solar terminology

A guide to common solar energy terms

EnergySage makes going solar as easy as booking a flight online with our tools for calculating your solar savings and comparing quotes from pre-screened solar installers. But shopping for solar can still feel like a confusing process with all of its new terminology. EnergySage has developed an index of solar energy terms to help you decode solar jargon and better understand your options.

Solar panel terminology

Solar pricing and policy concepts

  • Community solar: A solar power plant whose electricity is shared by more than one household. Often framed as an alternative to rooftop solar. Also known as a solar garden or shared renewable energy plant.
  • Federal investment tax credit (ITC): Commonly referred to as the solar tax credit, the ITC effectively reduces the total cost of your solar energy system by 30 percent with a credit to your federal taxes. It is regarded as the most significant financial incentive for solar in the U.S.
  • Grid parity: The point at which power generated by solar panels costs the same or less than power from conventional resources like natural gas. Solar is already at grid parity in 20 states.
  • Levelized cost of energy (LCOE): The per-unit cost of energy from a solar energy system. LCOE is calculated by dividing the out-of-pocket cost for the system by the estimated total amount of energy the system will produce over its lifetime.
  • Net metering: A practice that credits you for the excess electricity generated by your solar panels, which you can then draw upon when your panels don’t produce enough electricity to match your use. With net metering, you effectively use the electric grid to “store” excess electricity for later use.
  • Property-Assessed Clean Energy (PACE): A special type of loan that is repaid through an annual assessment on your property tax bill. PACE financing can be used to install a solar PV system, among other clean energy improvements.
  • Payback period: Represents how long it takes to “break even” on a solar energy investment. The average payback period for solar homeowners in the U.S. is just over seven years.
  • Performance-based incentive (PBI): Financial incentive for solar that pays a homeowner based on the energy production of their solar system. PBIs are typically paid per kilowatt-hour of electricity generated. Feed-in tariffs are a type of PBI.
  • Power purchase agreement (PPA): Contract with a solar company to have a solar energy system installed on your roof. With a solar PPA, you agree to pay the company a per kilowatt-hour rate for the electricity produced by the solar panels.
  • Solar lease: Contract with a solar company to have a solar energy system installed on your roof. With a solar lease, you agree to pay the company a fixed monthly fee to “rent” the system in exchange for the benefits (i.e., the electricity) the system provides.
  • Solar lease escalator: A clause of most leases and PPAs that increases payment rates by a fixed amount per year. A typical escalator is 2.9 percent.
  • Solar loan: A loan provided by a bank, credit union, or specialty provider to finance the cost of buying a solar PV system.
  • Solar renewable energy credit (SREC): For every unit of electricity that a solar panel system generates, an associated SREC is also created. In some states, you can sell your SRECs for additional revenue.
  • Third-party owner (TPO): In a lease or PPA, the owner of the solar energy system (typically a solar corporation). By entering into a solar lease or PPA, you sign an agreement with the third-party owner.

7 thoughts on “A guide to common solar energy terms

  1. Karen

    Well, as long as we have sunlight and you have panels on your house, you will always have electricity.
    Our home is just under 2800 ft.². We have 38 panels on our house and a large back up battery. With everything installed it cost us just over $54,000. A large investment but well worth it in the long run. I would advise Solar to anyone who wants to pro-activity help the environment, eliminate a monthly bill and not have to tell your kids or grandkids every five minutes to turn off the lights. It’s a win win for everyone!

    1. Daniel Schneider

      Does this set up handle all of your needs electrically speaking? What was your average energy expenditure on your electrical bill? Thanks

  2. Jon Hall

    Off the grid is good because you own all the electricity the system produces instead of having to ” sell” it back to the local power co. Or having to disable your system in an outage. I dont have time to explain that. Sorry. You dont want power going out to the grid when people are working on the grid. Short answer. Most systems have a disconnect that switches from dual to net metering or compleltey disables the array in a fraction of a second if a power loss is noticed by the disconnect. In a stand alone system (official name) you will need a battery bank to store energy. Not to outrageously expensive and well worth the money and stesss free nights and rainy days. Someone mentioned the size of the array wil have to be alot bigger and thus more money with a stand alone to make sure you have enough production all the time. This is true but it will not be to many more panels to fulfill the total load ( amount of electricity your home needs to power everything veryday) if thats they actual best idea you have or just the way you want your houses needs accomplished. What im saying is why not use a backup gas generator for appliances you don’t need all the time or that run on cycles or certain times of the year or day. And it will be there in an emergency also which will eventually be the case with solar arrays and weather conditions or damage or whatever. That is my suggestion. But if you can afford it, pay for a system that does the job all the way and get the generator for emergencies only.

  3. Doreen Campbell

    The thing we would need to go off the grid, is more panels but also Batteries even more so, to store power to use at night. And it depends on your location as to how much sun you get, how efficient the panels are, but yes off-grid is a great idea.

  4. Jorge McMillan

    I’ve been hearing more and more about this solar powered energy. There are some things about it though that I don’t understand and I would like to see what the buzz is all about. This helped me understand it better and I look forward to seeing if its something that I can put on my home.

  5. Nash Rich

    I think if I were to use solar power, I would want to be off grid. I know that would take a lot of panels, but I think if I were to have them, I’d just go all the way. I wonder if solar panels will become more efficient as technology improves over the years?


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