How Do I Choose a Solar Contractor?

Once you and your organization have decided to move forward with a solar installation you will need to choose a solar contractor.   This article addresses the key issues you should consider in choosing a solar contractor.

In addition to helping achieve competitive pricing the process of choosing a solar contractor is critical for several reasons:

  • Avoid conflicts of interest. Some buyers (e.g., governmental entities like municipalities) must solicit bids from competitive vendors in order to assure that there are no conflicts of interest in the awarding of bids.
  • Obtain competitive quotes. Stakeholders want to have confidence that they are receiving the best and most competitive prices.
  • Gather intelligence and creative ideas. Multiple bids help identify additional issues and opportunities that a single contractor may not have spotted.
  • Expand options to permit review of non-price criteria. In a highly commoditized business such as solar panels, multiple bids allow buyers to evaluate other important factors in awarding bids such as vendor experience, reliability and reputation.

Key Issues To Address

  • How do you launch an RFP for solar contractors?

Not all buyers are required to conduct an open auction process known as an RFP or request for proposals.  However, an RFP can help flush out competitive bids in a way that facilitates a meaningful comparison.

In an RFP, buyers solicit bids from contractors.   The RFP is a document that requests that interested contractors address not only price issues but also answer questions regarding their proposals for specific solar panels, their ideas on how much solar power can be produced by the project, their experience and qualifications, and many other factors that are relevant to a decision.

  • How do you find good solar contractors to solicit?

In order to reap the benefits of an RFP a buyer will want to receive multiple bids.  To assure this the RFP document must be distributed to prospective bidders.   Some buyers send the RFP directly; others use third party consultants or law firms to prepare and distribute their RFPs.

Most third party consultants and lawyers will charge fees to prepare the RFP and review the inbound bids.  If you use a third party make sure they understand solar construction and financing.  We have seen many RFP documents prepared or negotiated by law firms that miss important details.  In the interests of full disclosure, we at Solomon Energy provide this service but unlike most advisors we do not charge for our RFP services.  We are paid only if our client decides to proceed with a project.

The quality of responses to an RFP will depend upon the care used in choosing the contractors to receive it.   Use your search engine, e.g., Google, to look for lists of the “Best Solar Contractors” or the “Top 20 Solar Contractors.”   You could also narrow your search by specifying your geographic region, e.g.,  “Best Solar Contractors in New  York.”  These lists should help you identify contractors with a national or regional presence.

Whether or not you choose to conduct an RFP for your solar contractor,  don’t limit your search to the biggest contractors or the ones who advertise the most:  Smaller contractors may be better suited to work with local Town zoning and tax commissions as well as building departments who issue the permits required to build.    They may have better relationships with local utilities who must connect the project to the grid.  And they may have local crews that are available to complete your project in a timely manner.

To find these local contractors ask other building owners and facilities managers.   You probably have seen from a local highway a rooftop solar installation on a factory of commercial building.  Call the owner and ask who they used.

  • What to ask solar contractors?

            Whether or not you conduct an RFP, you should ask bidders to perform a minimal amount of due diligence on the project and answer a number of detailed questions.  Don’t be concerned that the contractor is spinning its wheels.  Solar contractors are thrilled when motivated customers contact them and show they have given their project some thought.  Moreover, many of the things you are asking for they have prepared for other prospective clients before.

Here are some questions you should cover.   If you distribute an RFP you should ask for these in writing.  Remember that if you miss some questions or learn something new you can always supplement the RFP with another email blast to the original list:

  • Experience in solar construction
  • A description of prior projects
  • Key personnel that will work on your solar project
  • Size of proposed solar system
  • Proposed configuration of the solar system on your roof or land
  • Projected costs to buy or lease the solar system
  • If a power purchase agreement (PPA) is proposed, what is the price per kilowatt hour in the first year and the annual escalator, if any?
  • Term of the proposed agreement (e.g., 15-, 20- or 25-years)
  • Specifications of the solar panels the contractor will propose using
  • Warranties that will be delivered with the panels and/or inverters
  • Insurance protection that will be delivered with the contractor
  • References from satisfied customers
  • What to look for in a good solar contractor?

            There are several important factors to evaluate in choosing your contractor.  Some of these can prove to be more important than the cost of the solar project or the PPA price.

  • Does the contractor have experience with solar in general and with projects like yours in particular?
  • Has the contractor worked in your area and is it familiar with the permits required to build?
  • Has the contractor worked with your local utility?
  • What kind of panels does the solar contractor plan to use?
  • How much solar production does the contractor propose to build and how does it intend to configure the panels on your roof?
  • What kind of warranties will the solar contractor provide with its panels and inverters?
  • How credit-worthy is the solar contractor and is it willing to provide a performance or surety bond to guarantee completion if it should have financial problems in the middle of a project?
  • Does the solar contractor build its solar projects with its own crews or does it subcontract?
  • When can the contractor start work and what is its estimated completion date?
  • If desirable, what kind of solar financing can the solar contractor offer?
  • Keeping the RFP open until the deadline

            If you send out an RFP you will set a deadline for submissions.  That deadline is within the control of the building owner and its advisors; it can be extended if need be.  But to be fair to all of the contractors who are submitting bids, a deadline is a deadline.  Once the deadline is passed – assuming it is not extended – it should be honored.  Any submissions received after the deadline should not be accepted.

