Solar energy provides homeowners and businesses with an abundance of benefits, including reduced energy bills, environmental savings, and sometimes income tax credits. Despite these clear advantages, as of 2023, only roughly 5% of U.S. households have solar installed. This may be due in part to consumers’ growing dissatisfaction with techniques employed by those with whom they enter solar contracts. The tactics often employed by the solar industry harm the environment by deterring consumers and businesses from investing in solar power.
Between 2018 and 2023, one-star ratings on Solar Review saw an increase of over 1000%.
“There are probably two things you see when you’re looking at those numbers,” Chris Cucci, EVP of Climate First Bank, explained. “2018 was right around the time when the non-bank lending market for solar finance really came into play. Many of these non-bank lenders came into the market between 2016 and 2018 and grew over the last five to six years. When you’re not a bank, you’re not regulated like a bank, so they don’t have the same consumer protection requirements to adhere to ...there was an increase in complaints because consumers were working with lenders who often were not looking out for their best interests the way a lender like Climate First does.”
While there are definitely lenders out there who aim to do what is right for their customers, it is important to know what to look for in a lender to minimize your likelihood of having a poor experience. If you’re looking to borrow money to install solar on your rooftop, it is often best to look for a reputable lender. Preferably, this would be a lender that is either a bank or backed by a bank. This is because they have high standards to adhere to. Additionally, several red flags may indicate early signs of a rough solar experience.
Within the solar industry, there exist various selling methods for installers. Certain companies may be “vertically integrated,” meaning their sales, engineering and installations are all handled in-house. On the other hand, some solar companies may employ an entirely different company to act as their sales department, luring clients to their service. While there is nothing inherently wrong with solar companies outsourcing their sales agencies, this practice should still be considered a solar “red flag” by consumers. When talking to a sales representative who is not a direct employee of the solar contractor you want to work with, you should be wary of their selling points. Oftentimes, these sales reps make promises on behalf of the installer, which they then lack the power to see through. This leaves consumers feeling cheated in that the installers cannot meet the expectations fabricated by their sales agents.
It is best practice for you, as a consumer, to ask whether the person you are speaking to works for a solar installer. If they do, they should be able to provide their contact information along with a licensed contractor number. If they are not a certified contractor, most likely they work for a sales organization .
“You just want to be a bit more conscious when dealing with someone like that,” Chris said. “It’s not that they are all bad; it’s that they aren’t directly part of the same company as the contractor, so certain points can be miscommunicated to the consumer.”
Another solar red flag that consumers should keep an eye out for is the price of their system. Although solar energy is often a significant investment for many, installers have been caught overcharging in the form of price gouging, which worsened the impact of this investment on consumers. Solar costs are typically calculated by looking at the “price per watt,” meaning the cost of the entire system divided by total system wattage. In Florida, for example, residential solar should not cost more than $3.75 per watt. If you are looking to go solar and being charged more than $3.75, you may be able to find a better deal elsewhere.
The final, and perhaps biggest, red flag to be aware of is the promise of free money. It is critical to watch for salespeople who promise rebates or free money for going solar. This common misconception originates from the concept of federal rebates. Although there is a federal tax credit that many households with solar are eligible for, this point is often misconstrued. Salespeople may try to tell consumers that they will pay next to nothing for solar, or that the system will be almost free. In reality, the tax credit covers only 30% of the installation cost and is not available to everyone. To know if you qualify for the federal tax credit or solar rebates, it is best to speak with a financial professional, such as an accountant.
While not technically a scam, dealer fees are associated with many transparency issues in solar selling. A dealer fee is an additional fee charged by the lender to the installer, who then passes the cost onto the consumer. These fees are oftentimes hidden from the consumer and not included in the initial discussion. Consumers should be mindful of these hidden costs when negotiating solar loan deals. They should seek to use a lender who does not charge dealer fees, which could be as high as 35-40% of the total installation cost.
The issue of dealer fees comes when a consumer is looking to finance their solar via loan. Say, for instance, that you are looking to install a unit on your home that costs $35,000. If you could pay in cash, you’d spend only $35,000. However, many people choose to finance their solar energy, since $35,000 is a large expense. After the dealer fees, the total price you would pay could total $49,000 or higher. However, when the system is being sold, you are not told about this. Rather, you are led to believe the price of the system is, in fact, $49,000. Read our blog, which breaks down dealer fees.
Climate First Bank is the world’s first FDIC-insured digital community bank founded to combat the climate crisis. The Bank’s solar lending product is designed to provide consumers and businesses with responsible solar lending options. Through a unique partnership with sister fintech OneEthos, Climate First Bank offers a network of thousands of vetted installers across the nation. Every installer goes through a rigorous approval process which involves a complaint check, a Better Business Bureau inspection, and a thorough look at their insurance history. Installers must also have been in business for over a year and have a labor warranty of at least 5 years, guaranteeing the installation is done properly.
While the abundance of red flags may leave some consumers lukewarm on the idea of installing solar, there are plenty of green flags and best practices to look for when deciding who to contract with.
“One of the things I do when I need work done on my home is look for who is doing work in my neighborhood,” Chris said. “Walk around your neighborhood and look for who has solar on their roof...when you see [your neighbor] outside, ask them who did their solar. Word-of-mouth referrals can be a really good thing because you can ask that person, ‘Are you happy with it? Are you satisfied? Who did you use?”
Solar United Neighbors (SUN) is a non-profit advocate for those who have solar. On their website, they list installers from across the nation, providing reviews as an alternate means of receiving a word-of-mouth referral. They use a verification process that is comparable to that of Climate First Bank’s. Your solar company should practice standards that would leave them highly rated by SUN. Seeing that an installer is recommended by SUN is a green flag.
“When you’re talking to a good solar installation company, you won’t feel pressured to make a decision immediately. They will give you the information and allow you time to make your own decision,” Chris pointed out. “Kind of like the difference, when you go to buy a car, between a really pushy salesperson and one who is more consultative with you.”
Another element to look for is the cash price of solar versus the financed price. By asking in a straightforward manner about the issue of dealer fees, consumers can learn both these numbers. If the two numbers match, that is a green flag, meaning there are no dealer fees.
Lastly, it is critical to make sure your contractor is licensed and insured. This is especially important when paying cash because you are bypassing having a financial institution or bank to ensure compliance with all regulations.
It’s easy to apply for financing with Climate First Bank. Simply visit the website or call us at 727.335.0500.
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