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Solar Energy Terms You Should Know

Last Updated January 30, 2024

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Michael Jones

By Michael Jones

Michael literally wrote the book on solar (it’s called The Homeowners’ Guide to Going Solar) and has been a solar consultant for over four years.

Defining solar energy terms you'll need to know.

We at the Cape Cod Solar Guys are all about education. One of the most  important aspects of what we do – even more so than closing deals – is explain how solar works, how it gets paid for and what it can do for both you and for the environment.

But as with any high-tech industry, explanation can quickly devolve into technical terms, abbreviations and jargon that only industry insiders understand.

So in this article, we’ll give you a list of solar energy terms that we think you need to know. Knowing these terms and how they relate to your solar project will help you to understand how  the solar process works and help you to ask the right questions.

So pay attention, class. There’ll be a test on Monday.

Technical Solar Energy Terms

These are the solar energy terms that refer to the solar panels and other equipment and the way they are installed, as well as the relationship any given system has with the rest of the electrical grid.

Alternating Current (AC)

Electricity flows in one of two different ways, Alternating Current or Direct Current. We power our homes and businesses with AC. There was a fun movie out a few years ago called The Current War, which explains how that happened. Solar panels produce DC power so they can only be used to power our homes if we first push that power through an inverter.


A solar array is any number of solar panels that are connected together, either on a rooftop or on the ground, to make up an energy-producing system. These panels then work as a single unit to generate electricity.


Azimuth refers to the direction your solar panels are facing. Since Cape Cod is in the northern hemisphere, the panels should ideally face in a southerly direction but very few buildings have a roof that faces due south, and even those that do may not be suitable for installing panels. Azimuth represents the angle, measured in degrees, between the direction your roof faces and true north.

Direct Current (DC)

Direct current is the kind of electricity that solar panels produce. Most of our lives (with the notable exception of electric vehicles) are powered by alternating current. So the power our solar panels produce can only be used after it has passed through an inverter.

Fragment of the ground-mounted solar power station with fixed photovoltaic arrays on a background of forest and sky, panoramic view

Ground-Mounted System

Not all solar arrays are installed on rooftops. Some, particularly large commercial or community solar farms, are installed on the ground. Ground-mounted solar systems are also a great alternative for residential properties which don’t have enough suitable roof space but do have plenty of land.

Electric Grid

Described by Gretchen Bakke, the author of The Grid, as the “largest machine in the world”, the national power grid is the system of wires, pylons, power stations, substations and other infrastructure that connects all of us to our electricity supply. It’s an immensely complicated 20th century system that is in urgent need of repair, expansion and reinvention so as to be fit for 21st century purpose.


This is the process of connecting any given solar project to the Grid. For projects on Cape Cod, approval must be obtained from Eversouce, who will determine whether the grid can take the extra power the solar panels will produce and under what terms the owner of that system will be compensated for that power (as spelled out in the Net Energy Metering (NEM) Agreement).


Since the electricity we use in our homes and businesses is AC, and solar panels produce DC, we need an inverter to convert the electricity the system produces from DC to AC. There are two types of inverters – micro-inverters and string inverters. The difference between them is explained here.

Kilowatt / Kilowatt Hour

We’ve included these two solar energy terms together because they are often confused with one another. They are both units used to measure electricity but they measure different things. 

A kilowatt measures the amount of power a device uses or a solar system is capable of generating. In solar terms, it’s simply a factor of the number of solar panels in the system (12 x 400w panels = a 4.8 kW system).

A kilowatt hour (kWh) measures the amount of electricity a device (or household full of devices) uses over time. So a 7kW EV charger that you plug your car into for 2 hours is going to use 14 kWh of electricity.

In solar terms, you’re most likely to see this on your electricity bill. How many kWh your home consumes each month will determine how large a solar system (measured in kW) you’ll need in order to cover that usage.

Off-Grid Solar System

In Massachusetts, the vast majority of solar panels are connected to the electric grid but it is possible to have a stand-alone solar system that is not connected to the grid. These are called off-grid systems.

