Solar terminology

The solar industry is filled with specialized equipment, jargon, and acronyms. We’ve listed the most common terminology below to help make sense of any unfamiliar terms.

Solar terminology

The solar industry is filled with specialized equipment, jargon, and acronyms. We’ve listed the most common terminology below to help make sense of any unfamiliar terms.

SOLAR POWER & SOLAR PANELS

OTHER HOME SOLAR EQUIPMENT

HOME SOLAR DESIGN & OPERATION

SOLAR INCENTIVES & FINANCE

ELECTRICAL BASICS

SOLAR POWER & SOLAR PANELS

OTHER HOME SOLAR EQUIPMENT

HOME SOLAR DESIGN & OPERATION

SOLAR INCENTIVES & FINANCE

ELECTRICAL BASICS

Solar power & solar panels

Photovoltaic (PV) – The phenomenon by which light is converted to electricity.  

Irradiance – The amount of sunlight. For home solar systems, the greater the irradiance, the more solar power is produced.

Solar Panel / Solar Module – Solar panels, also known as solar modules, are made by connecting a series of solar cells and then laminating them between a transparent cover (usually glass) and a weatherproof back cover (typically a film called a backsheet). Solar panels which use more efficient solar cells tend to be more expensive than those which use less efficient solar cells.

Solar Cells – Solar cells are made of semiconductor materials that are able to absorb light and convert it to electricity. Most solar cells are made of crystalline silicon (the same stuff that computer chips are made of), but even within the crystalline silicon, there are dozens of different variations. Some variations of solar cells are more efficient, meaning that they convert a greater percentage of sunlight into electricity.  Others have better performance characteristics in different conditions (high temperatures for example – see Solar Panel Temperature Coefficient below).  And some degrade less than others over time (see Solar Panel Degradation below).    

Solar Panel Efficiency – Solar panel efficiency measures the percentage of sunlight that is converted to electricity. Most residential solar panels convert 18 percent to 22 percent of sunlight into electricity.  

Standard Test Conditions (STC)  – To maintain a level playing field, solar panels are tested and rated at STC which specifies the intensity of light, the color spectrum of the light, and the solar panel temperature. All voltage, current, and power (from which efficiency is derived) ratings of a solar panel are based on STC unless otherwise noted. It is important to understand that in the real world, solar panels almost never operate at STC. So STC ratings, while helpful in comparing solar panels, should not be confused with real world performance of solar panels under different temperature and lighting conditions.

Solar Panel Temperature Coefficient – The ability of solar cells to generate power also degrades inversely with temperature. So the hotter a solar cell is, the less power it will produce.  Temperature coefficients, measured in percentage per degree celsius, tell you how much less energy solar cells and solar panels will produce as the temperature increases.

Solar Panel Degradation – The ability of solar cells, and thus solar panels, to generate power degrades over time. You’ll most likely come across solar panel degradation when reviewing solar panel warranties. Most solar panels are warranted for their power to degrade less than one percent annually over their 25 year lifetime.

Solar Panel Backsheet – Solar panel backsheets are weatherproof polymer films that sit below the solar cells and, when laminated into a solar panel, keep moisture from reaching the solar cells. While solar panel backsheets are critical for protecting the solar cells, you’ll more likely notice them from an aesthetic viewpoint since you can see the backsheet through gaps between solar cells. White backsheets reflect more light back into the cell and keep the panels cooler, improving performance when compared to black backsheets. But white backsheets also create a less homogenous aesthetic with black solar cells and strips of white in between them.

Solar Roofing – True to its name, solar roofing is solar that also functions as roofing. Despite the recent increase in awareness of solar roofing as an alternative to traditional solar panels, solar roofing products have been around for 15-20 years. Even though the low profile of solar roofing products leads to a better aesthetic, solar roofing isn’t widespread yet since it is typically more expensive than traditional solar panels. You can read more about solar roofing here.

Solar Shingles – Solar shingles are a form of solar roofing. In certain cases, they integrate with a surrounding traditional asphalt shingle roof so you can put your solar shingles in the sunniest locations and use lower-cost asphalt shingles for the rest of the roof. In some instances, the term solar shingles is used more generically to refer to any type of solar roofing.

Solar Tiles – Solar tiles are a form of solar roofing. In certain cases, they integrate with a surrounding traditional tile roof so you can put your solar tiles in the sunniest locations and use lower-cost traditional tiles for the rest of the roof. In some instances, the term solar tiles is used more generically to refer to any kind of solar roofing.

