CA Solar Contract Review: What to Check Before You Sign
Complete guide to reviewing solar contracts in California. Understand NEM 3.0 implications, CSLB requirements, PACE liens, and the clauses that trap homeowners.
California Solar Contract Review: What to Check Before You Sign
Disclaimer: This article is informational, not legal advice. Have a qualified attorney review any contract before signing if you have concerns.
California's solar contracts are among the most complex in the nation. The combination of NEM 3.0 billing changes, PACE financing options, dealer fees, and California-specific regulations makes thorough contract review essential. A single overlooked clause can cost you tens of thousands of dollars over the life of your solar system.
This guide walks you through every element of a California solar contract that deserves scrutiny — from system specifications to financing traps to the clauses that keep homeowners trapped for decades.
NEM 3.0 and Your Contract
How NEM 3.0 Changes Everything
California's transition from NEM 2.0 to NEM 3.0 (Net Energy Metering) fundamentally changed the economics of residential solar. Understanding how NEM 3.0 affects your contract is critical.
| Element | NEM 2.0 (Legacy) | NEM 3.0 (Current) |
|---|---|---|
| Export compensation | Retail rate (~$0.25-$0.35/kWh) | Avoided cost rate (~$0.04-$0.08/kWh) |
| True-up period | Annual | Annual |
| Time-of-use rates | Yes | Yes — more granular |
| Battery incentive | Not required | Strongly encouraged by rate structure |
| Grandfathering | 20 years from interconnection | 20 years from interconnection |
What Companies Get Wrong About NEM 3.0
| Misrepresentation | The Reality |
|---|---|
| "Your system will eliminate your electric bill" | Under NEM 3.0, export credits are worth 70-80% less than retail rates; most systems cannot fully offset bills without batteries |
| "You'll be grandfathered into NEM 2.0 rates" | NEM 2.0 grandfathering ended April 2023 for new systems; only already-interconnected systems retain legacy rates |
| "Solar pays for itself in 5 years" | Under NEM 3.0, payback periods have extended significantly, especially without battery storage |
| "You don't need a battery" | Under NEM 3.0, solar without battery storage provides significantly lower savings because export credits are minimal |
True-Up Estimate Verification
Your contract should include a true-up estimate showing the expected annual reconciliation with your utility. Verify this estimate:
- Check the assumed export rate — Under NEM 3.0, it should reflect avoided cost rates, not retail rates
- Compare with your actual usage — The estimate should be based on your historical consumption data
- Factor in time-of-use — NEM 3.0 compensates exports differently by time of day
- Ask about summer vs. winter — Export values vary dramatically between seasons
The California Solar Consumer Protection Guide
Required Disclosures
California Senate Bill 1000 requires solar companies to provide a Solar Consumer Protection Guide before you sign a contract. This guide must include:
| Required Element | What to Look For |
|---|---|
| Consumer rights | Explanation of your cancellation rights and complaint process |
| Contract terms | Plain-language summary of key contract provisions |
| Financing options | Clear comparison of loan, lease, and PPA options |
| System performance | How production estimates are calculated |
| Warranty information | Coverage terms for equipment and workmanship |
| CSLB requirements | Confirmation of contractor licensing requirements |
| Multi-language availability | Must be available in English, Spanish, Chinese, Tagalog, Vietnamese, and Korean |
If the company does not provide this guide before contract signing, that is a violation of California law and a significant red flag.
For more on California-specific protections, see our California solar scams guide.
