Glossary
A
- Annual percentage rate (APR)
- The yearly cost of credit, expressed as a percentage. Your loan documentation may include both an APR and an interest rate; typically, the APR encompasses additional loan fees and tends to be higher than the interest rate.
- Azimuth
- Refers to the orientation of your roof in relation to solar energy. Measured in degrees, azimuth indicates the angle between your roof and true north. Optimal solar panel placement typically involves facing panels towards the south for maximum production.
B
- Bill credit
- Upon subscribing to a community solar farm, you receive energy credits on your electric bills based on the solar energy generated by your share of the farm. The quantity of bill credits fluctuates monthly, correlating with the solar energy production attributed to your share.
- Building-integrated photovoltaic (BIPV)
- Solar panels designed to blend seamlessly with a building’s roofing materials, rather than being mounted on top of the roof. Also referred to as solar shingles.
C
- Community solar
- Also known as solar farms, shared solar, solar gardens, or roofless solar, community solar projects are centralized power plants that generate electricity for the grid, accessible to multiple participants.
- Credit pull
- A term synonymous with credit inquiry, referring to the process by which a lender assesses your creditworthiness. There are two types: hard inquiries, which can impact your credit score, and soft inquiries, which do not.
- Credit report
- A comprehensive record detailing your credit history, encompassing current and past credit accounts, inquiries, and other relevant information. Lenders often review your credit report to evaluate your creditworthiness before extending a loan.
- Credit score
- Refers to your FICO Credit Score, a numerical representation of your creditworthiness based on factors such as payment history, credit utilization, and credit history length. A higher score indicates lower risk to lenders, potentially leading to more favorable loan terms.
D
- Dealer fee
- A charge levied by solar lenders to mitigate lending risks, often included as part of closing costs or loan premiums.
- Demand charges
- Utilities employing demand charges recalibrate the billing structure from total monthly electricity consumption to the peak electricity demand experienced within a billing cycle, impacting both residential and commercial customers.
- Depreciation-based incentives
- Commonly utilized for commercial solar installations, depreciation incentives, such as bonus depreciation and Modified Accelerated Cost Recovery System (MACRS), decrease taxable income by the full or partial cost of depreciable assets.
- Down payment
- The initial amount required to secure a solar loan, though some loans offer no-money-down options. Down payment specifics can typically be found in loan quotes.
E
- Energy service company (ESCO)
- A company offering holistic energy solutions, including audits, redesigns, and implementation of energy consumption changes, all aimed at enhancing efficiency for its customers.
F
- Federal investment tax credit (ITC)
- Also known as the solar tax credit, this incentive reduces the overall cost of your solar energy system by 30%, applied as a credit to your federal tax liability. It stands as the primary financial incentive for solar adoption in the United States.
- Financing term
- The duration of your loan, usually expressed in months, which may influence interest rates and other loan terms.
G
- Gigawatt (GW)
- The collective capacity of community solar across the nation is quantified in gigawatts. One gigawatt equals 1,000 megawatts.
- Gross system price
- The total cost of your solar system, including all associated expenses before factoring in incentives or rebates.
- Ground-mounted solar
- Solar panel systems installed on a foundation in an open area of land rather than on a building’s roof.
H
- Hard inquiry
- A credit inquiry initiated by a lender when assessing your creditworthiness for a solar loan, potentially affecting your credit score for up to two years.
- Home Equity Line of Credit (HELOC)
- A line of credit secured by the equity in your home, commonly used for home improvements such as solar panel installation.
- Home equity loan
- Also known as a second mortgage, a loan option allowing homeowners to borrow against accrued home equity, often utilized for solar financing.
I
- Interest rate
- The percentage charged by a lender for borrowing money to finance a solar panel system, payable over the loan term.
- Inverter
- An essential component of a solar panel setup that transforms the electricity generated by solar panels into a usable format for powering homes.
- Investment tax credit (ITC)
- A federal tax credit available to individuals installing solar energy systems, currently set at 30% of installation costs.
- Investor
- Often required by developers or project owners to provide financial backing, investors may stipulate a minimum number of subscribers before project development commences.
K
- Kilowatt (kW)
- The unit of measurement for the size of a residential solar panel system. A kilowatt equals 1,000 watts.
- Kilowatt-hour (kWh)
- The unit of measurement for electricity usage on utility bills, representing consumption over time. In 2024, the average U.S. household consumed 899 kWh per month.
L
- Loan amount
- The total sum owed over the loan’s lifetime, encompassing the base amount, interest, and fees.
- Low-and-moderate income (LMI) communities
- Characterized by a higher proportion of income allocated to electric bills, LMI communities benefit from federal incentives supporting community solar projects tailored to their needs, sometimes exclusively accessible to LMI individuals.
M
- Megawatt (MW)
- Some commercial solar projects exceed one megawatt in capacity. One megawatt equals 1,000 kilowatts. For context, according to the Solar Energy Industries Association (SEIA), one megawatt of solar energy can supply approximately 173 homes with power.