Solar Thermal – The conversion of light to heat which is then used (typically) to heat a fluid. Solar thermal panels absorb heat, which is then transferred to a fluid circulating within the panel.  That fluid is used to heat water.  Common examples of solar thermal applications include domestic hot water or pool heating.

Solar power & solar panels

Photovoltaic (PV) – The phenomenon by which light is converted to electricity.  

Irradiance – The amount of sunlight. For home solar systems, the greater the irradiance, the more solar power is produced.

Solar Panel / Solar Module – Solar panels, also known as solar modules, are made by connecting a series of solar cells and then laminating them between a transparent cover (usually glass) and a weatherproof back cover (typically a film called a backsheet). Solar panels which use more efficient solar cells tend to be more expensive than those which use less efficient solar cells.

Solar Cells – Solar cells are made of semiconductor materials that are able to absorb light and convert it to electricity. Most solar cells are made of crystalline silicon (the same stuff that computer chips are made of), but even within the crystalline silicon, there are dozens of different variations. Some variations of solar cells are more efficient, meaning that they convert a greater percentage of sunlight into electricity.  Others have better performance characteristics in different conditions (high temperatures for example – see Solar Panel Temperature Coefficient below).  And some degrade less than others over time (see Solar Panel Degradation below).    

Solar Panel Efficiency – Solar panel efficiency measures the percentage of sunlight that is converted to electricity. Most residential solar panels convert 18 percent to 22 percent of sunlight into electricity.  

Standard Test Conditions (STC)  – To maintain a level playing field, solar panels are tested and rated at STC which specifies the intensity of light, the color spectrum of the light, and the solar panel temperature. All voltage, current, and power (from which efficiency is derived) ratings of a solar panel are based on STC unless otherwise noted. It is important to understand that in the real world, solar panels almost never operate at STC. So STC ratings, while helpful in comparing solar panels, should not be confused with real world performance of solar panels under different temperature and lighting conditions.

Solar Panel Temperature Coefficient – The ability of solar cells to generate power also degrades inversely with temperature. So the hotter a solar cell is, the less power it will produce.  Temperature coefficients, measured in percentage per degree celsius, tell you how much less energy solar cells and solar panels will produce as the temperature increases.

Solar Panel Degradation – The ability of solar cells, and thus solar panels, to generate power degrades over time. You’ll most likely come across solar panel degradation when reviewing solar panel warranties. Most solar panels are warranted for their power to degrade less than one percent annually over their 25 year lifetime.

Solar Panel Backsheet – Solar panel backsheets are weatherproof polymer films that sit below the solar cells and, when laminated into a solar panel, keep moisture from reaching the solar cells. While solar panel backsheets are critical for protecting the solar cells, you’ll more likely notice them from an aesthetic viewpoint since you can see the backsheet through gaps between solar cells. White backsheets reflect more light back into the cell and keep the panels cooler, improving performance when compared to black backsheets. But white backsheets also create a less homogenous aesthetic with black solar cells and strips of white in between them.

Solar Roofing – True to its name, solar roofing is solar that also functions as roofing. Despite the recent increase in awareness of solar roofing as an alternative to traditional solar panels, solar roofing products have been around for 15-20 years. Even though the low profile of solar roofing products leads to a better aesthetic, solar roofing isn’t widespread yet since it is typically more expensive than traditional solar panels. You can read more about solar roofing here.

Solar Shingles – Solar shingles are a form of solar roofing. In certain cases, they integrate with a surrounding traditional asphalt shingle roof so you can put your solar shingles in the sunniest locations and use lower-cost asphalt shingles for the rest of the roof. In some instances, the term solar shingles is used more generically to refer to any type of solar roofing.

Solar Tiles – Solar tiles are a form of solar roofing. In certain cases, they integrate with a surrounding traditional tile roof so you can put your solar tiles in the sunniest locations and use lower-cost traditional tiles for the rest of the roof. In some instances, the term solar tiles is used more generically to refer to any kind of solar roofing.

Solar Thermal – The conversion of light to heat which is then used (typically) to heat a fluid. Solar thermal panels absorb heat, which is then transferred to a fluid circulating within the panel.  That fluid is used to heat water.  Common examples of solar thermal applications include domestic hot water or pool heating.

Other home solar equipment

Racking / Mounting System – The racking or mounting system is the structure that is used to mount solar panels to a roof or the ground. The primary components of racking or mounting systems are brackets attached to the roof structure, extruded metal rails attached to the brackets that the solar panels sit on and the clamps that hold the solar panels to the rails. 