12-Point Contract Review Checklist
Comprehensive Review Items
Go through every item on this checklist before signing:
1. System Specifications
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| System size (kW DC) | Determines production capacity | Size doesn't match your usage analysis |
| Panel brand and model | Quality and warranty vary by manufacturer | Vague "premium panels" without specifics |
| Inverter type | String, microinverter, or power optimizer | Wrong type for your roof layout or shading |
| Number of panels | Confirms system size calculation | Fewer panels than needed for quoted output |
| Battery storage | Included or optional; brand and capacity | Battery undersized or overpriced |
2. Pricing and Payment
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| Total system cost | Compare cost per watt ($/W DC) with market average | Above $4.00/W without justification |
| Itemized breakdown | Equipment, labor, permits, financing | Single lump sum with no itemization |
| Down payment | How much due upfront | More than 10-20% before installation begins |
| Payment schedule | Tied to installation milestones | Full payment demanded before completion |
| Dealer fee | Origination fee for financing | Dealer fee above 25% or not disclosed |
3. Production Guarantee
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| Annual kWh guarantee | Minimum expected production | No written guarantee or vague language |
| Measurement methodology | How production is measured and verified | Relying on estimated rather than actual data |
| Remedy for underproduction | What happens if system underperforms | No remedy or remedy requires arbitration |
| Guarantee duration | How long the guarantee lasts | Less than 10 years |
4. Warranty Terms
| What to Check | Typical Coverage | Red Flag |
|---|---|---|
| Panel warranty | 25-year performance, 12-25 year product | Less than 25-year performance warranty |
| Inverter warranty | 10-25 years depending on type | Less than 10 years |
| Workmanship warranty | 10-25 years | Less than 10 years or "limited" without specifics |
| Battery warranty | 10 years / 6000+ cycles | Less than 10 years |
| Roof penetration warranty | 10-25 years | No specific roof penetration warranty |
| Transferability | Warranty transfers to new homeowner | Warranty void upon home sale |
5. Interconnection and Net Metering
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| Utility interconnection | Who handles the application | Unclear responsibility for utility paperwork |
| NEM agreement | Which NEM tier applies to you | Misrepresentation of NEM status |
| Meter installation | Bi-directional meter provided by utility | Cost for meter not included or hidden |
| Permission to Operate (PTO) | Timeline for system activation | No estimated PTO timeline |
6. Monitoring System
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| Monitoring platform | App or website for tracking production | No monitoring included |
| Data access | Real-time production data | Only monthly summaries |
| Alert system | Automatic notification of issues | No failure alerting |
7. Maintenance and Repair
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| Included maintenance | Regular inspections, cleaning, system checks | No maintenance provisions |
| Repair response time | How quickly issues are addressed | No response time commitment |
| Service area | Company's ongoing presence in your area | Out-of-area company with no local service team |
8. Cancellation Terms
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| 3-day right to cancel | California and federal law | Not clearly disclosed in contract |
| Cancellation process | Written instructions provided | Cancellation requires phone call only (no paper trail) |
| Cancellation penalties | What you owe if you cancel after 3 days | Excessive penalties beyond actual costs |
9. Arbitration Clause
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| Mandatory arbitration | Requires disputes be resolved through arbitration | Mandatory binding arbitration with no opt-out |
| Arbitration forum | Which organization administers | Unfamiliar or company-favorable arbitration forum |
| Cost allocation | Who pays arbitration fees | You pay all arbitration costs |
| Class action waiver | Prohibits joining with other victims | Class action waiver buried in fine print |
10. UCC-1 Filing / Lien Terms
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| UCC-1 financing statement | Lender files claim on solar equipment | UCC-1 filed against your home (not just equipment) |
| Fixture filing | Whether system is treated as part of your property | Fixture filing that clouds title |
| Release terms | When UCC-1 is removed | No automatic release upon loan payoff |
Learn more about this risk in our UCC-1 solar filing guide.
11. PACE Financing Terms
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| PACE vs. conventional | How financing is structured | PACE offered without explaining differences |
| Annual assessment | Amount added to property tax bill | Assessment increases over time |
| Foreclosure risk | PACE liens have super-priority | Not disclosed that PACE can lead to foreclosure |
| Transfer on sale | What happens when you sell | Buyer must assume PACE obligation |
| Total cost | Full repayment amount including interest | Total cost not clearly disclosed |
For detailed PACE risks, read our PACE foreclosure risk guide.
