Reading Your Solar Contract: 5 Red Flags and What Honest Installers Should Disclose Upfront

Most DC homeowners who feel burned by solar didn't read a bad contract — they signed one they didn't fully understand. Solar contract terms explained in plain language can prevent the most common traps: escalating PPA rates, SREC ownership clauses buried in section 12, and production estimates that assume zero shading on a row-house roof. This post walks through five specific red flags, what honest disclosure looks like, and how to verify what you're signing before you commit to a 20-year agreement.

We're City Renewables, a Washington, DC solar installer. We design and install rooftop systems on DC row houses, detached homes, and small commercial buildings. Every contract observation in this post comes from real proposals we've reviewed alongside customers — including proposals from other companies — and from the financing structures we use ourselves.

Why Solar Contract Problems Are an Industry-Wide Pattern

Solar contract confusion is not a fringe problem — it's a structural one. The sales cycle for residential solar is fast, the documents are long, and the financial projections involve 20-year assumptions that are genuinely hard to verify. A 2026 review by ContractsCounsel, which has assisted more than 55 clients with solar panel contracts, found that the most disputed clauses involve production guarantees, escalator rates, and early termination fees. The U.S. Department of Energy's own guidance on rooftop solar contracts ↗ flags the same three areas. In DC specifically, the added complexity of SREC ownership — who keeps the Solar Renewable Energy Certificates your system generates — creates a fourth category of confusion that most national contract templates don't address clearly. DC SRECs traded at roughly $360–$400/MWh in early 2026, with a Solar Alternative Compliance Payment ceiling of $440. That's real money, and some contracts quietly assign it to the installer or financier. The pattern isn't that installers are dishonest — it's that a fast-moving sales process and complex documents create predictable gaps in understanding.

What Are the 5 Red Flags in a Solar Contract?

Five specific clauses cause the most problems for DC homeowners. Each one is findable if you know where to look.

1. A production estimate with no shading analysis attached.
Any proposal that projects annual output without a site-specific shading report is guessing. DC row houses average 1,100–1,200 kWh per kW installed per year under good conditions, but a chimney, a neighboring roofline, or a mature tree can cut that by 20–30%. If the proposal shows a round number like 8,000 kWh/year and there's no shade analysis document, ask for one before signing. Tools like Aurora Solar or Helioscope generate these reports in under an hour.

2. An escalator clause above 2.9% annually in a PPA or lease.
Power Purchase Agreements and leases often include an annual rate escalator — the price you pay per kWh goes up each year. Escalators between 0% and 2.9% are common and defensible given historical utility rate trends. Escalators at 3.5% or higher mean your payment in year 20 could be 97% larger than in year 1. The contract will state this as a percentage; it will not calculate the year-20 dollar figure for you. Do that math yourself.

3. SREC ownership assigned to the installer or financier.
In a cash purchase, you own the SRECs your system generates. In some PPA and lease structures, the financier retains SREC rights — because those certificates are part of how they monetize the deal. Sol Systems' DC SREC contract options ↗ show that a 15-year upfront SREC contract pays $1,382.50 per kW installed. On a 7 kW system, that's roughly $9,678 in SREC value over the contract term. If your PPA assigns that to the financier, you've given up a meaningful asset without realizing it.

4. A transfer or buyout clause that complicates a home sale.
Most PPAs and leases run 20–25 years. If you sell your home before the term ends, you typically have three options: transfer the contract to the buyer, buy out the remaining obligation, or prepay. Buyout formulas vary widely — some are fair net-present-value calculations, others are punitive. The contract must spell this out. If it says "buyout amount to be determined at time of request," that's a red flag. You need a formula, not a promise.

5. A workmanship warranty shorter than 10 years.
Equipment warranties — panels at 25 years, inverters at 10–12 years — come from manufacturers, not installers. The installer's workmanship warranty covers roof penetrations, wiring, and mounting. Anything shorter than 10 years on workmanship is below the industry norm. Some contracts bury this in an exhibit rather than the main body; check both.

How Does a PPA Differ From a Solar Loan or Cash Purchase?

The financing structure determines almost everything about your long-term economics, and each option has a different contract type with different risks. Understanding the difference is the foundation of reading any solar agreement.

Note: The federal residential solar Investment Tax Credit (Section 25D) expired for systems placed in service on or after January 1, 2026. Any proposal that still quotes a "30% federal tax credit" for a new installation is using outdated information. DC-specific incentives — including SRECs and the DCSEU's Solar Advantage Plus program ↗ — remain active. See our full breakdown at DC solar incentives 2026.

A cash purchase gives you the cleanest contract: you own the asset, you keep the SRECs, and there's no ongoing financial relationship with the installer beyond warranty claims. A solar loan is similar in ownership terms but adds a lender. PPAs and leases shift ownership — and often SREC rights — to a third party in exchange for lower or no upfront cost. That trade-off can make sense, but only if you understand what you're giving up.

What Is the 120% Rule for Solar?

The 120% rule is a National Electrical Code requirement that limits how large a solar system can be relative to your home's main electrical panel. Specifically, the combined amperage of your main breaker and your solar interconnection breaker cannot exceed 120% of the panel's rated busbar capacity. On a standard 200-amp panel, that means your solar breaker cannot exceed 40 amps — which corresponds to roughly a 9.6 kW system on a 240V connection. If your installer proposes a system larger than that without a panel upgrade, the utility will reject the interconnection application. A good contract will either size the system within the 120% limit or include a panel upgrade line item with a specific cost. If the proposal is silent on this and your system is above 8 kW, ask the question directly before signing.