Flashing – Flashing refers to products and methods which are used to waterproof the holes in your roofing system that are required to attach a home solar system through your roof to your roof’s structural members (rafters for example).

Inverter – An inverter’s primary function is to convert DC electricity to AC electricity and  optimize the amount of power a solar energy system generates. Inverters optimize solar power by adjusting the resistance on the circuit to find the point at which the solar energy system is producing the maximum power. Over the years, inverters have added many important safety features.  For example, grid-tied inverters (inverters designed to be connected to the electrical grid) will turn off if the grid goes down to avoid pushing electricity back into the grid so workers can safely work on fixing grid equipment. Additional safety features include arc-fault detection and ground fault detection, where the inverter will shut down to prevent more serious electrical faults. Think of an inverter as the brain of a solar energy system.

String Inverter – A string inverter is a larger inverter connected to one or more strings of solar panels where one “string” consists of multiple solar panels connected to each other (think of a string of holiday lights).

Microinverter – A microinverter is a smaller inverter that is connected to only one, or in some cases two, solar panels.  It provides all of the functions of an inverter at the individual solar panel level.

DC Optimizer (Direct Current) – A DC optimizer is an electrical device connected to one, or in some cases two, solar panels. DC optimizers perform the power optimization and safety features of inverters but need to be connected to a string inverter to perform the DC to AC conversion function.  

Electrical Panel – An electrical panel is also known as a service panel or breaker panel and  distributes electricity in your home. It’s where your circuit breakers are located.  Each circuit has its own circuit breaker which “trips” or shuts off to protect the circuit if there is a fault.

Sub-panel – All homes have a main electrical panel. Some homes will also have a smaller sub-panel to serve a more specific set of electrical loads.

Critical load panel – A critical load panel is a specific type of sub-panel designed to serve (you guessed it!) critical loads in the event of a power outage. Electricity would be supplied to the critical load panel by a home battery or generator and would provide power only to the circuits that are connected to it. Critical load panels serve to reduce the required capacity of the home battery or generator so that it does not need to power your entire home; this results in a lower capacity and lower-cost home battery or generator while maintaining power to important appliances (your refrigerator, wifi router, cell phone charger, etc.).

Energy Storage / Home Battery – Batteries, also known in the solar industry as “energy storage,” are basically the same as a any battery you might have in your home but more sophisticated and on a much larger scale. Home battery units include the battery itself, a charge controller, and an inverter.  Batteries that are paired with home solar systems can store energy produced by the home solar system, but batteries can also be charged with energy from the grid. That energy can then be used when your home solar system isn’t making as much energy as your home needs or in cases when the grid goes down. 

Charge Controller – A charge controller regulates the flow of electricity into a battery to ensure that a battery is being charged with the right amount of voltage, current, and power. Different battery types have different electrical characteristics and different charging profiles, so a charge controller makes sure they’re charging correctly.  

Battery Cycles – One battery cycle occurs when a battery discharges and then recharges. The ability of a battery to store energy degrades as it accumulates more charge / discharge cycles. Many home battery warranties are based on a number of years or a number of battery cycles, whichever comes first.    

You can learn more about home solar components here and home battery systems here.

Other home solar equipment

Racking / Mounting System – The racking or mounting system is the structure that is used to mount solar panels to a roof or the ground. The primary components of racking or mounting systems are brackets attached to the roof structure, extruded metal rails attached to the brackets that the solar panels sit on and the clamps that hold the solar panels to the rails. 

Flashing – Flashing refers to products and methods which are used to waterproof the holes in your roofing system that are required to attach a home solar system through your roof to your roof’s structural members (rafters for example).

Inverter – An inverter’s primary function is to convert DC electricity to AC electricity and  optimize the amount of power a solar energy system generates. Inverters optimize solar power by adjusting the resistance on the circuit to find the point at which the solar energy system is producing the maximum power. Over the years, inverters have added many important safety features.  For example, grid-tied inverters (inverters designed to be connected to the electrical grid) will turn off if the grid goes down to avoid pushing electricity back into the grid so workers can safely work on fixing grid equipment. Additional safety features include arc-fault detection and ground fault detection, where the inverter will shut down to prevent more serious electrical faults. Think of an inverter as the brain of a solar energy system.

String Inverter – A string inverter is a larger inverter connected to one or more strings of solar panels where one “string” consists of multiple solar panels connected to each other (think of a string of holiday lights).

