Photo by Michael Coghlan , acquired via Flickr.com
Free Solar Panels... Really?
2017 will be the last year of the ‘microFIT’ and ‘FIT’ programs that were created in 2009 by the Ontario government as an incentive to increase renewable electricity generation.
As part of this program, numerous companies are offering ‘free’ solar panels and profit-sharing programs to home owners. You may have received a ‘pre-approval’ notice from one of these companies in your mailbox or stuck to your door.
This is a typical ‘buyer beware’ situation where, if you don’t ask the right questions, you may get stuck with costs or burdens you didn’t expect. Here are some concerns you should address before signing on to any deal:
First, be aware that since you will be a supplier of electricity, rather than a consumer, the contract you enter into will be a commercial contract—which means that consumer protections do not apply. Commercial contracts are typically interpreted to the letter, and unlike when you buy an advertised product, there is no leeway given for what you “thought it meant” nor for “reasonable expectations”.
Tax and Insurance
Second, make sure you’re aware of tax and insurance implications. Will your property taxes change? Will your income taxes be affected by the additional income you receive, and how should you claim it? How will your taxes be affected if you sell your home? Will you need to pay capital gains tax now that a portion of your home has become an income-producing property?
Does your home insurance including the panels, and do the panels affect how your insurance covers your roof? I recommend you speak with a tax consultant about these questions, as the amounts of money involved can be significant.
Third, make sure you understand the terms of the deal. The installer will typically offer you several different proposals. They might offer to pay you several thousand dollars up-front, with the panels becoming yours at the end of the term. Or, they may propose a profit-sharing scheme, or the option to purchase the panels outright at the start. Each option has advantages and disadvantages.
Return on Investment
Fourth, make sure you properly calculate the expected return. If you’re sharing in the revenue, ask how the company projected the revenue and what their assumptions were (location, number of panels, number of sunny days, price per kilowatt hour, and so on).
Don’t forget to ask who is paying for the paperwork, applications, and permits; who is paying for connection to the grid; who pays for maintenance and repairs; and when you can expect to receive your first payment. (One common estimate is 180 days from your application being accepted.) These deals can be complicated and you need to consider them fully.
After the Contract Expires
Fifth, what happens when the contract expires? Will you have to negotiate directly with the IESO for another contract? Will you have to dismantle the panels, and at what cost? If you keep the panels, will you need to maintain them yourself, and at what cost? What is the projected lifespan of the panels and for how long does the warranty run?
Finally, look out for any potential complications and pitfalls. Will you be expected to get permits yourself? Is the installer qualified, certified, and experienced? (Ask for referrals.) What guarantees are offered? Does the installer have insurance for their workers and property, or are you potentially liable?
How will you be connected to the grid? Is the contract transferable if you sell your home? Who does the maintenance? And if the installer does the maintenance, to what standards will the panels be maintained and how is the maintenance guaranteed?
The decision to install solar panels can have a significant financial impact on you, so you should investigate thoroughly before signing any contract.
For more information, you may want to visit the website of the IESO (the body that oversees the electricity market in Ontario), at www.ieso.ca.
Want to know more about rooftop solar or other major renovations? Just ask me, I'll be happy to help.