14 July 2023 / Jeffrey K. Bearss

Financing of Solar Energy Contracts: Considerations and Protections

Solar energy is more popular than ever and many contractors are wading into the business. However, there are some important considerations to keep in mind in drafting solar contracts that you may not see in typical construction contracts that may open you up to a counterclaim. Here are some important things to keep in mind when drafting solar energy contracts that may close some potential loopholes and protect the contractor from defenses and/or counterclaims being raised after the installation:

Avoid making specific guarantees regarding power generation or energy production

Energy production projections are variable and subject to speculative factors beyond the control of the contractor. For example, natural obstructions such as trees, buildings, other man-made obstructions, and weather. Further, you will want to have a separately signed document under which the buyer acknowledges that no such guarantees, representations, or warranties were made. You may also want to have a loan agreement tailored for this specific situation which includes a provision identifying that no such guarantees, representations, or warranties were made. Any such representation cannot be the basis for the borrower’s failure to make payments.

Avoid making specific guarantees regarding the buyer's projected energy consumption and cost savings

These are also subject to speculative factors and beyond the control of the contractor, such as the fluctuating market cost of energy, and the buyer’s energy usage. Small variations in the buyer’s usage and minor changes in energy costs from the buyer’s energy supplier will affect the buyer’s cost savings.  

Avoid making representations regarding rebates, incentives, tax credits, and power rate negotiations

Do not guarantee a buyer's eligibility for, or the actual dollar amount of, any rebate. Taxing entities occasionally adjust the rebate or credit amounts. Rebate amounts may be periodically adjusted downward as incentive programs reach preset milestones. Consider adding language that the buyer is encouraged to seek advice regarding all tax ramifications of the installation from the buyer’s own tax professional.  
If you have any questions on this topic, please contact attorney Jeffrey Bearss at any time.

This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

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