Microinverter – A microinverter is a smaller inverter that is connected to only one, or in some cases two, solar panels.  It provides all of the functions of an inverter at the individual solar panel level.

DC Optimizer (Direct Current) – A DC optimizer is an electrical device connected to one, or in some cases two, solar panels. DC optimizers perform the power optimization and safety features of inverters but need to be connected to a string inverter to perform the DC to AC conversion function.  

Electrical Panel – An electrical panel is also known as a service panel or breaker panel and  distributes electricity in your home. It’s where your circuit breakers are located.  Each circuit has its own circuit breaker which “trips” or shuts off to protect the circuit if there is a fault.

Sub-panel – All homes have a main electrical panel. Some homes will also have a smaller sub-panel to serve a more specific set of electrical loads.

Critical load panel – A critical load panel is a specific type of sub-panel designed to serve (you guessed it!) critical loads in the event of a power outage. Electricity would be supplied to the critical load panel by a home battery or generator and would provide power only to the circuits that are connected to it. Critical load panels serve to reduce the required capacity of the home battery or generator so that it does not need to power your entire home; this results in a lower capacity and lower-cost home battery or generator while maintaining power to important appliances (your refrigerator, wifi router, cell phone charger, etc.).

Energy Storage / Home Battery – Batteries, also known in the solar industry as “energy storage,” are basically the same as a any battery you might have in your home but more sophisticated and on a much larger scale. Home battery units include the battery itself, a charge controller, and an inverter.  Batteries that are paired with home solar systems can store energy produced by the home solar system, but batteries can also be charged with energy from the grid. That energy can then be used when your home solar system isn’t making as much energy as your home needs or in cases when the grid goes down. 

Charge Controller – A charge controller regulates the flow of electricity into a battery to ensure that a battery is being charged with the right amount of voltage, current, and power. Different battery types have different electrical characteristics and different charging profiles, so a charge controller makes sure they’re charging correctly.  

Battery Cycles – One battery cycle occurs when a battery discharges and then recharges. The ability of a battery to store energy degrades as it accumulates more charge / discharge cycles. Many home battery warranties are based on a number of years or a number of battery cycles, whichever comes first.    

You can learn more about home solar components here and home battery systems here.

Home solar design and operation

Roof Takeoff – A roof takeoff is a set of measurements of roof space. Roof takeoffs were originally performed  to determine how much roofing would be needed to re-roof and subsequently generate a quote. Nowadays, roof takeoffs are also done in order to determine how much roof space is available for solar panels.  Though there’s still a little room for error, roof takeoffs which are done remotely using satellite or aerial imagery have become quite accurate and are a good substitute for on-site measurements.  

Solar Proposal – Solar proposals are essentially quotes for a home solar system.  However, since home solar systems generate energy and savings for homeowners, solar proposals also include energy and financial models to forecast how much energy the home solar system will generate and the resulting savings from that energy generation.  A home solar proposal will factor in rebates and incentives and will show monthly lease and loan payments if a homeowner is interested in financing a home solar purchase.  For cash purchases, a solar proposal should show payback period.  Since home solar systems last for 25 years or more, it’s critical that a solar proposal uses accurate assumptions for energy generation, solar panel degradation and utility rate escalation. Small changes in these assumptions can make a big difference when compounded over 25 years.

Solar Panel Degradation – The ability of solar cells, and thus solar panels, to generate power degrades over time. You’ll most likely come across solar panel degradation when reviewing solar panel warranties. Most solar panels are warranted for their power to degrade less than one percent annually over their 25 year lifetime.

Utility Rate Escalation – The cost of electricity from utilities has always increased over time as normal inflation increases the cost of fuel for traditional fossil fuel based energy generation and utilities look to recoup investments in upgrading their infrastructure or building new power plants.  Over the long term, utility rate escalation has historically 1-2% annually but can be higher or lower in any given year depending on your specific utility. Utility rate escalation is used in a solar proposal to predict future savings on energy which your home solar system generates and which you will not need to purchase from the utility.  It’s important that realistic assumptions on utility rate escalation be used in a solar proposal as higher assumptions on utility rate escalation, compounded over 25 years, will make the financial returns on a home solar investment look significantly better.  In other words, the higher the cost of electricity from your utility, the more you save.

