Solar energy 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 a power purchase agreement. The option you choose can affect the amount of money you spend up front and over the life of the system, your ability to get certain tax breaks, and your obligations when you sell your home. Before making a commitment, evaluate the company, the product, the costs, and your obligations.

• solar power options

• Is solar power the right choice for you?

• How to buy a solar power system

• System lease and power purchase agreements

solar power options

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

If you purchase 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 a power purchase agreement (PPA), you may pay less up front and monthly payments may be lower, but you usually can't receive tax credits or other incentives – because the company that owns the system will get them. system. Even if you buy or lease a system, or have a power purchase agreement, you may still have to pay a portion of the power you use to your local power company.

Is solar power the right choice for you?

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

• Start by reviewing your electricity bill to see how much energy you used in the past year and how much it cost. Note how much of the total bill is “metered” electricity or kilowatt-hours (kWh) and how much is other items such as distribution costs. Even if you reduce the number of kilowatt-hours you buy from the utility company, you will still have to pay fixed service charges, such as distribution or administrative costs.

• Evaluate how you use energy, and look for ways to reduce electricity use in your home . To reduce your energy needs, maximize the energy efficiency of your home and your appliances, and make sure your home is properly insulated against outside temperatures.

• A residential solar system is designed to remain installed in a home for at least 20 years. Generally, system leases and power purchase agreements are also long-term, some lasting 20 years. If you think you might be able to move within that time frame, find out what effect having a system installed will have when you want to sell your home. Ask the solar company what the rules are that apply to transferring the contract to the new owner after the sale, and confirm that what they say is the same as what is stated in the contract.

• Calculate what size solar energy system you need to meet your average energy usage. Learn about the variety of products available in your area that best meet your home's energy needs. The Department of Energy has an individualized calculation tool where you can enter your address and system details to calculate how much energy you will produce.

• Solar power systems use one or more alternators to convert direct current (DC) electricity from solar panels into alternating current (AC) electricity that you use in your appliances and outlets. The amount of power you get from a solar panel system depends on the following factors:

o The average annual number of hours of direct, unshaded sunlight your roof receives.

o The slope (angle), age and condition of the roof of your house, and the orientation with respect to the cardinal points.

o The size and power of your system.

o Environmental factors such as snow, dust, or shade that may cover the system.

• Contact your electric utility company to find out what options are available to solar homeowners. Your electric utility company may use “net metering” which is a type of arrangement that pays you or gives you credits for excess energy produced by your system during the day that is returned to the electric grid.

• If you're part of a homeowners association, find out if you need to get their approval before installing the system.

How to buy a solar power system

If you buy solar panels. Costs vary depending on the size of the system, but panels can typically cost as much as a new midsize car. You could pay for your system with a home equity loan, or get financing through the installer, a bank, a credit union, or a finance company. You may have a state or local financing program, such as a clean energy user program, such as the PACE program, that 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 up front?

How are your payments calculated?

Will the amount of the installments change throughout the duration of the loan?

Will you have to make a balloon payment?

Can the lender establish a collateral pledge on your house or system?

Incentives and benefits

If you purchase a system, you may be eligible for federal, state or local tax credits or other incentives. The federal renewable energy tax credit 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 from installing a solar energy system. Depending on local net metering rules, your utility company may pay you for the amount of energy your system returns to the grid. You may also be able to sell the extra electricity your system produces or get credit for Renewable Energy Certificates (RECs). 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 out of a residential address, that has solar panels sells all renewable energy certificates, it loses the right to tell its customers that it is using renewable energy. This is important to keep in mind if you operate a business from home and want to claim that you use renewable energy.

Analyze the proposals

Compare detailed proposals from various companies. 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 any charges for building 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 current alternators) and to the labor of the installers.

If you own a solar power 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 repair or replacement of the current alternator, or 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 looking for a company, ask friends, family, and neighbors for referrals. Check a company's background with the appropriate state or local consumer protection agencies and with state boards that issue licenses to contractors. Ask if the company you are considering has the licenses, certificates or endorsements required by the authorities in your state, county or city of residence. For example, your state might require the installer to have an electrician's license. Also do an internet search by entering the company name and see what you find.

System lease and power purchase agreements

If you want to go solar but don't want to buy a system, you could lease a system or sign a solar purchase agreement. In both cases, you will have a solar power system installed on your home. Typically, when you lease or sign a power purchase agreement, you cannot claim renewable energy certificates and are not eligible for tax credits or financial incentives because the recipient owns the system.

Lease

If you enter into 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 power the system produces, and you'll probably reduce the amount of power you buy from your utility company. If the system produces more power than you need and your electric utility uses net metering, the utility may pay you or credit your account for the amount of power that the system returns to the grid. Your contract may establish a progressive increase in the amount of your monthly payment. The system is likely to be maintained by the leasing company.

Power purchase agreement

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

If you lease a system or have a power purchase agreement:

Analyze the proposals

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

A company might show you a comparison of what you could pay for energy over the next few years with and without the system. This comparison can estimate the yearly increase in the utility company's rates, and could suggest that you'll pay less if you use their system because you'll be buying less energy from the utility company. But since the energy rates of the electricity supply company depend on various factors, it is difficult to predict future rates.

Please read the proposals carefully. Compare what they say about:

The costs, including installation charges and monthly payments.

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

What will happen in the event of 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 the vendors 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 a power purchase agreement, or PPA).

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

If you have to pay any other costs or charges.

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

Who will provide the maintenance and repair service, and whether you will be charged for those services.

The contract should also say:

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

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

What you must do to keep the contract valid, for example, pay your bill by a certain date or notify the company if you plan to sell your home.

What will happen if you want to end the contract early? Will there be an early termination fee or any other fees?

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

If you sell your house

Find out if the contract will have any effect on your ability to sell your home. The provisions of the contract:

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

Do they allow you to transfer the contract to the buyer of your home?

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

Do you require the buyer to meet credit requirements or pay any fees before entering into the contract?

If you think a company's product doesn't live up to its advertising, you can file a complaint with the FTC and with your state consumer protection agency .