Solar contracts are filled with industry jargon and terminology that can be confusing for homeowners. Understanding these terms is the first step to knowing whether your contract is fair—and what options you have.
Contract Types
Solar Lease
You rent the solar system from the company and pay a fixed monthly fee. The company owns the equipment and is responsible for maintenance. Typical terms are 20-25 years.
Power Purchase Agreement (PPA)
Instead of renting equipment, you agree to buy the power the system produces at a set rate per kWh. The rate often increases annually (escalator). The company owns and maintains the system.
Solar Loan
You borrow money to purchase the solar system outright. You own the equipment but owe monthly payments on the loan. Interest rates and terms vary widely.
Key Contract Terms
Escalator Clause
The annual percentage your payment increases each year. A 2.9% escalator means if you pay $100 today, you'll pay $102.90 next year, $105.88 the year after, and so on. Over 25 years, this compounds dramatically.
Buyout Amount
The price to purchase the system or exit the contract early. Often calculated as the remaining value of the lease or the "fair market value"—which solar companies define in their favor.
Transfer Fee
The amount charged when you sell your home and transfer the solar agreement to the new owner. Can range from $0 to several thousand dollars.
UCC Filing / Solar Lien
A claim the solar company places on your property or the equipment. This can complicate selling or refinancing your home.
Production Guarantee
A promise that the system will produce a minimum amount of energy. Good contracts include this; bad contracts don't.
Arbitration Clause
A provision requiring disputes to be settled through arbitration rather than court. This limits your options but doesn't eliminate them entirely.
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