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Solar Power Purchase Agreement Definition, and Financial Contract Terms - Solar Definitions Part 3

Apr 27, 2020

Continuing our Solar Glossary series, we’re wrapping up with Part 3: terms related to financing, contracts, and purchasing solar. These would not be as exciting as a brand new solar and storage system on your house, but these are some of the most important terms you’ll need to know before going solar.

Community solar: A shared solar system that serves more than one home, household, or group of buildings. Community solar systems can range from a system for an apartment complex, a community garden, or an entire neighborhood of single-family homes.

Federal investment tax credit (ITC): This is a financial incentive in the U.S. that’s meant to help people buy a solar system — either through cash payment or financing. The ITC reduces the total amount paid by 26% in 2020, and 22% in 2021. That price reduction is paid back to the customer through a credit on federal taxes.

Net metering: This is a system your local utility may or may not employ to credit you for excess electricity your system produces if that energy goes back into the grid and isn’t stored on-site by a battery. Net metering usually appears as a credit on your utility bill.

Peak Hours: These are the hours when electricity demand is highest in your area, according to your local utility company. It’s also when you pay the highest amount per kWh for your electricity usage. During summer, peak hours are usually weekdays from 10:00 am- 8:00 pm, and during winter, weekdays in the morning and night. But these peak hours vary by utility, so be sure to check with yours.

Property-Assessed Clean Energy (PACE): This is a special loan created specifically for clean energy improvements to your home. It can be used for solar systems. Unlike traditional solar loans, PACE loans are usually repaid through your annual property tax bill rather than monthly payments.

Power purchase agreement (PPA): This is often what solar companies call their “contract” — it’s the agreement you’ll sign with a solar company before they can install the system.

Solar lease: Not to be confused with financing or a loan, a solar lease is essentially a rental contract that allows for a solar system to be installed for your home, and in return, you pay a monthly fee. Keep in mind with a solar lease, you will NOT own the system.

Solar loan: A loan a solar customer obtains through a local or national bank specifically to purchase a solar system.

Installer: A company that plans and physically installs your solar system. Installers generally also provide maintenance of your system.

Solar installer: An expert or company that specializes in delivering and physically installing solar equipment on buildings and homes.

Click here to read part one - Electrical and Solar Energy Definitions, and part two - Solar System Components & Definitions.

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