What’s the Difference Between a Solar PPA and a Solar Lease?

Do you want to use clean energy but can’t afford the cost of solar panels? A lease or solar power purchase agreement may suit you. While both options allow you to use solar panels for a monthly cost, there are some differences between them. Use this helpful guide to explore the major differences between a solar PPA and lease so you can decide which one is right for you.

What Is a Solar Lease?

A solar lease is an agreement to pay a monthly fee for solar panels that power your home with clean energy. The solar company installs and maintains the panels. In return, you make monthly lease payments. You don’t own the solar panel system, but you pay to use the energy they provide.

It’s similar to leasing a car, though a solar lease usually has longer terms. Typically, you lease a solar system for 15 to 25 years, though some leases may be as short as 10 years. At the end of the lease, you can either end or renew the agreement, or you might be able to purchase the panels.

With a lease, you pay a fixed amount each month for the term, regardless of how much electricity you use. It typically costs between $50 and $250 per month for a solar lease, though it varies depending on where you live and the size of the system.

Benefits of a Solar Lease

Here are some benefits of leasing solar panels:

• You won’t pay upfront costs for the panels or installation.
• The solar company manages the panels, so there’s no additional cost for maintenance or repairs.
• While you might still have an electricity bill for energy consumed in non-sunlight periods, it will be much lower, allowing you to potentially cut your total energy costs.
• You pay one fixed rate throughout your lease, so you know what you owe each month.
• You use less power from the electricity grid, so you’ll reduce your carbon footprint.

Challenges of a Solar Lease

Despite the benefits of solar leasing, there are drawbacks. Here are some disadvantages:

• The overall cost savings are lower than if you owned the panels.
• Since you don’t own the panels, you’re not eligible for solar tax credits or other incentives.
• You won’t increase your property value because the solar company owns the panels.
• If you sell your home before the lease ends, you will either need to pass the lease on to the new homeowner or buy out the remainder of the lease.

What Is a PPA?

Like a lease, a solar PPA allows you to use clean energy without buying expensive panels. Under a solar PPA, you agree to purchase the energy the panels generate at a fixed rate per kilowatt-hour. That means your payments will vary based on how much energy you use each month.

A PPA usually lasts between 15 and 25 years. During that time, you may save money on your total energy costs because you will use less electricity from the grid.

Benefits of a Solar PPA

Leasing and power purchase contracts have many of the same benefits. Here are some benefits of a PPA:

• Typically, you pay little or no upfront costs to enter into a PPA.
• The solar company pays to maintain the panels throughout the PPA term.
• A solar PPA will lower your energy bill because you’re not relying as much on the grid.
• A PPA allows you to get all the benefits of clean energy without paying for solar panels.
• You only pay for the energy the panels produce, so your utility bill may be lower in some months, especially in the winter when the days are shorter.

Challenges of a Solar PPA

There are some downsides of a solar PPA, such as:

• You won’t get tax credits or incentives with a PPA.
• There can be expensive fees if you need to end a PPA early.
• A PPA can make it more difficult to sell your home if potential buyers don’t want to take over the agreement.
• Your monthly payments will fluctuate each month, and they can be high during months when you use a lot of power.

FAQs About Solar PPA vs. Lease

What’s the Difference Between a PPA and a Lease?

The main difference between a lease and a PPA is the payment structure. With a lease, you pay a fixed monthly rate. Under a PPA, you pay the cost per kWh that the panels produce.

It’s important to note that contracts for both leases and PPAs may have escalation clauses. An escalation clause means you will make higher payments over the terms of the agreement. It’s usually an increase between 3% and 5%.

Is a Solar Lease or a Solar PPA the Better Choice?

Both a solar lease and a PPA allow you to use solar panels without purchasing them. If you prefer to know what your utility bill will be each month, choose a solar lease. A lease can be a good option if you have a strict budget and don’t want to stray from it.

If you want your bill to track your monthly energy usage, a solar PPA might be the better choice. For example, if the solar company charges you 10 cents per kWh and you use 700 kWh of solar electricity in one month, you will pay $70. Next month, the panels might only produce 550 kWh of energy, meaning you will pay $55.

There are important factors to consider when deciding whether to contract for a solar lease or PPA. First, review your current electricity rate and determine if using solar energy can help you save money. Then, compare different lease and PPA terms to decide whether the solar cost savings will offset the price of the agreement.

Also, it’s critical to check out the reputation of the company who will be installing the panels, and who will be maintaining the solar system for years to come.

Interested in taking your commitment to green energy even further? Compare renewable energy plans in Texas with Home Energy Club and find discounts on plans matched to your home’s energy usage patterns.