Maybe you’ve seen ads for solar deals or you’ve seen solar panels pop up on rooftops around the neighborhood. You may be wondering, is a solar system right for me? Can it save me money? According to the U.S. Department of Energy, “Most solar electric systems last 30 years and pay for themselves in 4 to 5 years after tax credits and rebates. That means homeowners can enjoy free electricity for years.” But for an individual consumer, the answer is “it depends.” And saving money through solar depends primarily on three things: your homeyour utility, and your contract. Here are a few tips to get the most out of a solar system.
 
Efficiency First
Making cost-effective energy efficiency upgrades to your home at the same time or prior to buying a solar system can help save you thousands of dollars. Energy efficiency upgrades plus solar have the double bonus of lowering energy bills (especially if your utility charges extra for peak usage). This can decrease the cost of solar because you can buy a smaller system to cover more of your electricity needs, which can significantly reduce the price of the system. Improving efficiency can be cheap or even free, and can range from taming the energy hogs in your home to upgrading your HVAC system.
 
Right-Size Your Solar Array
Many installers are happy to oversize your solar system because they make more money that way, so you need to look at your utility bills and understand how much of your usage you’re likely to offset. Unless your utility is paying a reasonable rate for the excess electricity you put back on the grid, your over-investment is giving away energy for free to the utility.

Check Your Utility Prices and Policies
Two important factors for calculating your savings and payback are how your utility charges or gives credits for solar and the electric rate the solar company uses as a baseline for comparison. While some homeowners are able to go off the grid, and improved home battery storage options will make that more likely, most solar customers are still going to be tied to their utility. Find out how much your utility pays (or charges) you for going solar. Some utilities already do or are trying to charge solar customers higher fees or cut payments for excess power you put back on the grid, so reviewing your utility’s solar policies is an important step.

You should also look closely at your current electric rate and the rates the solar company uses for comparison—is there a match? If the solar offer assumes that your utility will increase costs by 5 percent a year, but the utility rates have actually been dropping over the past several years, the savings estimate could be seriously inflated.

Get the Right Financing
“Zero down” may sound like a great deal, but chances are, you are leaving lots of money on the table if you select a lease or power purchase agreement (PPA). Many states have very reasonable loan products for a variety of customers, and if you can qualify for a low-interest loan, that’s probably your best bet for saving the most on your electric bills.

Compare Solar Offers and Read the Fine Print
Solar offers often put the most appealing and compelling numbers up front, while burying less optimistic savings estimates. Don’t just look at the first year payments—look at the whole length of the contract to understand your expected payments. If you do opt for a PPA or lease, are there “escalation clauses” that make your payments more expensive over time? Are there maintenance costs? What happens if you move or get behind on your payments? Are there any performance guarantees?
 
Don’t Give Away Valuable Rights
Lastly, solar energy is valuable, and several states have a secondary market that trades this value called “renewable energy credits” (RECs). Most consumers are not familiar with this market, so they may unknowingly give away these valuable assets. Some contracts may transfer the value of these RECs to the solar installer, and these can be worth thousands of dollars in future payments from utilities and other entities complying with renewable energy requirements. Many consumers do not want to transfer these credits at all because that means utilities get credit for the consumer’s solar installation and can reduce utilities’ obligations to invest in more renewable energy.