Prior to the deadline you should not open any bids.  This will avoid any allegations by contractors that you shared the proprietary information in their bids with other contractors and thereby gave those other bidders a leg up.    You can answer questions of bidders prior to the deadline.  But all answers should be circulated to all of the contractors who have been solicited.  This ensures that everybody has the same information when they bid.

Prior to the deadline, any bidder should be allowed to withdraw their bids and to resubmit or modify them.   Once the deadline passes no amendments should be permitted.  However, in the course of clarifying questions about bids or negotiating contracts with the solar contractors you choose the contractors should be allowed to improve their bids.

  • Comparing the bids from solar contractors

Now is the time for you to review the offers you receive from solar contractors and compare them.

This process is not as easy as it seems.  Even if asked very specific questions, every contractor responds differently.  Sometimes contractors do not answer all of the questions.  This could be an omission on their part which might reflect negatively on their bid.  But it could also be an honest misunderstanding that can result from an ambiguous or complex question.

Even if the contractors you solicit answer all of your questions in detail there will be many challenges.  How do you compare, for example, two different solar panel specifications?  Or two different configurations, one of which delivers 450 kilowatts and the other 550 kW?

To rank your bids in order of desirability you will need to do an apples-to-apples comparison.  A spread sheet should be prepared with your bidders listed on the left, for example, and your criteria specified at the top of your columns.

Key criteria for evaluation will fall into two categories:  System specific and contractor specific.  System specific items may include:

  • Proposed size of system
  • Warranty
  • Term
  • Price
  • Warranty term
  • Escalator, if any

Contractor specific items may include:

  • Local experience
  • Experience with similar projects
  • Surety bond, if any
  • Insurance
  • Ratings by references
  • How negotiable are solar contracts?

            After completing your apples-to-apples review the most attractive solar contractor will probably appear.  However, in case negotiations do not go well, try to narrow your selection down to two or three solar contractors, not just one.  This will not only give you a fall back in the event that negotiations with your top choice do not work out.  By keeping competitors in the wings you will increase your chances of striking a beneficial deal with your top contender.

Before making your final selection you will want to review detailed contracts and determine whether the final proposed terms of the deal are satisfactory.  Contracts should be negotiable and you should not finalize your decision until you are satisfied that you have a deal that protects you.

There are several issues that you should review carefully with a view to negotiating better terms from solar contractors:

  • Price Protection.  Make sure that your agreements provide you with financial benefits compared with local utility rates.   This will require reviewing a number of assumptions that the contractor will present:
    • Year 1 Price.  How does this price compare to current utility prices?  Is there an escalator for later years?  Are the price and escalator negotiable?  Would you be better off with a fixed price and no escalator than a lower price with an escalator?
    • Savings Guarantee.  Will the solar contractor guarantee that your price will never be greater than the local utility price?  The contractor may agree to a guaranteed minimum discount to the local utility price in exchange for a higher price.
  • Solar System Size.  Can the size of the system be increased?  Are the panels proposed the maximum wattage available?  A 305 watt-panel will produce 30% more energy than a 245-watt panel in the same area.
  • Term.  The solar contractor may ask for a 20 or 25 year term.  Can you reduce the length of the term?
  • Maintenance.  If a third party will own and operate your system and sell you the electricity via a PPA, will you be charged for maintenance?  If a hail storm or other natural event damages your solar panels will you be insured for replacement cost?
  • Property taxes.  A solar contractor may ask you to assume responsibility for local property taxes if they are imposed or increased at any time during the term.  Can you split that risk with the contractor?
  • Flexibility.  Can you cancel the contract if the panel production drops?  If electricity prices drop?
  • Assignment.  Will the solar contractor permit you to assign your PPA and other obligations to a third party, in the event you wish to sell your property?

Supervision of Solar Contractor

Once selected, your solar contractor will get to work.  Make sure that you have the staff, resources and experience to evaluate the contractor’s work.  Here, too,  you may wish to turn to an expert that can see your project through to completion.

Specifically you or your advisors will want to watch for a number of issues:

  • Solar panel quality. The panels that are installed are the ones specified in your final agreements.  In addition, you will want to confirm that the panels are not damaged with, say, hairline fractures in the glass or frayed or disconnected wires.
  • Inverters. All inverters are new and carry visible identification markings that align with warranties.
  • Permits. All local building permits have been properly drawn.   All engineering plans are stamped if required.
  • Installation. If you have opted for a rooftop installation you want to make sure galvanized or stainless steel hardware is being used and that all roof penetrations are properly sealed.
  • Supervised crews. Installations that are not carried out in accordance with manufacturer instructions may not be eligible for important warranty protection.  All contractors, electricians and other personnel on the job site should be experienced and well-supervised at all times.  They should be wearing safety harnesses on rooftops and hardhats at all times.  Work must be in accord with local building codes.
  • Commissioning. All work is reviewed by a local utility representative who must sign off on the installation before it can be connected to the utility grid.

After reviewing these topics you may find these other articles of interest:

  • How do I know if solar will save money?
  • Do solar developers guarantee savings?
  • What kinds of problems can I expect with solar?
  • Will solar panels damage my roof?
  • What are typical problems with solar panels?
  • What kinds of building permits will I need for a solar installation?
  • What to watch out for in a PPA
  • What kinds of warranty protections will I need for solar panels?
  • Who are the best solar panel manufacturers?
  • Can solar panels increase the risk of fire?
  • Do solar panels deteriorate over time?