12. Equipment and Performance Milestones
| What to Check | Why It Matters | Red Flag |
|---|---|---|
| Installation timeline | Specific start and completion dates | "Weather permitting" with no hard dates |
| Permitting responsibility | Who obtains building permits | Unclear who handles permitting |
| Inspection process | Building department and utility inspections | No mention of required inspections |
| PTO timeline | When utility grants permission to operate | No estimated timeline for activation |
Red Flags in California Solar Contracts
Top 10 Contract Red Flags
| # | Red Flag | What It Means |
|---|---|---|
| 1 | No production guarantee | Company won't stand behind its savings estimates |
| 2 | Dealer fee not disclosed | Hidden cost inflating your loan by 20-30% |
| 3 | Mandatory arbitration only | Limits your legal options if something goes wrong |
| 4 | PACE without disclosure | You may not understand you're taking on a tax lien |
| 5 | "Free solar" claims in contract | Nothing is free — you're paying through financing |
| 6 | Vague equipment specifications | Allows substitution of cheaper components |
| 7 | No CSLB license number | Unlicensed contractor — illegal in California |
| 8 | Escalation clause above 3% | Lease/PPA payments increase faster than inflation |
| 9 | Buyout formula uses NPV | Buyout cost may be far higher than system value |
| 10 | Automatic renewal clause | Lease/PPA auto-renews for another term |
Understanding PACE Liens
What Is PACE Financing?
Property Assessed Clean Energy (PACE) financing allows homeowners to finance solar installations through their property tax bill. While PACE can make solar accessible with no upfront cost, it carries unique and serious risks that California homeowners must understand.
Major PACE Providers in California
| Provider | Status | Notes |
|---|---|---|
| Ygrene | Active in some areas | One of the largest PACE providers in CA |
| Renew Financial | Active in some areas | CALFIRST program |
| HERO (Renovate America) | Largely wound down | Previously the largest; many existing liens still active |
PACE Risks Specific to California
| Risk | Explanation |
|---|---|
| Super-priority lien | PACE liens are paid before your mortgage in foreclosure |
| Foreclosure risk | Failure to pay PACE assessment can lead to property tax default and foreclosure |
| Home sale complications | Buyers may be unwilling to assume PACE obligation |
| Refinance barriers | Some lenders refuse to refinance properties with PACE liens |
| Assessment increases | Some PACE programs include escalating payments |
| Total cost | PACE financing typically has higher total cost than conventional loans |
2024+ PACE Consumer Protections
Recent regulatory changes have added protections for California homeowners considering PACE:
- Enhanced disclosure requirements — PACE providers must provide detailed cost and risk disclosures
- Ability-to-pay verification — Lenders must verify you can afford the payments
- Right to cancel — Extended cancellation rights for PACE agreements
- Foreclosure protections — Additional requirements before PACE-related foreclosure proceedings
Despite these protections, PACE remains one of the riskiest ways to finance solar. Most consumer advocates recommend exploring conventional loans or cash purchases first.
Verifying Your California Installer
CSLB C-46 License Verification
Before signing with any California solar installer, verify their license:
- Visit cslb.ca.gov and use the license lookup tool
- Confirm the following:
| What to Verify | Acceptable | Red Flag |
|---|---|---|
| License classification | C-46 (Solar) listed | No C-46; only general B license |
| License status | Active | Suspended, expired, or revoked |
| Workers' comp | Certificate on file | No workers' comp (if company has employees) |
| Bond | $15,000 contractor bond on file | No bond or bond below requirement |
| Disciplinary history | Clean or minor issues only | Multiple or serious disciplinary actions |
Workers' Compensation Insurance
California requires contractors with employees to carry workers' compensation insurance. If an uninsured worker is injured on your property, you could be held liable. Verify coverage:
- Ask for a certificate of insurance naming you as certificate holder
- Call the insurance company to verify the policy is current
- Check the CSLB website for workers' comp status
For more on verifying installers, see our solar installer legitimacy check.
After You Sign
The 3-Day Cancellation Window
Once you sign a solar contract in California:
- You have 3 business days to cancel without penalty (Saturday counts as a business day in California)
- Use the cancellation form provided with your contract
- Send by certified mail to create proof of timely delivery
- Keep copies of all cancellation documents
If you have second thoughts, act immediately. For more details, see our guide on canceling door-to-door solar contracts.
