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If you’ve ever thought about installing solar panels on your home, you’ve probably heard of SolarCity. Headquartered in San Mateo, California, SolarCity is the largest solar company in the country, and primarily offers solar leases and power purchase agreements (PPAs) to homeowners. Do you have a SolarCity proposal in hand? Read on for a guide on how to evaluate your SolarCity quote.

Understanding the Basics: How SolarCity Leases and PPAs Work

When you sign a SolarCity lease or PPA, you give the company permission to install solar panels on your roof and agree to pay the company each month for the electricity that they generate. If you sign a lease, you pay a flat monthly “rent” to SolarCity in exchange for electricity; if you sign a PPA, you commit to paying a fixed rate per kilowatt-hour (kWh) for the electricity that your solar panels generate. Both SolarCity leases and SolarCity PPAs typically have 20-year terms.

What to Look For When Evaluating a SolarCity Lease Agreement

SolarCity lease and PPA proposals all contain common points of information that can help you evaluate your long-term solar savings. Here’s a quick guide to help you understand your SolarCity quote.

Terms included in a SolarCity Power Purchase Agreement.

Monthly payments due to SolarCity: Every SolarCity offer will be based on either a per-kWh rate (in the case of a PPA) or a flat monthly payment (in the case of a lease). This is one of the most important numbers in your SolarCity quote. For the economics of a SolarCity lease to make sense, your monthly payments should be significantly lower than an average electricity bill from your utility.

Annual payment increase (also known as the “escalator”): It’s important to note that the monthly payment indicated in your SolarCity lease or PPA offer is only your rate in the first year. There is typically an annual rate increase of around three percent per year built into the agreement. In the example above, the year one rate for the PPA is 12.5 cents, but by year 20, the 2.9% escalator will result in a rate of 21.5 cents per kWh (look at the fine print at the bottom to see where the 2.9% increase is mentioned).

Electricity rates (and rate increases) can vary significantly by state across the country. Use the U.S. Energy Information Administration, a federally funded resource for energy statistics and analysis, to get context about what sort of rate increase to expect in your state. The EIA has information about historical per-kWh rate increases as well as projections for future electricity rates. Make sure to double-check if the EIA is projecting a rate of increase that’s less than what SolarCity’s offer entails.

System production: How much of your electricity use can you expect your solar panels to meet? Understanding how much electricity your panels will generate, and how much electricity you will need to buy from your utility, can give you a sense of your total monthly costs.

The estimated energy mix metric can also help you ensure that your system is the right size for your home. In most cases, you don’t want a system that will produce more electricity than you can use. If SolarCity installs a system that produces more electricity than you use, you could end up paying SolarCity for more electricity than you actually need.

Assumptions: The values that SolarCity provides in their offers to consumers are based on estimates. You can find the information that they use to make those estimates at the end of your offer on the “Assumptions” page. Be sure to review these assumptions carefully and confirm that your electricity bill information and other data are accurate for your home, and that the system size and characteristics are what you expect. Don’t be afraid to ask clarifying questions!

Questions to Ask When Reviewing a SolarCity Quote

A preliminary SolarCity quote doesn’t contain all of the information that will be included in your final contract. Before you sign on the dotted line, there are a few more questions you should ask your SolarCity energy consultant:

Is there a performance guarantee? A performance guarantee ensures that your system will produce a certain amount of electricity so that you get what you pay for. In the unlikely event that your system malfunctions, the performance guarantee is your recourse with the company. Make sure you have one in your contract.

Did you make any changes to the design of the system? Your system’s design isn’t finalized until you receive the final contract from SolarCity. Make sure to confirm that there haven’t been any significant changes to the physical design and layout of your solar panel system since you reviewed the preliminary design in your original offer. For example, check if any new panels been added, or if their location on your roof has changed.

What are the terms of the warranty? The initial offer that you receive will have an overview of terms for warranties and repairs, but you should review the fine print in your final contract to understand what is and is not covered in your warranty.

What are my options when the agreement ends? Most homeowners will have the option to either extend their agreement with its existing terms, upgrade to a new system under a new contract, or have SolarCity remove the system at no cost.

How to Compare a Solar Lease or PPA to a System Purchase

Whether you choose to buy or lease your solar panels is dependent on your motive for going solar. While owning your solar panels does offer significantly greater 20-year savings, solar leases are often a simpler option and can be a better deal for homeowners who can’t take advantage of tax credits or other rebates and incentives.

Most solar leases require $0 down, and solar leasing companies make it easy for you to sign an agreement on the same day. However, solar leases and PPAs are still 20-year contracts with significant financial commitments that require you doing your homework first. As with any other major financial commitment, shopping around is the best way to ensure that the solar financing option you select is the best option for you. Getting multiple offers from local solar installers on the EnergySage Solar Marketplace is an easy, free way to review all of your solar options and find the best fit.

Homeowners with pre-existing SolarCity quotes in hand are encouraged to join, and compare their SolarCity offer with competing offers from local solar installers on EnergySage.