Solar Monitoring – Solar monitoring refers to the ability to see data on the performance of a home solar system. Solar monitoring typically includes measurements of voltage, current and wattage (power) generated over various periods of time (energy) as well as faults or other system issues. It’s important to make sure a home solar system has a monitoring system which you can easily access and understand so that you can make sure that it is performing as expected and correct any issues quickly.  Note that solar monitoring depends on the system having a good internet connection so if your monitoring is connected to your home internet and changes or goes down, you won’t be able to see what your system is doing until your home internet is restored and your monitoring system reconnects to it.

O&M / Operations & Maintenance – O&M is typically used to refer to plans provided by solar contractors or third-parties to monitor a home solar system and respond to and repair any issues which occur.  These plans can be prepaid up-front or be based on a monthly or annual subscription payment.  O&M plans can be a good option for homeowners who want the security of knowing that someone else will monitor their system’s performance and correct or repair any issues which occur. Without an O&M plan, the homeowner may need to pay the cost of labor for removing and replacing the defective part, but home solar equipment has become very reliable and manufacturer warranties typically cover replacing defective parts for 25 years or more.  Before committing to the additional expense of an O&M plan, you should first understand what the manufacturer and installer warranties already cover.

Home solar design and operation

Roof Takeoff – A roof takeoff is a set of measurements of roof space. Roof takeoffs were originally performed  to determine how much roofing would be needed to re-roof and subsequently generate a quote. Nowadays, roof takeoffs are also done in order to determine how much roof space is available for solar panels.  Though there’s still a little room for error, roof takeoffs which are done remotely using satellite or aerial imagery have become quite accurate and are a good substitute for on-site measurements.  

Solar Proposal – Solar proposals are essentially quotes for a home solar system.  However, since home solar systems generate energy and savings for homeowners, solar proposals also include energy and financial models to forecast how much energy the home solar system will generate and the resulting savings from that energy generation.  A home solar proposal will factor in rebates and incentives and will show monthly lease and loan payments if a homeowner is interested in financing a home solar purchase.  For cash purchases, a solar proposal should show payback period.  Since home solar systems last for 25 years or more, it’s critical that a solar proposal uses accurate assumptions for energy generation, solar panel degradation and utility rate escalation. Small changes in these assumptions can make a big difference when compounded over 25 years.

Solar Panel Degradation – The ability of solar cells, and thus solar panels, to generate power degrades over time. You’ll most likely come across solar panel degradation when reviewing solar panel warranties. Most solar panels are warranted for their power to degrade less than one percent annually over their 25 year lifetime.

Utility Rate Escalation – The cost of electricity from utilities has always increased over time as normal inflation increases the cost of fuel for traditional fossil fuel based energy generation and utilities look to recoup investments in upgrading their infrastructure or building new power plants.  Over the long term, utility rate escalation has historically 1-2% annually but can be higher or lower in any given year depending on your specific utility. Utility rate escalation is used in a solar proposal to predict future savings on energy which your home solar system generates and which you will not need to purchase from the utility.  It’s important that realistic assumptions on utility rate escalation be used in a solar proposal as higher assumptions on utility rate escalation, compounded over 25 years, will make the financial returns on a home solar investment look significantly better.  In other words, the higher the cost of electricity from your utility, the more you save.

Solar Monitoring – Solar monitoring refers to the ability to see data on the performance of a home solar system. Solar monitoring typically includes measurements of voltage, current and wattage (power) generated over various periods of time (energy) as well as faults or other system issues. It’s important to make sure a home solar system has a monitoring system which you can easily access and understand so that you can make sure that it is performing as expected and correct any issues quickly.  Note that solar monitoring depends on the system having a good internet connection so if your monitoring is connected to your home internet and changes or goes down, you won’t be able to see what your system is doing until your home internet is restored and your monitoring system reconnects to it.

O&M / Operations & Maintenance – O&M is typically used to refer to plans provided by solar contractors or third-parties to monitor a home solar system and respond to and repair any issues which occur.  These plans can be prepaid up-front or be based on a monthly or annual subscription payment.  O&M plans can be a good option for homeowners who want the security of knowing that someone else will monitor their system’s performance and correct or repair any issues which occur. Without an O&M plan, the homeowner may need to pay the cost of labor for removing and replacing the defective part, but home solar equipment has become very reliable and manufacturer warranties typically cover replacing defective parts for 25 years or more.  Before committing to the additional expense of an O&M plan, you should first understand what the manufacturer and installer warranties already cover.

Solar incentives and finance

Federal Investment Tax Credit (ITC) – The Federal Investment Tax Credit or ITC is an incentive for solar energy systems whereby the owner of a solar system can deduct a certain percentage of the total cost of the solar system from their federal tax liability. It is important to understand this is a tax credit that reduces tax liability on a 1:1 basis (meaning a credit of $1 reduces taxes owed by $1) and it does not reduce taxable income. 

