No Solar vs Power Purchase Agreement (PPA) vs Purchasing

This calculator compares three 25-year options: No Solar System, PPA or Lease, and Purchasing.

Frequently Asked Questions

What is a solar PPA and how is it different from buying solar panels?

A Power Purchase Agreement (PPA) is a contract where a solar company installs panels on your roof at no upfront cost and you agree to buy the electricity those panels produce at a fixed rate per kilowatt-hour — typically lower than your current utility rate.

You do not own the panels. The solar company owns them, maintains them, and claims all associated tax incentives. You simply pay a monthly bill based on how much electricity your roof generates.

Buying solar means you own the system outright — either by paying cash or financing through a loan. You claim the ITC, build equity in the system, and once paid off, your electricity is effectively free for the remainder of the panel warranty.

Is a solar PPA worth it compared to buying?

For most US homeowners who have sufficient federal tax liability, direct ownership delivers significantly better 25-year financial returns than a PPA.

The ownership advantage comes primarily from the 30% federal tax credit — a credit the solar company claims instead of you when you sign a PPA. On a $24,000 system that is $7,200 going to the solar company rather than your pocket.

Ownership creates equity. A paid-off solar system adds approximately $3 – $4 per watt to home appraisal value according to Lawrence Berkeley National Laboratory research. A PPA provides no equity and can complicate home sales.

PPAs make sense for specific situations: homeowners who cannot qualify for a solar loan, those with no federal tax liability to use the ITC (retirees on Social Security income, for example), and homeowners who want zero maintenance responsibility regardless of financial optimization.

What is a PPA escalator and why does it matter?

The PPA escalator is the annual percentage rate by which your PPA electricity price increases each year throughout the contract term.

A contract starting at $0.12/kWh with a 2.9% annual escalator reaches $0.18/kWh by year 15 and $0.24/kWh by year 25. If your local utility rate rises more slowly than the escalator, you may find yourself paying more for solar electricity than grid electricity in later contract years.

The escalator is often the most important but least scrutinized number in a PPA contract. Always calculate what your PPA rate will be in year 15 and year 25 and compare it to a reasonable projection of utility rates in your market before signing.

What happens to a PPA when you sell your house?

This is the most common source of friction and stress for US homeowners who have signed a solar PPA and later decided to sell.

Because the solar company owns the panels on your roof, the PPA contract must be transferred to or assumed by the new buyer. Many buyers – particularly those using conventional financing – are reluctant or unable to take on a long-term electricity contract as part of a home purchase.

Some PPA companies allow buyout at fair market value, which can run $15,000 – $25,000 for a system mid-contract. Others require full transfer to the buyer. Real estate agents in California, Arizona, and Florida – the states with the most PPA installations – report that active PPA contracts regularly complicate or delay home closings and can reduce the pool of eligible buyers. Owned solar systems, by contrast, simply add to the home’s appraised value and transfer cleanly in the sale.

Can I buy out a solar PPA early to switch to ownership?

Most PPA contracts include an early buyout provision, but the pricing structure is designed to protect the solar company’s investment and profit.

Buyout prices in PPA contracts are typically set at a schedule that ensures the solar company recovers the full value of the tax credit they claimed, their expected profit, and remaining equipment value. In practice, early buyout prices are often set high enough that purchasing in years 1-5 is expensive, with prices declining over the remaining term.

Some PPA contracts include buyout rights at specific intervals – year 5, year 10, year 15 – at predetermined prices. Read your contract carefully for these provisions. If you are considering a PPA and think you may want to own eventually, negotiate the buyout schedule terms before signing rather than after.