How to Read a Solar Proposal in California: What Every Number Actually Means

Most California homeowners get two or three solar proposals and compare them the wrong way, looking only at the monthly payment and the total price. The numbers buried in the middle of the proposal, system size, annual production, offset percentage, NEM 3.0 export rates, financing escalators, and warranty terms, are the ones that determine whether the investment actually pays off. This guide walks through every section, using real numbers from SW Riverside County installs.

System Size: kW vs kWh and Why It Matters

System size is listed in kilowatts (kW) DC, referring to the total rated power of all solar panels combined. A 10 kW system using twenty 500-watt panels is a common mid-size install for Temecula homes with $250-350 monthly SCE bills.

The proposal should also show inverter capacity in kW AC. For most string-inverter or microinverter systems, the AC capacity is 75-80% of DC capacity due to clipping and conversion losses. A 10 kW DC system typically has an 8-8.5 kW AC inverter. If those numbers look very different from each other, ask why.

Do not confuse kW (capacity) with kWh (energy produced). Your SCE bill charges you for kWh consumed. The proposal's production estimate translates kW capacity into kWh delivered per year.

Annual Production Estimate: PVWatts vs Solargraf vs Aurora

Every installer uses software to model how much energy your roof will generate. The three most common tools are PVWatts (NREL's free government calculator), Solargraf, and Aurora Solar. All three pull from historical irradiance data for your zip code and model shading from trees, chimneys, and neighboring structures.

For Temecula and Murrieta, the Inland Southern California climate averages roughly 5.6-5.8 peak sun hours per day. A 10 kW DC system in ideal conditions produces around 14,000-15,000 kWh per year before shade deductions. If a proposal shows significantly more than this for a 10 kW system in SW Riverside County, ask the installer to show you the PVWatts or Aurora output report, not just the summary slide.

The software modeling also applies a system derate factor, typically 0.85 to 0.87, accounting for wiring losses, inverter efficiency, soiling, and module mismatch. A reputable proposal will show this factor. One that shows only the gross number before losses may be overstating what you will actually generate.

Degradation Rate: The Number Nobody Explains

Solar panels lose efficiency slowly over time. Premium panels (Panasonic, Qcells, SunPower, REC) degrade at 0.25-0.30% per year. Standard tier panels degrade at 0.40-0.50% per year. Over 25 years, that gap compounds significantly.

A panel starting at 400 watts with a 0.30% annual degradation rate produces 382 watts after 25 years (about 96% of original output). A panel degrading at 0.50% per year produces 352 watts after 25 years, about 88% of original output. For a 10 kW system, that difference is roughly 800-1,000 kWh less per year by the end of the 25-year performance warranty period. Always check degradation rate in the panel spec sheet, not just the proposal summary.

Offset Percentage vs Actual Bill Reduction

This distinction trips up more homeowners than any other number on a proposal. Offset percentage is the ratio of estimated solar production to your current annual electricity consumption. A 100% offset system produces as many kWh per year as you currently use.

Under NEM 3.0, 100% offset does not mean $0 SCE bills. Here is why: solar production peaks midday, when you may not be home and using that power. Excess midday production exports to the grid at NEM 3.0 rates of approximately 5-8 cents per kWh. You then import power in the evening at SCE TOU rates of 28-34 cents per kWh (and up to 47 cents during the 4pm-9pm on-peak window on TOU-D-PRIME). The timing mismatch means you are selling cheap and buying expensive, even with 100% offset.

A realistic 100% offset system for a Temecula home currently paying $250/month will typically reduce the SCE bill to $40-90/month in non-summer months and $80-160/month during peak summer, not zero. Ask your installer to show you the month-by-month True-Up simulation, not just the annual offset number.

Year 1 vs 25-Year Production Table

A complete proposal should include a production table showing estimated kWh generation by year for the full 25-year period, accounting for panel degradation. Compare year 1 and year 25 carefully. If the table shows identical numbers across all 25 years with no degradation curve, the modeling is too optimistic.

A sample table for a 10 kW system in Temecula might show 14,500 kWh in year 1, declining to 13,800 kWh by year 10, and roughly 13,200 kWh by year 25 at a 0.35% annual degradation rate. The cumulative 25-year production figure is what drives the total lifetime bill savings calculation. Use this number to compare proposals, not just year 1.

Financing Fine Print: Loan APR, Escalator Rate, and Price Per Watt

Solar financing has three common structures in California: cash purchase, solar loan, and solar lease or PPA. Each appears differently in a proposal, and the critical numbers hide in different places.