Financial Solar Energy Terms

These are solar energy terms that refer to how a solar system is paid for, the contractual terms you’re likely to come across and which solar incentives might help you to offset some of that cost.

Escalator Clause

This is a term that applies only to leases and power purchase agreements. It’s the annual rate of increase that is built into the agreement for the cost of either the leasing of the panels or the purchase of the electricity. So an agreement that has a 3% escalator clause built in will set a payment of $100/month in year, and it will increase to $103/month in year two.

Investment Tax Credit (ITC)

This is the federal tax credit that can be applied to the purchase of solar panels. The amount has varied over the years between 22% and 30% of the value of the installed system, with impending decreases often used by solar companies to create urgency with customers (“go solar now before the ITC goes down”). Now it is set at 30% and scheduled to stay at that level until 2033. 

It’s important to note that it’s a tax credit, not a tax rebate, and that not everyone qualifies for it. Speak to your own tax advisor to see if you do (never take tax advice from a solar rep).

Net Metering in Massachusetts has been called the unsung hero of solar

Net Metering

Net metering is a program provided by your local utility company (Eversource for Cape Cod homeowners) that allows solar customers to send excess electricity back to the grid in exchange for solar credits. 

These credits can then be used to buy electricity back from the utility company at times when your panels are not generating enough electricity to meet your immediate needs. Massachusetts has some of the most generous net metering terms in the country, which explains why we have some of the highest solar adoption rates, too.


Offset describes the amount of your current electricity usage that can be met by the installation of solar panels. It’s measured as a percentage of the power you used over the previous twelve months. So if you used 5,000 kWh of power over the previous year and your system is expected to generate 4,500 kWh of electricity over the next year, your system will give you a 90% offset.

Power Purchase Agreement (PPA)

As the name suggests, a Power Purchase Agreement is an agreement you make with a solar company to purchase power. What that means in practical terms is that the solar company installs a system on your roof and, rather than paying for the cost of installation, you agree to purchase the power it produces instead. With a solar PPA, the company retains ownership of the system, maintaining it for the entire length of the term, which usually lasts for 20 or 25 years.

Production Guarantee

Some solar companies offer a guarantee that the system they install for you will actually generate the amount of power that they say it will. Obviously, nobody can guarantee for certain that the sun will shine on any given number of days, or that it won’t rain, so production guarantees do come with certain parameters. Typically, if a system produces less than, say, 90% of what the solar company said it would, then the customer will be credited for the difference.


This stands for Permission to Operate and refers to the act of switching your solar system on. After your solar system is installed, the town and the utility company need to make sure it’s been installed properly and up to code. A new electric meter will also need to be installed. 

All of this takes time so your system will not be operational for some time after it’s installed. Only after all of these things have been done will Eversource grant your system permission to operate.

Solar Lease

A solar energy term that is often used interchangeably with PPA, a solar lease is, in fact, slightly different. With a PPA, you agree to purchase the power a system produces, with a solar lease, you are leasing the equipment, just like if you were leasing a car.

SMART Program

The Solar Massachusetts Renewable Target (SMART) Program is an incentive program established by the Massachusetts Department of Energy Resources in 2018 to encourage the development of solar projects throughout the state. That can be anything from a community solar farm along the side of the highway to a residential rooftop system in a leafy suburb. 

Credits from the SMART program can offset the cost of a solar system, sometimes making the difference between a project that is economically viable and one that is not.

Third Party Owned (TPO)

Third Party Owned is a blanket term that covers Leases, Power Purchase Agreements or any other arrangement where the solar system is not owned by the owner of the property on which it is installed, but by a third party owner or investor.


While it’s not absolutely essential that you know and understand the meaning of all these solar energy terms, it is essential that your solar consultant does. 

Don’t be shy about testing their knowledge a little bit. You’ll soon learn if you’ve got a trusted advisor who can guide you through the complexities of the solar process or one who hasn’t bothered to learn their craft.

If you would like to test us on our knowledge of any of these solar energy terms, feel free to contact us to set up a time to chat. I bet we’ll ace the test, and we might even be able to help you to go solar.

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