Solar Panel Scams: How to Avoid Them and the Biggest Red Flags

Solar panels are becoming more mainstream as the residential solar industry in the United States continues to rapidly grow. In fact, the solar market has now surpassed 3 million solar panel installations since December 2021. 

But with that comes a lot of excitement and, occasionally, people ready to exploit that excitement for an unethical buck.

While there are few reliable sources on solar panel customer satisfaction, reports of overly aggressive sales tactics and promises that solar panels can’t deliver crop up from time to time. Recently, a news team in Detroit looked at sales tactics by Powerhome Solar, which recently rebranded as Pink Solar, and found customers who paid for systems that generated far less power than they were sold on. 

Despite these instances, solar panels can save you money and help expand the use of cleaner energy. With the federal solar tax credit and state or local incentives, you could save as much as you paid well before the warranty on your panels runs out. 

There’s no real reason to believe unethical sales tactics are widespread, but they do occur. Avoiding a solar panel purchase that can’t deliver doesn’t take an industry expert. It does take doing a bit of homework, knowing what to look for and relying on experts and advocates when you need them.

Read also: Where Can You Shop for Solar Panels?

What to know beforehand

There’s fierce competition in the booming residential solar industry. Companies employ a variety of sales strategies from in-house sales teams or third-party companies. Tesla’s solar arm relies solely on online inquiries. While there are industry guidelines for consumer protection, tactics vary from company to company and, as the report from Detroit showed, can verge on dishonesty. Going in with a strong understanding of some key solar topics can help you spot when a salesperson is flouting those guidelines.

Salespeople are likely to tout the federal solar tax credit. When you install solar panels (and certain other related technology) you receive a portion of the cost back on your taxes. In 2022, the portion you get back is 26%. In 2023 it will be 22% before it expires in 2024, unless the US government extends it. 

The tax credit is not a check the government will send you or a rebate. Instead, it’s a credit you can count against the taxes you need to pay each year. In order to take full advantage, you’ll need to pay federal income tax and pay enough of it to match 26% of your system’s cost.

If a salesperson says your electricity bill will disappear after installing solar and that you can kick your utility to the curb, that could also be an exaggeration. Your bill will vary depending on your net metering agreement with your utility, your electricity usage and the base rate utility customers pay to keep up grid infrastructure. Solar panels installed and operating correctly will reduce the electricity you use and can save you a bunch of money, but the effect on your bill will vary.

Be sure you understand how your utility compensates you for the electricity you produce before going solar. These rates are not necessarily set in stone. In California, regulators are trying to change net metering in the state, though proposals so far have included provisions to keep established customers on their previously agreed to net metering rates. 

If you see ads that claim you can put solar panels on your house for free, make sure you understand what “free” means. Likely, it means the product advertised is likely either a power purchase agreement (PPA) or lease. While this means you don’t pay a large upfront cost for the panels, you will pay monthly to the company that owns them. These are legitimate services and part of the reason residential solar has exploded in the last decade. You’re likely to save more money overall with a purchase than a lease or PPA. Still, the low upfront cost of these two options may make solar more available and still save you money in the long run, even if the solar electricity isn’t exactly free.

With leases and PPAs, you save money if its cost doesn’t rise faster than the cost of electricity from your utility. You can check online how much your electricity has risen in recent history.

Siting solar panels on your roof is another potential issue. In the northern hemisphere, panels produce the most electricity facing south, though east- and west-facing panels work too. Panels facing west might be useful in areas with time-of-use rates, where afternoon and evening solar production can offset more costly electricity. 

If your roof is shaded, make sure an installer has a plan for addressing that. For solar to work well, you may need to cut back trees or install panels somewhere other than your roof. Your roof should be in good shape, too. Taking panels off to fix the roof likely carries additional costs. It’s important to address these issues before a contract is signed and panels are installed on your roof.

For all of these issues, any installer should give you clear answers. An installer pushing you to sign before you’ve read a contract or had all your questions answered are red flags. If you do sign something you later regret, by law, you have three days to cancel most door-to-door sales, according to the Federal Trade Commission.

Possible red flags 

Here’s a quick list of additional red flags and claims from Solar United Neighbors and the Department of Energy that should prompt you to do some research.

• “The federal solar tax credit is going away soon.” The tax credit does reduce in 2023 and is slated to go away in 2024. There are some deadlines here, but as of the time this story publishes, nothing that doesn’t allow you a second to think.
• “There’s a special program ending soon.” Some utilities are moving away from net metering and government programs do end. Make sure you get the specifics and understand whatever program is being discussed.
• “You only have one choice of equipment.” Most solar installers have preferred providers for equipment, but can accommodate preferences from customers.
• “Your utility is going to raise electricity prices XX% each year.” Electricity rates do go up (and it’s particularly uncertain now), but you can find historical electricity costs for your area and judge whether or not a company’s estimate passes the smell test.
• “You can save up to 70% on your electricity bill.” Seventy percent sounds great, but that “up to” could be doing a lot of work. Do most people save 70% or does everyone save far less? Be sure to ask.
• “Put solar on your roof for free!” This almost certainly doesn’t mean free but rather, no money down. You’ll still have a monthly payment after that.
• “You can say your home is powered by green energy.” This is only legally true if you get to hold on to the solar renewable energy certificates. In a PPA, you might sign those over to the solar provider, who then gets to claim the environmental benefits.

Resources for getting a fair deal

There are plenty of organizations aiming to help people go solar with the best possible experience, including industry groups and governments.

The Department of Energy’s guide to going solar has a long list of things to consider before settling on an installer. Many states run consumer protection offices with state specific advice, sometimes specifically for solar.

There are national groups dedicated to helping people and communities adopt solar.

Soliciting quotes through a solar marketplace can ensure installers know they’re competing for your business and let you review your options outside of the pressure of an in-person meeting. It’s always a good idea to get quotes from multiple companies.

The Better Business Bureau gives grades to companies based on their responsiveness to complaints and honesty. (Companies pay a fee to get a grade.) Checking a company via the Better Business Bureau and talking with neighbors or friends who have experience with them is a good idea if possible. 

You can find certified installers by checking with the North American Board of Certified Energy Practitioners.

Because many people haven’t had an experience with solar energy, selecting an installer can feel like a daunting task. But it’s possible to go solar and start saving money on your energy costs. There were 1 million solar installations (not just residential ones) from 2016-2019. If you plan on adding to that number, with a bit of work you can make sure it’s a positive experience.