you can file a complaint with the FTC and your state consumer protection agency .

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