Solar Loans

Look for the APR (annual percentage rate), loan term in years, and whether there is an initial fee rolled into the loan principal sometimes called a dealer fee or finance charge. Many solar loans carry dealer fees of 15-30% of the system price that are built into the gross loan amount before the tax credit is applied. The installer receives the full gross amount, but your loan balance at signing reflects the higher figure.

Example: a 10 kW system priced at $25,000 with a 25% dealer fee results in a loan principal of $31,250. Your 30% federal tax credit applies to $25,000 (the actual system cost), giving you $7,500 to apply to the loan. After applying the credit, your remaining balance is $23,750, not $17,500 as a naive calculation would suggest. Ask the installer for the dealer fee amount in writing before signing.

Also check whether the loan has a step-up payment structure. Some solar loans carry a promotional low monthly payment for the first 12 or 18 months that assumes you will apply your federal tax credit to the principal. If you cannot apply the full tax credit, the loan payment recasts to a higher amount for the remaining term.

Leases and PPAs: The Escalator Clause

Solar leases and power purchase agreements often include an annual escalator of 1-3% per year on your monthly payment. A lease starting at $150/month with a 2.9% escalator reaches $207/month by year 10 and $288/month by year 20. Understand the escalator percentage and run the math across the full 20-25 year term before comparing a lease to a loan.

Price per watt (PPW) is the most direct comparison metric across proposals. It is the total installed system cost divided by the system size in watts DC. In SW Riverside County in 2026, cash or loan installs run $2.30-2.60 per watt for standard equipment and $2.60-3.00 per watt for premium panels (Panasonic, SunPower). A proposal above $3.20/watt for standard equipment warrants a second-opinion quote.

Warranty Terms: Three Separate Guarantees

Every complete solar proposal should clearly separate three warranties.

The product warranty (also called equipment warranty) covers manufacturing defects in the panels themselves. Premium panels carry 25-year product warranties. Budget panels may carry only 10-12 years. This warranty is backed by the panel manufacturer, not the installer. If the manufacturer goes out of business, the warranty is void.

The performance warranty guarantees the panel will produce at least a stated percentage of its original rated output at year 25. Tier 1 panels carry 92% performance at year 25. Tier 2 panels may carry only 80%. Get the specific percentage from the panel spec sheet, not from the installer's verbal representation.

The workmanship warranty covers installation defects, roof penetrations, racking, and wiring. This warranty is backed by the installer, and it disappears if the company goes out of business. Look for installers who carry at least a 10-year workmanship warranty and have been operating in Riverside County for more than 5 years. Freedom Forever's 2025 bankruptcy is a reminder that a workmanship warranty is only as good as the company backing it.

Why Two Proposals for the Same Roof Can Differ by $8,000

Eight thousand dollars of price difference between two proposals for an identical 10 kW system on a Temecula home usually comes from four places. First, panel brand and tier: a premium panel like the Panasonic EverVolt carries a $0.20-0.40/watt premium over a standard-tier panel, equaling $2,000-4,000 on a 10 kW system. Second, inverter type: string inverters are the least expensive. Power optimizers (SolarEdge) add $500-1,000. Microinverters (Enphase IQ8) add $1,500-2,500. Third, installation complexity: steep-pitch roofs, tile work, attic access limitations, and main panel upgrades each add real labor cost. Fourth, dealer fees in the loan: an installer with a 30% dealer fee built into financing will quote the same gross number, but your effective cost is higher than a competitor with a 15% dealer fee.

Red Flags to Watch For

• Production estimates that show identical output every year across 25 years with no degradation curve.
• Offset percentages above 110-120% for a home with no plans to add an EV or heat pump, since SCE will not compensate excess annual production under NEM 3.0.
• Proposals that do not list the panel manufacturer and model number by name.
• Loan paperwork that does not disclose the dealer fee as a separate line item.
• Verbal promises about production, savings, or tax credits that do not appear in the written proposal, since none are binding unless written.
• High-pressure tactics tied to a one-day offer expiration, since reputable installers hold pricing for reasonable review periods.
• Companies without a valid California Contractors State License Board (CSLB) license in the C-46 (Solar) or C-10 (Electrical) classification.

The Right Way to Compare Two Proposals Side by Side

Comparing proposals correctly takes about 20 minutes. Pull these numbers from each proposal and put them in a simple table: system size in kW DC, panel brand and model, degradation rate, year 1 production in kWh, year 25 production in kWh, price per watt (gross cost divided by system size), loan APR, loan term, dealer fee disclosed, inverter type, product warranty years, performance warranty percentage at year 25, and workmanship warranty years with company background.

The cheapest price per watt does not always win. A lower-cost proposal using panels with a higher degradation rate can deliver fewer kWh over 25 years than a slightly more expensive proposal using premium panels, making the effective cost per kWh of lifetime production higher on the cheaper proposal.