Solar Renewable Energy Credits (SRECs) – SRECs are measured in megawatt-hours, and one SREC equals one megawatt-hour. In states with SREC programs, utilities are required to produce a certain percentage of their energy from renewable sources. Since utilities generally can’t meet these percentage goals from their own energy generation, they will purchase SRECs from solar system owners. The price of an SREC can be fixed or fluctuate based on supply and demand. 

Transitional Renewable Energy Credits (TRECs) – TRECs are renewable energy credits that are specific to the New Jersey’s Clean Energy Program. In December of 2019, the board of public utilities (BPU) approved a transition from New Jersey’s SREC program to its TREC program, which was effective for systems placed into service in June 2020. The TREC program has been phased out as of October 2021 and is being replaced with a successor program, also known as SREC-II.  Like SRECs, one TREC equals one megawatt-hour of solar energy produced. However, unlike SRECs, TREC prices are fixed and do not fluctuate with supply and demand. New Jersey’s Clean Energy Program also guarantees that TRECs can be sold at that fixed price for 15 years.

Successor Solar Incentive Program (SuSI) – The SuSI is specific to New Jersey’s Clean Energy Program and replaces the previous TREC program.  The SuSI program created SREC-IIs which are essentially SRECs with a guaranteed price ($90 / MWh for residential solar installations) and time period (15 years).

Net Energy Metering (NEM) – Net energy metering is a state-level policy enacted by the public utility commission whereby a homeowner receives compensation for energy exported to the grid, which is equal to the rate they pay for energy they consume from the grid. Basically, this means that a homeowner would be billed for power consumed from the grid minus energy exported to the grid in any particular billing cycle. States which do not have net metering policies typically compensate homeowners at a lower rate for energy that they export to the grid.

Solar Lease – Residential solar leases are contracts between a third-party who owns and operates a solar system and a homeowner who agrees to pay a monthly lease payment for the energy generated by that solar system. Solar leases are typically 15-20 year contracts with an annual escalator (meaning that the monthly lease payment increases every year).  In these arrangements, the third-party owner is responsible for repairs and maintenance, but retains all of the rebates and incentives for the home solar system.

Solar Power Purchase Agreement (PPA) – Residential solar power purchase agreements are basically identical to solar leases except that the homeowner is billed based on how much solar energy the third-party-owned system produces instead of on a fixed monthly payment. They are also typically 15-20 years in length.  The third-party owner is responsible for repairs and maintenance and retains all available rebates and incentives.

Solar Loan – A solar loan is a way to finance a home solar purchase.  Solar loans cam provide the same $0 down payment and fixed monthly payment that a solar lease does, except that the homeowner owns the system after paying off the loan balance. Since the homeowner also owns the solar system, they are responsible for repairs and maintenance but keep all rebates and incentives.

Levelized Cost of Energy (LCOE) – Levelized cost of energy is the total cost of energy produced by a generating source (like a home solar system). The levelized cost of energy is measured in dollars per kWh ($/kWh). It is calculated by taking the total cost of the generating source, including maintenance, and repairs over its lifetime and then dividing that by the number of kilowatt-hours that it will generate over its lifetime.

Payback Period – The amount of time that it will take a home solar system to pay for itself through energy savings.  This financial metric is most applicable when home solar is purchased with cash.

Cash Flow – How much cash a home solar system is generating in savings minus any loan payments, typically measured on a monthly basis.  This financial metric is most applicable when home solar is purchased with a loan, including home equity loans or lines of credit.  When a home solar system is saving more than your monthly loan payment, your home solar system is effectively paying for itself.  

Return on Investment (ROI) – Another metric used to determine the profitability of a home solar investment, sometimes found in solar proposals. The return on investment is a percentage and can also be thought of as the total return over the lifetime of the investment.

Internal Rate of Return (IRR) – A metric used to determine the profitability of a home solar investment, sometimes found in solar proposals. The internal rate of return is a percentage and can be thought of as the annual growth rate of an investment. If a solar proposal has an IRR number, you can use that to compare a home solar investment to other ways you could invest your money – like the stock market.

Solar incentives and finance

Federal Investment Tax Credit (ITC) – The Federal Investment Tax Credit or ITC is an incentive for solar energy systems whereby the owner of a solar system can deduct a certain percentage of the total cost of the solar system from their federal tax liability. It is important to understand this is a tax credit that reduces tax liability on a 1:1 basis (meaning a credit of $1 reduces taxes owed by $1) and it does not reduce taxable income. 