Building Permits and Inspections
Your installer must obtain proper building permits before beginning work:
| Step | Who Handles It | Timeline |
|---|---|---|
| Permit application | Installer (your responsibility to confirm) | Before installation begins |
| Permit issuance | Local building department | 1-4 weeks |
| Installation | Installer | 1-5 days typically |
| Building inspection | Local building inspector | Within 1-2 weeks of installation |
| Utility interconnection application | Installer submits, utility processes | 2-8 weeks |
| Utility inspection | Utility inspector | 2-6 weeks after application |
| Permission to Operate (PTO) | Utility grants after inspection | Typically within 1 week of utility inspection |
Important: Your system should not be energized until the utility grants PTO. Operating without PTO may violate your utility's interconnection agreement and could create safety and liability issues.
What to Verify After Installation
- Installed equipment matches contract — Panel brands, models, inverter type, and quantity
- All permits finalized — Building department has signed off
- Monitoring activated — You can see production data in real-time
- Utility interconnection confirmed — You have written PTO from the utility
- All warranty documents provided — Manufacturer and workmanship warranties in hand
- As-built documentation — Final system diagram and specifications
For more on protecting yourself from California solar scams, read our comprehensive California solar scams guide and learn about the 10 questions to ask before signing a solar contract.
FAQ
What is a dealer fee in a California solar contract?
A dealer fee is an origination fee charged by solar lenders (like GoodLeap, Mosaic, or Dividend Finance) that is financed into your loan. These fees typically range from 15-30% of the system cost and are often not clearly disclosed. For example, on a $30,000 system with a 25% dealer fee, you would be financing $37,500 — and the dealer keeps the $7,500 fee. This is why a "low interest rate" loan can actually cost more than a higher-rate loan with no dealer fee. Always calculate the total cost over the loan term before signing. See our solar dealer fees explained guide for details.
Can I cancel a solar contract in California after 3 days?
The 3-day cancellation window is your strongest right, but cancellation after 3 days may still be possible in certain situations. If the solar company committed fraud or misrepresentation, you may have grounds for contract rescission under California law. If the company breached the contract — for example, by failing to install the system within the agreed timeline or installing different equipment than specified — you may have grounds for termination. Additionally, if the contract contains illegal provisions or violates California consumer protection laws, those provisions may be unenforceable. Consult with a solar attorney in California for advice specific to your situation.
What is a PACE lien and why is it dangerous?
A PACE (Property Assessed Clean Energy) lien is a financing mechanism that adds the cost of your solar installation to your property tax bill. It is dangerous because: (1) PACE liens have super-priority status, meaning they are paid before even your mortgage in a foreclosure; (2) failure to pay the PACE assessment can result in property tax default and foreclosure; (3) PACE liens can complicate selling or refinancing your home; and (4) the total cost of PACE financing is often significantly higher than conventional loans. California has added consumer protections, but PACE remains one of the riskiest financing options for solar.
How do I know if my NEM 3.0 savings estimate is accurate?
To verify your savings estimate under NEM 3.0: (1) Get your actual electricity usage from the past 12 months (available from your utility account); (2) Use the NREL PVWatts Calculator (pvwatts.nrel.gov) to estimate system production; (3) Apply NEM 3.0 export rates — currently approximately $0.04-$0.08/kWh for exports, much lower than the retail rate you pay for imports; (4) Account for time-of-use rates — exports during peak afternoon hours may have different value than evening exports; (5) Factor in true-up costs — the annual reconciliation may show you owe money if exports don't cover imports. If the company's estimate is significantly more optimistic than your independent calculation, ask for a detailed explanation of their assumptions.
Got blindsided by a solar deal that did not deliver?
You may have a claim — and the law may make the company that defrauded you pay your legal fees. Our 2-minute eligibility check screens for the consumer-protection statutes that apply to your situation (TILA § 130, the FTC Holder Rule, your state UDAP) and connects you with a consumer-protection attorney in our network if you qualify. Free review, no upfront cost, no obligation.