Aggressive internet advertising and sales people are pushing Solar leases and Power Purchase agreements for residential customers. These are often teased as “no money down” offers and in Massachusetts some programs sponsored by the state include this type of third party ownership (TPO) model from out of state solar companies and their financiers.
At BPVS we have yet to see an offer like this make real financial sense for any homeowner and we are not offering the current crop of TPO schemes.
About Residential Solar Lease/PPA agreements
Initial issues:
Does it sound too good to be true? Is the salesperson pushy?
- Is there some discount you’ll lose if you don’t sign right away?
- Is just a summary proposal with a signature page presented ?
- Is there an initial deposit requested or required with your signature?
If the answer to any of these questions is yes , be sure you receive a copy of the full lease/ppa contract to review; these will be over ten pages long. Do not sign anything or make a deposit . It is strongly recommended you have your attorney review the documents. Remember this is a twenty year binding agreement.
Design issues:
- Does the presentation detail the brand and model and # of the solar modules, mounting equipment , inverter(s) , switch gear and metering devices including warranties ? Is there a clause allowing the provider to substitute other brands and models ? If so does the provider list all possible substitutes and include their detailed spec. sheets and warranties?
- Does the design include surge and/or lightning arrestors? Is there a customized drawing showing your roof and the arrays actual dimensions?
- Does the design capacity production estimate use an objective 3rd party software and include a shading analysis of your site?
- Does the production estimate from the solar capacity exceed your annual electricity needs?
It is common practice for providers to oversize the PV system in these deals- you will pay for all production even the excess you cannot use. Your utility will credit excess production to your account however that excess is credited at slightly less than the retail rate and cannot be cashed in… you have to designate another electric account using the MA DPU form Schedule Z to transfer credits. Has the provider explained this process? Have they filled out Schedule Z on your behalf? Is the transfer of excess credits detailed?
- Has the provider modeled your electricity savings accurately? Does their graph or analysis use an electricity cost inflation factor?
It is common practice for these providers to assume utility electricity costs will rise as much as 7% per year but not tell you what factor they are using. If the deal is summarized to you by a statement that says “ over the contract you will save $____” find out what factor they are using. Since 1990 electricity costs for Massachusettsresidents have increased on average 3% per year however in recent years costs have dropped even with temporary charges utilities are allowed due to storm recovery efforts.
- If the contract is for electricity purchase does the provider have an escalation clause which ratchets up the price per kWh you will pay in future years?
- If the provider suggests they will compensate you for the difference between production they promise and production received, is their baseline annual production estimate very low?
Typically a properly sited , well designed installation will produce 1100 kWh per year per kW of capacity before any shading penalties are factored.
- If the contract is for a monthly lease payment does the provider have an escalation
clause which ratchets up the payment per month in future years?
Legal issues:
- If the salesperson makes an attractive verbal representation you should ask where in the written contract such a benefit is detailed. Ask your attorney to insert a clause to assure such a benefit if it is not written. For example if it is represented to you that you will save 20% on electricity costs from your utility over the life of the system then have a clause inserted in which they guarantee that saving and will compensate you if not achieved.
- If the salesperson does not leave you with a copy of the complete contract for your or your attorneys’ review with their signature on it then they are very likely not in compliance with Massachusetts law .
- If a deposit is required or you are required to sign any type of agreement, has the salesperson informed you of your rights to renege under Massachusetts law within three days and provided you with a cancellation form and/or cancellation contact process and written guarantee that all monies received will be returned to you forthwith?
- Does the contract require you to forfeit all rights to : “ clean energy attributes”, “green tags”, “ carbon offset credits”, “RECS” (Renewable Energy Certificates) or “ SRECS” ( Solar Renewable Energy Certificates) , “pollution credits” or any other synonym for the green attributes of the generation? If so has the salesperson informed you of the value of the attributes? If so has the salesperson informed you that you cannot make any representation that you are using or hosting clean energy electricity or clean energy generation. For more information on the representation of attributes from solar electric systems see the Federal Trade Commission “ Green Guides”Section 260:15 under Authority :15 USC 41- 58. You can download this at
http://www.ftc.gov/sites/default/files/greenguides.pdf
In all instances when RECS or SRECS are sold neither you nor the provider can claim the electricity from the solar system is green. In fact it is considered just as polluting as the conventional utility supply.
