Before signing any contract, it’s a good idea to be aware of things like jargon, acronyms, common practices, and assumptions. If you’re considering signing a solar contract, which may require a 15- to 20-year commitment, it’s important to be prepared. In this blog, we review some common features of a solar contract. By understanding these, you can make a more informed decision about what’s best for your organization.
Project Turnkey Costs
A turnkey project usually includes the system design, parts, and installation. Because these are full-service solutions, they can be expensive. Most contracts will include a turnkey cost. There are several things to look out for:
- Does the contract specify a clear list of exclusions from the quoted price?
- How much will it cost you to source the excluded parts or services?
- Which parts and services are included in the price?
- What’s the bottom line? Know what you are expected to pay.
Key Components and Bloomberg Tier 1
A well-written contract or proposal should state the type of panels, inverters, and racking systems the contractor will use. Be sure to request a datasheet or a sales sheet for the panels and inverters. Independently research those products online and look for reviews and blogs that describe other buyers’ experiences.
For panels, try to find out if the manufacturer is Bloomberg Tier 1. Developed by Bloomberg New Energy Finance, the tiering system was developed to help financial institutions determine the bankability of solar manufacturers. Tier 1 manufacturers are trusted by the largest solar purchasers in the world and tend to be more financially stable and credit worthy, which means they are more likely to uphold their warranty obligations.
Warranties and Guarantees
Contracts should state which warranties are included in the project. Solar panels typically feature a 25-year power performance warranty and a 10- to 12-year product warranty. Avoid panels that offer less coverage than these minimums.
Inverters typically have a 5- to 10-year factory warranty. Most manufacturers will offer warranty extensions of up to 20 years. Consider purchasing the additional warranty. With lifespans of 10 to 15 years, inverters typically need to be replaced before the solar array exhausts its usefulness.
Although not a requirement, favor contracts that have a clearly stated energy production guarantee. The standard coverage will guarantee about 80 percent of projected electricity production.
Insurances and Licensing
Protect your firm from liability by making sure the contractor is adequately insured. Look for general liability coverage and insurance that covers the contractor’s employees working on your property.
In certain markets, solar installers have to be licensed. Even if your area doesn’t require a license, it is worth looking for specific training certifications. The North American Board of Certified Energy Practitioners (NABCEP) issues a well-established and widely recognized certification for professionals in the field of renewable energy. An installation team without NABCEP certified designers or installers is unusual.
Projections and Assumptions
Many solar contracts estimate energy production and project long-term savings. Because these are based on assumptions, it’s important to make sure that all of the assumptions are clear.
Watch for projections that use high avoided rate escalation numbers. The national average for utility rate escalation is approximately 2.4 percent. Most markets, like Pennsylvania, are experiencing two percent or lower rates of increase. To learn more about the avoided cost of solar and how to calculate it, read our blog “How Much Will You Save?”
If you have any questions about the included assumptions, don’t hesitate to ask the contractor/developer to explain them. If necessary, do your own projections.
Adopting solar energy can be a substantial decision for most organizations. We can help you understand your contract and run projections to give you piece of mind. If you have questions or need any assistance, contact us.