The Difference Between a PPA and a Solar Lease, and How Each Impacts the Consumer’s Wallet

Are You Considering Making the Switch to Solar?

switch to solar Solar energy has been rapidly gaining mainstream acceptance, but it’s still something of a niche product. If you’re considering going solar, you may be confused about the different options you have for acquiring a photovoltaic system. No matter where you live, you have the option to take out a loan and finance your new solar system yourself, but some states also allow consumers to lease solar arrays or to make power purchase agreements (PPAs) with solar providers.

How do these two options differ, how are they the same, and how will each impact your wallet?

Similarities Between Solar Leases and PPAs

Both solar leases and power purchase agreements allow creditworthy consumers to take advantage of solar energy without having to purchase the PV equipment themselves. They’re an excellent choice for those who are interested in saving money and doing their part for the environment, but would rather not have to put down the substantial down payments typically required when purchasing a solar panels system.

Under a solar lease or PPA, the solar company maintains ownership of your solar power system. And while maintenance issues are rare with modern photovoltaic technology, if any problems should arise, your solar provider will be responsible for addressing them. Because the solar company still owns your solar array, they’re entitled to the rebates, tax benefits, and other incentives such as solar renewable energy certificates, or SRECs.

These credits can be sold to utilities that need to meet renewable portfolio standard requirements by sourcing a certain percentage of the power they produce from renewable sources.

Solar Lease Versus PPA: the Finer Points

While both solar leases and PPAs allow homeowners to avail themselves of the environmental and some of the financial benefits of solar energy, they differ in a few key ways. With a solar lease, the customer agrees to pay a monthly lease payment in exchange for the right to consume all of the power produced by the solar array.

In contrast, a solar power purchase agreement requires the customer to buy the power from the provider at a guaranteed purchase price, subject to small annual increases.

Solar leases and PPAs both require consumers to commit to 15 or more years, but should you ever decide to sell your home, a solar PPA would be transferrable, whereas a solar lease would not. That shouldn’t necessarily be a deal-breaker for those who are considering a solar lease over a PPA, but foresee selling their homes in the future.

Both solar leases and PPAs allow customers to purchase their solar panels at a certain point, and the price may be negotiable. Taking advantage of the purchase option before selling your residence may be a smart move, as solar systems add resale value to any home.

Financial Impact of Solar Leases and PPAs

While the details of solar leases and PPAs may differ on paper, both will provide substantial long-term savings over continuing to purchase energy from a utility. It’s estimated that under either arrangement, the average consumer can save 10-30% on their monthly utility bill, all without the commitments of ownership or maintenance. Monthly payments for solar leases and PPAs are generally quite similar, but they vary from state to state and from one provider to the next.

If you were considering a solar lease or power purchase agreement, you’d be well advised to shop around for the best deal.

[Photo Via: Suncrest Solar]