How to read your solar proposal
Congratulations! You’ve taken a big step towards going solar and have at least one solar proposal from an installer. Now what? The most important thing is to have confidence that you are making the right decision for you. Confidence comes from knowledge and that comes from asking questions. We have a list of common questions in our Solar FAQ guide to reference during the process.
Five key considerations
1) Total cost of your system before incentives: This price should reflect the total “turn key” cost including design, permitting, etc. In many cases, the installer can adjust the proposed solar array size up or down to fit within a specific budget or desired level of energy production and performance. Even smaller systems provide a similar payoff period but will cost less upfront.
2) Your solar array’s size: Solar arrays are measured by their total power capacity in kilowatts (kW). Solar modules can vary in power capacity between 250 – 400 Watts. For reference, 1000 Watts is equal to 1 Kilowatt. If your proposal only gives you the number of modules that your system has, you do not have a full picture of how much electricity your system will produce. Add up your number of solar modules and multiply by their wattage to get system size. For example, sixteen 350 watt modules would be a 5.6 kW system.
3) Does the system meet your consumption needs? A recent electricity bill will give you an idea of how much electricity you use each year. This will help determine the size solar array you will need, and how much of your consumption you can offset with it. Electricity is measured in kilowatt-hours (kWh). Your proposal should include how many kWh your solar array is expected to produce on a yearly basis and how much of your annual electricity usage will come from solar. The answer will depend on the solar conditions at your site (including roof angle and shading) and some other assumptions taken by the installer when they generate your proposal. If you see big differences in kWh estimates between proposals from different installers for systems of similar size, ask each installer to explain the assumptions they used when making their estimate. If your system does not cover all your energy consumption, you can also look into energy efficiency upgrades to cover the difference. It may also be helpful to inform your installer if you are planning to buy an electric vehicle or make other home improvements that will increase your energy consumption.
For more information on how your solar array is sized and on average kWh estimates for a given system size (in kW), check out our Solar FAQ: How do I decide how big my system should be?
4) Know your system’s dollar per watt cost ($/W): This is an easy way to compare your system to average prices in the area. A lower $/W generally gives a quicker return on investment. This number is sometimes left out of a proposal but is easy to calculate. Take the total cost you will pay before incentives and divide by the total Watts of your system. For example, if your proposal shows a 5kW (or 5,000 Watt) system size and the installed cost is $15,000 then your cost per Watt is $3.00 ($15,000 divided by 5,000 Watts).
Now that you have the $/W price of your system, you can see how it stacks up to other proposals.
5) Verify the electricity cost and escalation assumptions: In solar proposals, the assumed cost of electricity from the utility before solar (“utility cost per kWh”), and the assumed rate at which those electricity costs will rise over time (“utility escalator”) are critical to how much electricity savings your array can be expected to generate. First, make sure the utility cost per kWh matches reality. You can do this by looking at a recent electricity bill, taking the total kWh used in that billing period and dividing it by the cost of the bill minus what are called “fixed charges”, or charges that are not by the kWh. If you aren’t sure how to do this, feel free to contact us for help. Second, confirm the utility escalator used. It is common for proposals to assume a 3% or 4% rise in electricity costs. While this may be true based on historic patterns in some areas, we recommend using no more than 2% to ensure your energy savings prediction is more conservative.
What else should I be paying attention to?
- How much does the proposal say you will save over the life of the system and what are the assumptions used in the estimate? The three most important assumptions are the amount of energy the solar array will produce over its lifespan, the current cost of electricity from your utility, and how fast that cost of electricity is assumed to rise over time.
- Specific equipment to be used: Make and model of panels; Inverters manufacturer and type; Roof attachments
- The details of your equipment warranties
- A contract that includes 1) Details on the workmanship warranty provided; 2) How roof leaks claims are handled; 3) How to exercise your warranty;
- Estimated timeline of permitting, installation, and interconnection
- Did the installer accommodate your requests to address any aesthetic concerns you may have about how the array will look from the ground? This might include a choice of different module style or color, decisions on where to route metal conduit, and add-ons like array skirts that make the array blend in to the roof more.
- System monitoring availability and cost
- Expected milestone payments for the contract (for cash and loan purchases)
- Are there additional fees/charges incurred for applications/permits?
- Is there a charge for helping you get approval from your homeowner’s association?
- Available financing options (if you’re not paying cash)
- Questions for leases and power purchase agreements (PPA)
- Company experience and qualifications:
- Are they a licensed contractor in the jurisdiction where you live?
- How many installations have they done in your area?
- How long have they been in business?
- Do they have any NABCEP-certified solar professional staff members?
- What do their reviews look like online?
We recommend getting at least 3 proposals so that you can see the differences in price, warranties, electricity offset and other factors you consider important. If you would like a more in-depth comparison of your solar proposals, consider buying the proposal comparison service from our store. We will provide a detailed analysis of up to three proposals.
- Solar Energy Industry Association transaction disclosure samples – You can review these examples for cash, lease, and power purchase agreement (PPA) contracts to make sure your agreement with your installer answers all the important questions.