Published March 6, 2026 · Updated June 22, 2026 · 5 min read
The short answer
Solar is full of acronyms — kW vs kWh, NEM 3.0, TOU, PPA vs lease vs cash, inverter, PTO, true-up. This glossary translates the terms you'll meet on your quote, contract, and utility bill into plain English so you can compare offers and understand exactly what you're signing.
By Vinnie Curcie, Founder & CEO
Decoding solar's alphabet soup
NEM, TOU, kW, kWh — the solar industry runs on acronyms, and it's hard to make a big decision when you're not 100% sure what the words on your contract mean. Consider this your translator. Below are the terms you'll hear most from solar consultants and utilities, in plain English.
General solar terms
The fundamentals — what the system is and how its output is measured.
| Term | What it means |
|---|---|
| Photovoltaic (PV) | The process of converting light directly into electricity using semiconducting materials. It's what makes a solar panel a panel. |
| kW (kilowatt) | A measure of power — how much a system can produce at once. A typical home system is about 6–10 kW. |
| kWh (kilowatt-hour) | A measure of energy over time — what the utility actually bills you for. A 7 kW system might produce roughly 10,000 kWh a year. |
| Array | The full set of connected solar panels working together as one system. |
| Degradation | The slow ~0.25–0.5%/year decline in a panel's output as it ages — why a 25-year-old system still makes ~85–92% of its original power. |
Utility & billing
How the grid credits your solar and how it shows up on your bill — the big one being NEM 3.0.
| Term | What it means |
|---|---|
| NEM 3.0 | California's current net-billing rules. The utility credits exported solar at a low rate and charges a premium in the evening — which is why a battery now matters. |
| TOU (Time-of-Use) | A rate plan where electricity costs more during the 4–9 PM peak and less off-peak. Timing your usage matters as much as the amount. |
| True-up | The annual reconciliation of what you exported vs. used. Any net balance is settled once a year, not monthly. |
| PTO (Permission to Operate) | The utility's final sign-off that lets you legally switch your system on after install and inspection. |
Equipment & hardware
The hardware on your roof and the side of your house.
| Term | What it means |
|---|---|
| Inverter | Converts the panels' DC electricity into the AC your home and the grid use. The component most likely to be serviced over the system's life. |
| Microinverter | A small inverter mounted at each panel (vs. one central inverter), so shade or a fault on one panel doesn't drag down the rest. |
| Optimizer | A module-level device that maximizes each panel's output while a central inverter does the DC-to-AC conversion. |
| Battery / ESS | Energy Storage System — stores solar for use at night, during the peak, or in an outage (e.g., the Tesla Powerwall). |
Financing
The ways to pay for a system — see our financing page for a full comparison.
| Term | What it means |
|---|---|
| Cash | You buy the system outright. Highest upfront cost, lowest lifetime cost, and you own it. |
| Loan | You finance the purchase and own the system, paying it off over time with interest. |
| Lease / PPA | A provider owns the system; you pay a fixed monthly amount (lease) or a per-kWh rate (PPA). Often $0 down — the provider claims the §48E tax credit and passes value through as a lower price. |
| Prepaid plan | You pre-pay for years of solar at a discount with no monthly payment and no credit check. |
Still seeing a term you don't recognize?
A trustworthy installer should explain every line of your quote in plain language before you sign. If a contract has acronyms no one will define, that's a red flag. Have a term you want decoded? Contact OC Solar and we'll translate it.
FAQ
kW (kilowatt) measures power — how much your system can produce at a given moment (a home system is typically 6–10 kW). kWh (kilowatt-hour) measures energy over time, which is what your utility bills you for. Think of kW as speed and kWh as distance traveled.
Incentives and rates change. This page is kept current — but always confirm specifics for your home.
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