- Monthly payment
- The recurring payment due each month for the solar loan, which may vary depending on loan type.
N
- Net metering
- A policy facilitating the storage of surplus electricity generated by solar panels in the electric grid, allowing homeowners to accrue credits for excess energy supplied. These credits offset electricity drawn from the grid, resulting in a “net” usage calculation on utility bills.
- Net system price
- The cost of the solar system after accounting for incentives, rebates, or credits.
O
- Off-grid
- Pertains to a system completely independent from the utility grid, lacking access to externally generated electricity. Off-grid homes rely solely on onsite electricity generation.
P
- Payback period
- The duration required to recoup the costs of a solar purchase or realize a return on investment.
- Performance-based incentive (PBI)
- A monetary incentive for solar systems based on their energy production levels. PBIs typically compensate system owners for each kilowatt-hour of electricity generated, with feed-in tariffs being a specific form of PBI.
- Photovoltaics (PV)
- Devices employing semiconductors to convert solar energy into electricity through the photovoltaic effect. Solar panels are examples of photovoltaics and constitute a PV system.
- Power output/rating
- Indicates the number of watts a solar panel produces under ideal conditions, serving as a quality benchmark. However, sustained ideal conditions are rare for most solar panels.
- Pre-approval
- A preliminary assessment of creditworthiness by a potential lender, typically involving a soft credit inquiry.
- Production ratio
- The ratio of electricity generated by a solar system over one year (measured in kilowatt-hours) to the system’s size (measured in watts). This ratio varies depending on factors such as weather, climate, and the condition of the solar panel system.
- Provider
- Also known as the subscriber organization, providers promote project enrollment, facilitate sign-up procedures, and manage subscriptions and billing. In some cases, the developer doubles as the project provider.
R
- Renewable energy certificate (REC)
- A tradable commodity used to quantify and transfer the environmental attributes of renewable energy. While project owners typically retain REC rights in community solar, subscribers can purchase RECs to claim the associated environmental benefits.
S
- Secured solar loan
- A loan requiring collateral, such as home equity, to secure the loan amount.
- Semiconductor
- A material with electrical conductivity greater than an insulator (like glass) but less than a conductor (such as copper). Semiconductors are extensively used in electronics, including solar panels.
- Soft inquiry
- A credit inquiry that does not impact your credit score, often used for pre-approval assessments.
- Solar carport canopy
- Elevated structures constructed above parking lots, equipped with solar panels to generate electricity while providing shade for parked cars.
- Solar cells
- Typically made of silicon, these semiconductors generate electricity when exposed to photons (particles of light) through the photovoltaic effect. A typical home solar panel system comprises around 60 solar cells.
- Solar developer
- Typically responsible for conceiving, constructing, and integrating community solar projects into the grid, developers may own or lease project land and may operate and maintain the project themselves or on behalf of third-party owners.
- Solar loan
- A loan specifically tailored for financing solar panel installation.
- Solar module
- Another term for a solar panel, commonly used within the industry.
- Solar panel efficiency
- A measure of how effectively a solar panel converts sunlight into electricity. Most solar panels have an efficiency rating of 17-20%, while high-efficiency panels can exceed 22%.
- Solar renewable energy credit (SREC)
- Corresponding to each unit of electricity generated by a solar panel system, an SREC is generated. In certain states, system owners can sell these credits for additional revenue.
- Solar-plus-storage
- A solar energy setup that incorporates a battery storage system. This configuration allows for the storage of surplus energy generated by solar panels, enabling backup power supply to the home.
- Subscribers
- Individuals enrolled in a community solar project, receiving bills from the provider and contributing to the project’s viability, often necessary for project development.
T
- Tax credit
- Similar to the ITC, a tax credit enables taxpayers to deduct a predetermined amount directly from their tax liability, providing financial relief for eligible expenses.
- Temperature coefficient
- Indicates a solar panel’s performance in high-temperature conditions. Elevated temperatures can diminish the effectiveness of solar panels, as is typical with electronic devices.
- Third-party ownership (TPO)
- Arrangement wherein a third party owns the solar system, such as through leases or power-purchase agreements.
- Tiered rates
- Typically implemented for commercial entities, tiered rate plans establish pricing tiers based on electricity consumption. Higher consumption levels correspond to higher rates.
- Time-of-use (TOU) rates
- Under a TOU rate plan, the cost of electricity fluctuates based on factors such as the season, day of the week, and time of day.
U
- Unsecured solar loan
- A loan not requiring collateral, potentially offering faster approval but may entail higher fees.
V
- Virtual net metering (VNM)
- Allows subscribers to earn credits by participating in solar panel systems located elsewhere, enabling bill credits for subscribing to a community solar farm.
W
- Watt (W)
- The unit of measurement for the output of a solar panel, representing the rate of electricity production.
