Jean Chatzky: Avoid solar energy rip-offs

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Prices for solar energy systems have dropped and more options to lease are available, making residential solar power more popular than ever. Since 2010, residential costs for solar have dropped 45%, according to the Solar Energy Industries Association. Partly as a result of lower prices, growth in solar capacity is expected to double in the U.S. in the next 2 years.

With popularity comes the hard sell. It seems not a day goes by without getting an email, phone call or visit from solar marketers. Many are legitimate, but the scams are out there, too. Overpromising energy savings, installing faulty equipment and misleading financing and warranties are some of the problems solar consumers have encountered recently.

Rip-offs aside, there’s no doubt solar can provide cleaner, cheaper energy in the right situation. These 5 steps can help you get the best deal and avoid shady operators.

Consider a personal loan to finance your solar installation, see today’s rates on Bankrate.

1. Compare buying and leasing

Deciding whether to buy your own solar equipment or pay a fixed monthly amount for a solar lease is one of the first decisions consumers interested in solar need to make.

When you buy a solar system, you purchase the panels and other necessary equipment and hire an installer to set up the system on your roof or in your yard. You own the system and all of the electricity that is generated from it.

You can finance the purchase and installation if need be and you’re responsible for maintaining the system, although solar companies will usually provide a warranty. The average purchase price of a residential solar system in the U.S. is about $20,000, says Tom Kimbis, SEIA’s general counsel.

With a lease agreement, a solar company will install panels on your roof, and in return you pay a monthly fee for electricity that is usually less than what you pay your utility. With most leases, but not all, you own the electricity generated by the system, including any extra that is fed into your local electric company. The solar company usually handles maintenance, monitoring and repairs.

There are 2 main types of leasing contracts. Which 1 you use will probably depend on where you live. With a traditional lease, you pay a fixed monthly rate for electricity usually over a predetermined period of time, often 20 years. With a power purchasing agreement, or PPA, you pay a fixed price per kilowatt hour.

2. Know your situation

Before you invest in any kind of solar program, it’s important to know your energy usage needs. Look back at your monthly electricity bills for the past year or 2, paying special attention to any increase in rates you’ve experienced. If your monthly bill averages less than $100, you may find the savings from solar aren’t worth the costs, according to the Better Business Bureau. In that case, you may want to consider other energy savings ideas.

You also want to look up on average how many sunny days you get per year and make sure your roof is large enough and in good enough repair to handle panels. Generally, consumers have the best luck with unshaded, southern-facing roofs. You also need to check if your community has any rules or restrictions on solar installations.

3. Understand ‘net metering’

Only in very remote areas does solar allow you to go completely off the grid. In most cases, you are still connected to your local utility so you can tap into conventional energy when your panels are not generating enough electricity for your needs — at night or on rainy days, for instance. The connection also allows you to send excess energy your panels produce during sunny periods back to the grid.

A special meter on the side of your home regulates this process, thus the term “net metering.” In the 43 or so states that allow net metering, you receive credit for excess energy you produce, which can potentially further reduce the cost of going solar. In a lease situation, it’s important when calculating your overall costs to understand who gets credit for the excess energy produced — you or the leasing company.

4. Choose an installer carefully

Whether leasing or buying, “This is the hot point for most consumer complaints,” says Kimbis. Shoddy equipment, faulty installation, and expensive or incomplete warranties are all potential problems. Always check references from an installer you are considering and check out the company with your local Better Business Bureau.

Also, make sure installers are certified by the North American Board of Certified Energy Practitioners or trained by the Interstate Renewable Energy Council.

5. Let Uncle Sam help

Through 2016, you can take advantage of a federal tax credit that lets you write off up to 30% of the cost of buying and installing a solar system. Plus, your state or municipality may offer other tax breaks and incentives.