Sunrun PPA contracts: problems you need to know about

I’m not a big fan of leases and power purchase agreements (PPAs). It’s a topic I’ve written about extensively.

While usage of PPAs has been dropping over the past decade, they still were 28% of the residential market in 2021 according to Berkeley Lab. Sunrun, the biggest solar installer in the country, is responsible for a large part of that market share.

While Sunrun offers a variety of payment options including purchases, monthly leases and PPAs are a main focus of their business strategy. There are numerous problems with this type of financing that you can read about in some of my other articles, but I wanted to focus on some specific details that I found in one Sunrun contract that you should look out for.

Like many contracts, Sunrun’s is lengthy and many consumers won’t bother to read it - which is a big mistake. But it’s also not always the consumer’s fault. Vivint Solar, which is now owned by Sunrun, was sued for bad business practices, which included salespeople deliberately skimming over the contract on a tablet then asking the customer to sign, having never provided a physical copy of the contract and cancellation notice as required by law.

If you are considering a PPA from Sunrun or any other solar installer, I urge you to take the time to read the contract in close detail before signing.

However, contracts can be difficult to understand and pitfalls are easy to miss. To help, I took the time to read over a copy of a Sunrun contract and identified some potential traps for consumers to look out for. A warning: your contract language might differ from the one linked here, so be sure to do your own analysis.

The warranty might not be all it’s cracked up to be

If you read complaints about Sunrun on the Better Business Bureau website, you’ll find that one of the most common problems is getting timely warranty service.

Sunrun provides a 20 warranty for their solar systems and a 10 year guarantee against roof leaks. According to the Sunrun website:

You pay nothing. Zero. We cover your system’s maintenance, plus we take care of paperwork, scheduling, and more. With Sunrun, you’ll never pay a dime for repairs.

Sounds good, right?

The main problem is that there’s no requirement in the contract for Sunrun to perform repairs within any specified amount of time. Instead, it states that Sunrun will use “commercially reasonable efforts” to fix an issue “as soon as possible after it becomes aware of such issue”.

Basically, Sunrun is saying that it’ll try - but won’t promise - to make repairs quickly. The vagueness of the contract means that you can be waiting a long time for repairs. Negative reviews of Sunrun show that many people end up waiting several months or even more for repairs.

And while you’re waiting, you will still be responsible for making monthly payments if you’re a lease customer, or paying for expensive utility electricity if you have a PPA.

On top of that, consumers reporting having to wait hours in some cases to reach a person via their customer service number, which means it can take a lot of effort in order to make Sunrun “aware” that you have an issue.

Full compensation for broken systems isn’t guaranteed

Let’s say that your system is down for several months before Sunrun is finally able to repair and get your system back online. Will you be compensated for the downtime, during which you were still either making monthly lease payments or paying for expensive utility electricity?

In the version of the Sunrun contract I’ve seen, there doesn’t appear to be any obligation for Sunrun to fully compensate you. The only guarantee is that Sunrun will pay you according to the performance guarantee if your guaranteed output for the year has not been met. In other words, if any failure causes the total amount of electricity generated by the system to fall below the amount that Sunrun guarantees, Sunrun will compensate you.

However, there are several issues with this:

• You may have to wait up to two years for this refund.
• The production guarantee isn’t 100% of system capability in a normal year. This is because Sunrun only wants to compensate you for significant underperformance. Typically, that’s going to be 90% of the estimated production.
• The estimated performance could be a lowball amount amount already.
• Your refund rate per kWh may be less - sometimes significantly less - than what you pay for utility electricity.

The bottom line is that the contract guarantees only a partial compensation for any extended downtime.

While it’s certainly possible - and some people have reported - that Sunrun will refund you any lease payments for any months of system downtime, it would be far better if there was explicit language in the contract that guarantees this.

Performance guarantee? Check the refund amount.

Sunrun provides a performance guarantee that will compensate you if the system doesn’t produce as much electricity in a year as indicated in the contract.

With any home solar quote, you’ll get an estimate of how much electricity the system will produce in a year with average weather conditions. This is important for any system, especially one that you purchase outright, because knowing the energy production is how you can determine if solar will be a good investment for you.

It’s important with leases and PPAs too. If you have a lease, you pay a fixed monthly amount, so you don’t want to get less electricity than you anticipated. With a PPA, underproduction means that you have to purchase more expensive utility electricity.

In Sunrun’s contract, you should find that Exhibit A lists the “refund rate”, which is the dollar amount per kilowatt-hour they’ll pay you if the system underperforms the “Guaranteed kWh Output”.

While at first it might seem that the performance guarantee eliminates a big risk for the customer, the problem is that the refund rate might be less than what you pay for utility electricity - sometimes significantly less. This is made worse when a homeowner has a time-of-use plan as many do, including all new solar customers in California. Peak electricity rates with a TOU plan can be very high, and could exceed your refund rate by several times. If that’s the case, the performance guarantee might not come close to fairly compensating you for a poorly functioning system.

The bottom line is that you should take a close look at the refund rate in your Sunrun contract and compare it to your utility bill to understand whether you will be fairly compensated for any system underperformance.

The performance guarantee could be based on an underestimate

Sunrun doesn’t want the performance guarantee to kick in on a contract, so they have an incentive to make sure your system stays above it.

One way to do that is to make sure their systems actually perform well, but another way is to underestimate your system’s production to give a little more buffer to make sure the threshold doesn’t get hit. Basically, they can give themselves a little more wiggle room by sandbagging the number.

To be clear, I have no proof that Sunrun has actually done this. However, if Sunrun is going to err in any direction, it would be better for them to underestimate rather than overestimate system production.

There’s a couple ways you can estimate if Sunrun’s production estimate is within a reasonable range. If you know the technical details such as the DC-to-AC ratio, soiling losses, shading losses, and the tilt and azimuth of the system, you could use PVWatts to generate your own estimate. Keep in mind that this will work only if you have a simple roof layout because PVWatts doesn’t let you design a system with panels in different orientations.

Another way is to get multiple quotes - which you should always do. If you have quotes with similar equipment and system designs, the production estimates should agree fairly closely.

Even if you are eligible for a refund, you could be waiting

The last issue with the performance guarantee is that the contract specifies that Sunrun will review your system production only once every 24 months to find out if you are eligible for compensation. This is somewhat reasonable because normal year-to-year weather variations means that any one year could be usually cloudy, causing a short term performance problem that isn’t the fault of the system. However, for the customer, it means that you could be waiting a really long time to be paid any compensation.

Bottom line: watch out for PPAs and always read the contract closely

If you’re thinking of signing a Sunrun PPA contract (or any such contract), there’s quite a few potential pitfalls that you need to be aware of. I’ve highlighted some important ones above, but the bottom line is that you need to read your contract carefully, don’t be afraid to ask questions, and consult a legal professional if in doubt.

I’ll emphasize again that everything in this article is based on the Sunrun contract I read, and yours may differ in important ways. If you’ve already signed a contract and are having second thoughts, be aware that you may still be able to cancel without penalty. Read my solar consumer protection guide for some tips that you might find helpful.