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Escalator, kWh, irradiance, derate factor, M1/M2 milestones — every confusing term in your contract, in plain English.
Glossary · 4 min read · Updated May 5, 2026
A glossary of the terms most likely to appear in your solar agreement, in the order you’re likely to encounter them.
Annual percentage increase in your monthly payment. Standard range: 1.9–3.5%. Compounds — a 2.9% escalator on $185 becomes ~$340 by year 25.
Cents-per-kWh you pay under a Power Purchase Agreement. Typical: $0.10–$0.18/kWh. Has its own escalator separate from a lease’s.
Adjustment if the system underproduces vs. the guaranteed amount. Often paid annually, often capped, often hard to actually collect.
Lump sum to terminate a lease/PPA early. Combines remaining-payment present value with “fair market value.” FMV explained →
Hidden percentage of a solar loan principal paid to the installer as a sales commission. 20–30% is typical. Inflates the amount financed.
Direct-current rating (panels) vs alternating-current rating (after the inverter). AC is usually 80–85% of DC.
Unit of electricity. Your bill is measured in kWh. A typical home uses ~900 kWh/month.
Predicted kWh in year one based on roof orientation, shading, irradiance. Should appear in your contract.
Annual decline in panel output, usually 0.5%/yr. Built into long-term production models.
Adjustment applied to nameplate panel capacity to account for inverter losses, wiring, soiling, and temperature. Often 0.85.
Sunlight hitting your roof, in kWh/m²/day. Drives the production estimate.
Lien filed by the finance company to perfect their security interest in the panels. Affects home sales →
UCC-1 that specifically attaches to real property. More durable than a regular UCC-1.
Authorization from your utility to turn the system on and feed the grid. Required before any savings happen.
Utility crediting you for excess solar production. Rules vary by state and utility.
Funding triggers in a solar loan. M1 is typically signing or installation start; M2 is PTO or system activation. Loan disbursements happen at these milestones.
Default provision letting the lender demand the entire remaining balance at once.
Transfer of a lease/PPA to a new buyer when you sell the house. Buyer must qualify.
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