Solar Renewable Energy Credits (SRECs) – SRECs are measured in megawatt-hours, and one SREC equals one megawatt-hour. In states with SREC programs, utilities are required to produce a certain percentage of their energy from renewable sources. Since utilities generally can’t meet these percentage goals from their own energy generation, they will purchase SRECs from solar system owners. The price of an SREC can be fixed or fluctuate based on supply and demand. 

Transitional Renewable Energy Credits (TRECs) – TRECs are renewable energy credits that are specific to the New Jersey’s Clean Energy Program. In December of 2019, the board of public utilities (BPU) approved a transition from New Jersey’s SREC program to its TREC program, which was effective for systems placed into service in June 2020. The TREC program has been phased out as of October 2021 and is being replaced with a successor program, also known as SREC-II.  Like SRECs, one TREC equals one megawatt-hour of solar energy produced. However, unlike SRECs, TREC prices are fixed and do not fluctuate with supply and demand. New Jersey’s Clean Energy Program also guarantees that TRECs can be sold at that fixed price for 15 years.

Successor Solar Incentive Program (SuSI) – The SuSI is specific to New Jersey’s Clean Energy Program and replaces the previous TREC program.  The SuSI program created SREC-IIs which are essentially SRECs with a guaranteed price ($90 / MWh for residential solar installations) and time period (15 years).

Net Energy Metering (NEM) – Net energy metering is a state-level policy enacted by the public utility commission whereby a homeowner receives compensation for energy exported to the grid, which is equal to the rate they pay for energy they consume from the grid. Basically, this means that a homeowner would be billed for power consumed from the grid minus energy exported to the grid in any particular billing cycle. States which do not have net metering policies typically compensate homeowners at a lower rate for energy that they export to the grid.

Solar Lease – Residential solar leases are contracts between a third-party who owns and operates a solar system and a homeowner who agrees to pay a monthly lease payment for the energy generated by that solar system. Solar leases are typically 15-20 year contracts with an annual escalator (meaning that the monthly lease payment increases every year).  In these arrangements, the third-party owner is responsible for repairs and maintenance, but retains all of the rebates and incentives for the home solar system.

Solar Power Purchase Agreement (PPA) – Residential solar power purchase agreements are basically identical to solar leases except that the homeowner is billed based on how much solar energy the third-party-owned system produces instead of on a fixed monthly payment. They are also typically 15-20 years in length.  The third-party owner is responsible for repairs and maintenance and retains all available rebates and incentives.

Solar Loan – A solar loan is a way to finance a home solar purchase.  Solar loans cam provide the same $0 down payment and fixed monthly payment that a solar lease does, except that the homeowner owns the system after paying off the loan balance. Since the homeowner also owns the solar system, they are responsible for repairs and maintenance but keep all rebates and incentives.

Levelized Cost of Energy (LCOE) – Levelized cost of energy is the total cost of energy produced by a generating source (like a home solar system). The levelized cost of energy is measured in dollars per kWh ($/kWh). It is calculated by taking the total cost of the generating source, including maintenance, and repairs over its lifetime and then dividing that by the number of kilowatt-hours that it will generate over its lifetime.

Payback Period – The amount of time that it will take a home solar system to pay for itself through energy savings.  This financial metric is most applicable when home solar is purchased with cash.

Cash Flow – How much cash a home solar system is generating in savings minus any loan payments, typically measured on a monthly basis.  This financial metric is most applicable when home solar is purchased with a loan, including home equity loans or lines of credit.  When a home solar system is saving more than your monthly loan payment, your home solar system is effectively paying for itself.  

Return on Investment (ROI) – Another metric used to determine the profitability of a home solar investment, sometimes found in solar proposals. The return on investment is a percentage and can also be thought of as the total return over the lifetime of the investment.

Internal Rate of Return (IRR) – A metric used to determine the profitability of a home solar investment, sometimes found in solar proposals. The internal rate of return is a percentage and can be thought of as the annual growth rate of an investment. If a solar proposal has an IRR number, you can use that to compare a home solar investment to other ways you could invest your money – like the stock market.

Electrical basics

Voltage – A measurement for the “pressure” of the electrons. Think of water pressure in a garden hose.

Current – A measurement for the volume of electrons. Think of a garden hose; the current would be the equivalent of the diameter of the garden hose.  The wider the hose is, the more water can flow through it at the same pressure.