How to Verify What You're Signing: A Pre-Signature Checklist

Before you sign any solar contract — cash, loan, PPA, or lease — work through this list:

1. Request the shading analysis report. It should be a named file (Aurora, Helioscope, or equivalent) with your address and roof planes labeled.
2. Find the escalator rate. In a PPA or lease, search the document for "escalator," "annual increase," or "rate adjustment." Write down the percentage.
3. Locate the SREC clause. Search for "SREC," "renewable energy certificate," or "REC." Confirm whether you or the installer retains ownership.
4. Read the transfer and buyout section. Find the formula. If it references a third-party calculation without defining the inputs, ask for a sample calculation at years 5, 10, and 15.
5. Check the workmanship warranty term. It should be at least 10 years and should cover roof penetrations explicitly.
6. Confirm the production guarantee. Some contracts guarantee a minimum annual output; others only estimate. Know which you have.
7. Verify permit and inspection costs are included. DC building permits for solar run $150–$400 depending on system size. Some contracts list these as pass-through costs billed separately.
8. Ask about SREC contract options. If you own the SRECs, you can sell them through platforms like Sol Systems. Our DC SREC guide covers the current contract structures in detail.

Take at least 48 hours between receiving the final contract and signing. Any installer who pressures same-day signature is removing your ability to verify.

What Does City Renewables Disclose Before You Sign?

We walk every customer through a structured pre-signature review before any document is executed. Here's what that looks like in practice.

First, we provide the shading analysis as a named PDF with your address, roof azimuth, and monthly production estimates broken out by plane. We use Aurora Solar. The file is yours to keep regardless of whether you proceed. Second, we explain SREC ownership in writing on page one of our proposal — not buried in an exhibit. For cash and loan customers, you own the SRECs. We explain current DC SREC market rates ($360–$400/MWh in 2026) and point you to SREC trading options so you can decide how to monetize them independently. Third, we do not offer PPAs or leases. We work with cash purchases and solar loans only. That's a deliberate choice — it keeps the ownership structure simple and ensures you keep the SRECs and any future incentive value. Fourth, we include a line-item cost breakdown that covers permits, inspections, and interconnection fees. There are no pass-through surprises after signing. Fifth, we give you a written production estimate range — not a single optimistic number — based on your specific roof conditions. A 7 kW system on a south-facing DC roof with minimal shading will produce roughly 7,700–8,400 kWh/year. We'll tell you if your roof produces less. If you want to understand the full incentive picture before we talk contracts, start with a Green Zone assessment — it's a no-obligation review of your roof, usage, and financial options.

FAQ

Is a solar lease or PPA better?

For most DC homeowners who can qualify for a solar loan, neither a lease nor a PPA is the better choice — a loan is. Both leases and PPAs mean you don't own the system, you typically don't keep the SRECs, and you take on a 20–25 year contractual obligation with buyout complexity if you sell. The difference between the two is how you pay: a lease charges a fixed monthly amount regardless of production; a PPA charges per kilowatt-hour your system generates. A PPA can be slightly better if your system underproduces, because you pay less. A lease is simpler to model. If upfront cost is the barrier, a solar loan preserves ownership and SREC rights while spreading payments over 10–20 years. DC homeowners should also check eligibility for the Solar for All program ↗, which provides community solar credits at no cost to income-qualified households.

What is the 120% rule for solar?

The 120% rule is a National Electrical Code limit on solar system size relative to your electrical panel. Your main breaker plus your solar breaker cannot exceed 120% of the panel's busbar rating. On a 200-amp panel, the maximum solar breaker is 40 amps, which limits system size to roughly 9.6 kW without a panel upgrade. If your installer proposes a larger system without mentioning a panel upgrade, ask how they plan to handle interconnection approval.

What is the downside of PPA?

The main downside of a solar PPA is that you don't own the system and often don't keep the Solar Renewable Energy Certificates it generates. In DC, where SRECs trade at $360–$400/MWh, that's a meaningful financial loss over a 20-year term. PPAs also include escalator clauses that raise your per-kWh rate annually — sometimes 3% or more — which can erode the savings advantage over time. Selling your home before the PPA term ends requires either transferring the contract to the buyer (which some buyers resist) or paying a buyout that can run into thousands of dollars. The federal 25D Investment Tax Credit, which expired January 1, 2026, was never available to PPA customers anyway — it went to the financier.

Can I legally cancel my solar contract?

Yes, in most cases — but the window is short. Under the FTC's Cooling-Off Rule, you have three business days to cancel a contract signed at your home without penalty. DC consumer protection law provides similar rights. After that window closes, cancellation terms depend entirely on what the contract says. Cash and loan contracts typically allow cancellation before installation begins, sometimes with a deposit forfeiture. PPA and lease contracts are harder to exit — early termination fees can be substantial, and some contracts require you to pay the net present value of remaining payments. Read the termination section before signing, not after. If you're already past the cooling-off period and want to exit, consult a DC consumer protection attorney before taking any action.

The Bottom Line

A solar contract is a long document, but the terms that matter most — production estimates, escalator rates, SREC ownership, transfer rights, and workmanship warranty — are findable in under 30 minutes if you know what to look for. The five red flags in this post cover the clauses that generate the most disputes. The pre-signature checklist gives you a repeatable process. And if you want a second set of eyes on your specific situation before you commit, a Green Zone assessment is the right starting point — we'll review your roof, your usage, and your financing options with no pressure and no same-day signature required.