Want to see every line in context? Walk through a sample solar contract page by page, with call-outs on what each section should include before you sign.
A solar proposal is a sales document. It is also a 25-year financial commitment. Most of the confusion is intentional — the numbers your installer highlights are not the numbers that decide whether solar pays off. This guide walks through the line items that matter: system size in kW, annual production in kWh, equipment specs, the real cost per watt, dealer fees buried in financing, escalators, and the savings projection that is almost always wrong.
How system size in kW and annual production in kWh actually work
A solar proposal opens with system size in kilowatts (kW) — the peak output under ideal conditions. A 10 kW system means 25 panels rated at 400 watts each. The number that matters more sits a few lines below: estimated annual production in kWh. A 10 kW system in California might generate 15,000 kWh per year; the same hardware in the Northeast might generate 12,000.
Match the system to your actual usage. Pull your last 12 months of utility bills and total the kWh. A system that covers 70 to 80 percent of that consumption is usually the financial sweet spot. Going larger costs more, takes more roof space, and — under newer net metering rules — generates credits worth far less than retail.
Production estimates come from your address's solar irradiance data, roof tilt, orientation, expected shading, and equipment efficiency. The model is reasonable, not certain. Real production swings with weather. Treat the kWh number as a planning estimate, not a guarantee.
What to look for: If your installer pushes a system sized for 100 percent of your usage without explaining the tradeoff, ask them to show the math both ways — 70 to 80 percent coverage and full coverage — side by side.
What you are actually buying: equipment and warranties
A proposal should name every piece of hardware: panel brand and wattage, inverter type, racking, and monitoring platform. Premium panels at 22 to 23 percent efficiency cost more per watt and degrade slightly slower than standard 20 to 21 percent panels. The long-term kWh difference rarely justifies the upgrade unless roof space is tight.
Inverters matter more than panel brand. String inverters are cheapest but drop the whole array's output when one panel is shaded. Microinverters add $3,000 to $5,000 to a typical system and isolate each panel. Power optimizers sit between the two on price and shading tolerance. If your roof has chimney shadows, tree gaps, or multiple orientations, the upgrade pays back.
Two warranty terms get conflated. The equipment warranty covers manufacturing defects — usually 25 years on panels and 10 to 12 years on inverters. The production guarantee is rarer: your installer promises a minimum annual kWh output and compensates you if the system underperforms. Equipment warranties do not cover shading, soiling, or grid outages. Production guarantees usually exclude extreme weather. Read both before signing.
How cost per watt, dealer fees, and the tax credit interact
Solar pricing has three layers. The gross cost is the sticker price — $35,000 to $50,000 for a typical 10 kW system. The net cost is what you pay after federal and state incentives. Cost per watt — net cost divided by system size in watts — is the comparison number that matters. National averages run $2.50 to $4.00 per watt. Anything above $3.50 deserves a second quote.
The federal tax credit changed in 2026. Section 25D, the 30 percent credit for cash and loan purchases, expired December 31, 2025. If you are buying outright, that incentive is gone. Section 48E remains available under current law if the project starts construction by July 4, 2026, or is in service by December 31, 2027, and applies to lease and PPA structures — the solar company claims the credit and passes some of the savings to you in lower monthly payments.
Dealer fees are the hidden inflation in solar loans. The finance company keeps 20 to 30 percent of the loan amount, buried in the effective interest rate rather than disclosed as a line item. A $28,000 system financed at a quoted 5 percent APR with a 25 percent dealer fee really costs you closer to 8 or 9 percent. Pull a home-improvement loan quote from your bank and compare APRs. If solar financing runs 3 to 4 points higher, dealer fees are why.
How lease escalators and net metering reshape the math
If your proposal is a lease or PPA, look at the escalator clause before anything else. Annual escalators of 1 to 3 percent sound small. They compound. A $150 monthly payment with a 2.9 percent escalator over 20 years reaches $173 at year five, $200 at year ten, and $266 at year twenty. Total lifetime cost can clear $50,000 — often more than buying the same system outright.
Some lease providers offer fixed-price leases with no escalator at a higher starting payment. Run both numbers over the full term before choosing.
Net metering rules determine what your excess kWh are worth. Under NEM 2.0, excess generation earns one-to-one credits at full retail rates. Under NEM 3.0 — now standard in California and spreading — excess kWh earn the "avoided cost," typically about 25 percent of retail. NEM 3.0 punishes oversized systems and rewards right-sizing plus battery storage.
Time-of-use rates add another layer: utilities now charge more during evening peak hours, exactly when your panels stop producing. Your proposal should model your specific rate structure, not a generic assumption. If it does not name your utility's net metering tier and TOU schedule, your installer has not done the work yet.
The savings number, payback period, and what to ask before signing
Every proposal promises a savings figure — usually "$60,000 over 25 years." It is a model output, not a contract. The number compounds estimated kWh production, your current utility rate, an assumed 2 to 3 percent annual rate increase, panel degradation, and the loan term. Change any assumption and the savings number changes too.
A more reliable metric is payback period: how many years before cumulative bill savings cover the system cost. A 6 to 10 year payback on a 25-year system leaves you 15-plus years of free electricity. A payback above 12 years deserves caution, especially if you might sell the home.
The most honest number you can compute is your levelized cost per kWh: total all-in cost (system price plus financing) divided by 25 years of estimated production. If that number beats your current utility rate, solar makes sense. If it does not, the proposal needs rework.
Before signing, get a second quote and compare cost per watt. Ask the financing company for the APR with no dealer fees included. Confirm your net metering tier and TOU rate. Insist the system is sized for 70 to 80 percent of your actual kWh use unless you have battery storage. An installer who can defend every line item is the one to work with.