PPA vs. Lease: What’s Right for Solar?
When it comes to getting a solar panel system installed on your roof, there are many decisions to be made – including tough financial decisions. For some homeowners, the ability to finance a system may not be possible. This is where solar leases and Power Purchase Agreements (PPAs) come into play. These are two options available to homeowners who are looking to save on their electricity bills by switching to solar without carrying the full financial burden of financing or paying off their own solar system. Under both a solar lease and solar PPA, the homeowner themselves will not own the actual solar energy installation placed onto their roof. Instead, a PPA or lease company has true ownership over the system. While very similar, PPAs and leases have some very distinct differences between them. Selecting the right one for your project is important!
Breaking Down Your Solar Options
- Solar leases – Under this type of agreement, a homeowner doesn’t own any of the equipment installed on their roof or connected to their home. They will still have the same interaction with their utility company in terms of buying and selling electricity (i.e. net metering), just as someone who actually owned their solar panels would. A homeowner can expect to pay monthly rent throughout the terms of the agreement, which can range from around 20 to 25 years.
- Solar PPAs – Under this type of agreement, the homeowner doesn’t own the equipment or even make any leasing payments. Instead, the PPA company comes in and installs their solar panel system on the house and actually sells the homeowner the electricity produced by the panels for a negotiated rate. With a PPA, the homeowner can either opt to pay for only the electricity they actually end up using or a fixed monthly amount, depending on the agreement details. Similarly to a lease, the agreements tend to run up to 25 years.
The specifics of the agreements can vary based on homeowner preference. For example, a contractor may offer zero down, free installation, a down payment, prepaid leases, varying kW sizes, and other factors.
Make the Best Solar Choice for Your Needs
So what’s the better option, a solar lease or PPA? At the end of the day, it comes down to what makes the most sense for your particular situation. You may prefer to not have a lease payment and be able to negotiate on the pricing of your electricity with a PPA or like the flexibility of leasing panels while buying / selling the electricity produced by it. The last option available to homeowners is financing or paying cash. For those that are able to, this is the most financially beneficial, as the homeowner will typically be able to pay offer the system in 12 or less years. Still, both solar leases and PPA agreement are viable options for those that want to benefit from the perks of solar without all the upfront costs.