Watts – A measurement of the total electrical power generated, watts are calculated by multiplying current times voltage. Using the garden hose example, this would be the total amount of water moving through a garden hose at a given moment in time.

Alternating current (AC) – An electrical current which reverses direction periodically.  Alternating current in the US operates at 60 Hertz, meaning that it completes one cycle of reversing from positive to negative and back to positive 60 times a second. Your home and its appliances use AC electricity.

Direct current (DC) – An electrical current which only flows in one direction. DC is produced by solar panels and batteries.

Solar Power – The amount of power that a solar panel or system produces. Power is measured in watts or kilowatts and is a snapshot of a moment in time as compared with energy which is a measurement of power produced over time.

Kilowatts (kW) – A measure of electrical power, one kilowatt equals 1,000 watts.

Megawatts (MW) – One megawatt equals one million watts or 1,000 kilowatts.

Solar Energy – The amount of energy that a solar panel or system produces. Energy is measured in kilowatt-hours and measures the amount of power produced over time.

Kilowatt-hours (kWh) – A measure of the amount of energy delivered over time.  One kilowatt-hour equals one kilowatt of power which is being generated or consumed for one hour.  The amount you pay a utility for electricity is determined by how many kilowatt-hours you have consumed in a month.

Megawatt-hours (MWh) – One megawatt-hour equals 1,000 kilowatt-hours.

Load – A load is any appliance that consumes electricity. Examples include refrigerators, lights, televisions, air conditioning, etc.  Loads are rated for how much power they need to operate (a 60 watt light bulb for example) and how much energy they typically use (think of the energy star sticker on an appliance which estimates how much it will cost to operate that appliance each year).

Electrical basics

Voltage – A measurement for the “pressure” of the electrons. Think of water pressure in a garden hose.

Current – A measurement for the volume of electrons. Think of a garden hose; the current would be the equivalent of the diameter of the garden hose.  The wider the hose is, the more water can flow through it at the same pressure.

Watts – A measurement of the total electrical power generated, watts are calculated by multiplying current times voltage. Using the garden hose example, this would be the total amount of water moving through a garden hose at a given moment in time.

Alternating current (AC) – An electrical current which reverses direction periodically.  Alternating current in the US operates at 60 Hertz, meaning that it completes one cycle of reversing from positive to negative and back to positive 60 times a second. Your home and its appliances use AC electricity.

Direct current (DC) – An electrical current which only flows in one direction. DC is produced by solar panels and batteries.

Solar Power – The amount of power that a solar panel or system produces. Power is measured in watts or kilowatts and is a snapshot of a moment in time as compared with energy which is a measurement of power produced over time.

Kilowatts (kW) – A measure of electrical power, one kilowatt equals 1,000 watts.

Megawatts (MW) – One megawatt equals one million watts or 1,000 kilowatts.

Solar Energy – The amount of energy that a solar panel or system produces. Energy is measured in kilowatt-hours and measures the amount of power produced over time.

Kilowatt-hours (kWh) – A measure of the amount of energy delivered over time.  One kilowatt-hour equals one kilowatt of power which is being generated or consumed for one hour.  The amount you pay a utility for electricity is determined by how many kilowatt-hours you have consumed in a month.

Megawatt-hours (MWh) – One megawatt-hour equals 1,000 kilowatt-hours.

Load – A load is any appliance that consumes electricity. Examples include refrigerators, lights, televisions, air conditioning, etc.  Loads are rated for how much power they need to operate (a 60 watt light bulb for example) and how much energy they typically use (think of the energy star sticker on an appliance which estimates how much it will cost to operate that appliance each year).

We understand that it’s not just the use of technical terms, acronyms and jargon which can make home solar confusing.  Learn more about how we help homeowners make sense of their home solar and clean energy options here or get started with a free Solar Assessment by clicking below.

Start My Free Solar Assessment

We understand that it’s not just the use of technical terms, acronyms and jargon which can make home solar confusing.  Learn more about how we help homeowners make sense of their home solar and clean energy options here or get started with a free Solar Assessment by clicking below.

Start My Free Solar Assessment

Have a solar term which we don’t have listed above?  Send us a message and we’ll answer ASAP.

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Have a solar term which we don’t have listed above?  Send us a message and we’ll answer ASAP.

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Learn about solar

Find honest answers to some of the most commonly asked questions on home solar and clean energy.

Learn about solar

Find honest answers to some of the most commonly asked questions on home solar below.