Solar contract glossary
The words in your solar paperwork, explained in plain English.
- Buyout
- Paying a set price to purchase a leased or PPA system from the solar company, ending the monthly payments. Many contracts list buyout prices at certain points in the term. Read: Lease vs. loan vs. PPA
- Cooling-off period
- A short window after a sale made at your home when you can cancel for any reason. The FTC rule generally allows 3 business days; some states allow longer. Read: Your right to cancel
- Dealer fee
- A fee a solar lender charges the installer to offer a low advertised interest rate. It is often built into the loan amount, so you may be paying it without seeing it as a separate line.
- Degradation
- The gradual drop in a panel's output over time, usually a fraction of a percent per year. Production estimates should account for it. Read: Solar not saving money
- Escalator
- A clause that raises a lease or PPA payment by a fixed percentage every year, often 2% to 3.9%. It compounds, so a 2.9% escalator nearly doubles the payment over 25 years. Read: Solar escalator clauses explained
- Export credit (net billing)
- What your utility pays or credits you for extra solar power you send to the grid. Many utilities have lowered these credits, which can shrink savings. Read: Solar not saving money
- Federal solar tax credit (25D)
- The 30% federal Residential Clean Energy Credit for homeowner-owned systems. It ended for systems installed after December 31, 2025. With a lease or PPA, the company claims tax benefits, not you. Read: The solar tax credit in 2026
- Home solicitation sale
- A sale made away from the seller's place of business, such as at your door. These sales come with a legal right to cancel within a short period. Read: Your right to cancel
- Interconnection
- The utility's approval process for connecting your system to the grid. Your system shouldn't run until interconnection is approved.
- Inverter
- The device that converts the panels' DC power into the AC power your home uses. Inverter failures are a common reason a system stops producing. Read: If your solar company closed
- Kilowatt-hour (kWh)
- The unit of electricity your utility bills you for. PPAs charge you a price per kWh your system produces.
- Net metering (NEM)
- A billing arrangement where the utility credits you for solar power you send to the grid, often at or near the retail rate. Many states have replaced it with less generous plans. Read: Solar not saving money
- Performance guarantee
- A promise in some leases and PPAs that the system will produce a minimum amount of power, with a payment or credit if it doesn't.
- Permission to operate (PTO)
- The utility's final approval to turn your system on. If you never got PTO, your panels may not be producing at all. Read: Solar not saving money
- Power purchase agreement (PPA)
- A contract where the solar company owns the panels on your roof and sells you the power they produce at a set price per kWh, usually for 20 to 25 years. Read: Lease vs. loan vs. PPA
- Production estimate
- The salesperson's or designer's forecast of how much electricity the system will make each year. Compare it to your actual production in the app. Read: Solar not saving money
- Re-amortization
- A recalculation of a solar loan payment, often triggered if you don't make an expected lump-sum paydown (usually tied to the tax credit) by a deadline. It can raise your monthly payment. Read: The solar tax credit in 2026
- Right of rescission
- A federal right to cancel certain loans secured by your home within 3 business days, sometimes longer if required disclosures weren't given. Read: Your right to cancel
- Solar lease
- A contract where you pay a fixed monthly amount to use panels the solar company owns. Leases often include an escalator. Read: Lease vs. loan vs. PPA
- Solar loan
- Financing you use to buy a system you own. You owe the lender even if the installer goes out of business. Read: Lease vs. loan vs. PPA
- Transfer
- Moving a lease or PPA to the buyer when you sell your home. The buyer usually has to qualify and accept the remaining term. Read: Selling a house with solar
- UCC-1 fixture filing
- A public notice, often filed with your county, that a lender or solar company has a claim on the panels. Title companies may flag it when you sell or refinance. Read: Selling a house with solar
General information, not legal or tax advice.