- Does the contract offer you a discount for pre payment of electricity costs or monthly lease payments? When is the payment due? Does the contract guarantee the PV system will be permitted, installed, approved by local inspectors and the utility and fully operational within a set number of days of receipt of such a payment? Consult your attorney ; generally you should not make a large payment of this sort unless you are guaranteed the service within a detailed time frame and it is prudent to not make such a payment until the system is legally in service.
- What are the penalties to you if once the system is operational , you make a late payment to the provider or if the provider claims it could not access the PV systems production data from the internet. Does the contract detail that you must provide 24/7 internet access to their on site datalogger?
- Have your attorney carefully review any clauses which condition whole payment for the system. For example if you miss a payment or the system fails to report via the internet will you be forced to immediately purchase the system? If the provider goes bankrupt or sells its stake in your equipment or contract to another company are you required to make whole payment ?
- Does any whole payment clause or another clause offering you the right to purchase the system at an interval of 5, 10 or 15 years detail the cost to you? Does the cost reflect the appraised value of the equipment only or does it include not just the equipment but also the revenue stream for monthly lease payments or electricity production and the value of attributes for the full 20 years of the initial contract term? Usually it’s the latter and this amount will surprise you.
9. Does the contract include any clauses which obligate you to make structural improvements to allow installation of the array on your roof ? Are their clauses requiring you to assist in securing permits to install the PV system? Is there a clause that requires you to remove any shading obstructions which affect array performance? The provider should detail any and all extra costs these provisions might entail. Will you be forfeiting your deposit if , after signing, the provider tells you you’ll have to have trees removed from your or your neighbor’s property? What if during the permit application process the inspector requires structural improvements which can cost many thousands of dollars ; do you have to proceed? Will you forfeit your deposit if you cancel the contract?
These are just a few of the legal issues . Depending on the lease/ppa provider there may be other obligations in contract language or omissions which allows the provider to increase your initial costs or later costs over the twenty year term.
Other Technical issues:
- Are you required to take delivery of or store solar equipment at your home without the solar installers presence or their start of work ? Some common carriers have dropped off crates of solar equipment on customers’ driveways without their foreknowledge. Others have seen their garage filled with uninstalled equipment for months.
- Does the installer warrant waterproofing or is there a clause which suggests they only warrant the array roof penetrations if the roof itself is under a waterproofing warranty?
- Who is responsible during the twenty year term for the cost of removing and re-installing the array if the roof needs replacement? If it is you what will that cost be?
- Does the lease/ppa provider’s insurance cover consequential damages to your property or just any damages to their equipment? Do you have a copy of their insurance policy detailing its limits and receive updates annually?
- If you purchase the system at any time are you required to use the provider’s production reporting equipment? Is there a fee for continued reporting? Will you own the attributes and if so do you have to sell them through the providers’ brokerage? What will the transaction fees be?
- If you purchase the system are the original manufacturers’ warranties truly transferable?
- If you elect to purchase the system from the provider can you use an independent
appraiser to determine fair market value or must you use their appraisers’ value?
We at BPVS hope this guidance has been helpful. Our firm has researched every provider and are still awaiting the lease /ppa deal that serves customers honestly. Until then we’ll continue to offer the ownership model .
In all cases if your credit score makes you eligible for one of these lease/ppa contracts then you’re also eligible for a loan from your local bank and in the end will realize a significantly better return , the satisfaction of owning your clean energy resource and freedom of choice on how to retire or sell the attributes.
Posted By: cdk . (2013-06-10)