What Is a Solar PPA? Understanding PPAs, Solar Loans, and Solar Leases

What is a solar PPA? If you’ve started researching solar, you’ve probably come across terms like solar loan, solar lease, and PPA (Power Purchase Agreement).

Unfortunately, many homeowners sign these agreements without fully understanding the differences. In some cases, homeowners later discover they don’t actually own the solar system on their roof, don’t qualify for the tax credits they expected, or are locked into a contract that becomes difficult to transfer when they sell their home.

At Prevost Law Firm, one of the most common questions we receive is:

“What is the difference between a solar loan, a solar lease, and a PPA?”

The answer matters because the legal rights available to homeowners often depend on which type of agreement they signed.

What Is a Solar Loan?

A solar loan is exactly what it sounds like: a loan used to purchase a solar energy system.

With a solar loan:

• The homeowner owns the solar system.
• The homeowner makes monthly loan payments.
• The homeowner may qualify for available tax credits and incentives.
• Once the loan is paid off, the system belongs to the homeowner free and clear.
• The homeowner builds equity in the system.

This is the structure we see most often in the cases we handle.

Many of the solar lawsuits we pursue involve homeowners who purchased systems through financing companies such as GoodLeap, Mosaic, Dividend, Sunlight Financial, and others. Because the homeowner owns the system, there are often clearer legal paths available when the system was misrepresented, improperly installed, or fails to perform as promised.

What Is a Solar Lease?

A solar lease is more like renting a solar system.

Under a lease:

• The solar company owns the equipment.
• The homeowner pays a monthly fee to use the system.
• Payments are often fixed regardless of how much electricity the system produces.
• The solar company typically receives the tax credits and incentives.
• The homeowner does not build ownership in the system.

Many leases last 20 to 25 years and may contain annual payment escalators that increase costs over time. Some agreements can also create challenges when selling or refinancing a home.

While leases can reduce upfront costs, homeowners should understand that they are entering a long-term rental arrangement, not purchasing an asset.

What Is a PPA (Power Purchase Agreement)?

A Power Purchase Agreement, commonly called a PPA, is another form of third-party ownership.

Like a lease:

• The solar company owns the system.
• The solar company generally maintains the system.
• The homeowner does not receive ownership rights.
• The homeowner usually does not receive the federal tax credit.

The difference is how payments are calculated.

With a PPA, the homeowner pays for the electricity the system produces, typically at a per-kilowatt-hour rate. Instead of paying a fixed monthly rental fee, the monthly payment varies based on production. If the system produces more electricity, the homeowner pays more. If it produces less, the homeowner pays less.

Think of it this way:

• A lease charges you for access to the equipment.
• A PPA charges you for the electricity generated by the equipment.

Why Some Homeowners Like PPAs

On the surface, PPAs can sound appealing. Many require little or no money down, and the homeowner avoids taking on a large loan to install solar panels. Because the solar company owns the system, maintenance and monitoring responsibilities may also remain with the provider.

Sales representatives often market PPAs as a way to reduce electric bills without the responsibility of ownership. Instead of buying expensive equipment, homeowners agree to purchase the electricity generated by the solar system at a predetermined rate.

For some homeowners, especially those who do not qualify for financing or do not want additional debt, a PPA may appear to offer a lower barrier to entry than purchasing a solar system outright.

However, it is important to understand that a PPA is still a long-term contractual commitment. While there may be little or no upfront cost, homeowners are typically agreeing to purchase power from the solar company for 20 to 25 years. Before signing, homeowners should carefully review how rates are calculated, whether those rates increase over time, and what happens if they decide to sell their home before the agreement expires.

Potential Drawbacks of a Solar PPA

One of the biggest misconceptions about PPAs is that they automatically save money. While some homeowners do see savings, the outcome depends heavily on electricity production, utility rates, contract terms, and annual price escalators.

Many PPAs include provisions that increase the price per kilowatt-hour over time. A rate that appears attractive today may become significantly more expensive over the life of the agreement. Homeowners should also understand that because they do not own the solar system, they generally do not receive the federal solar tax credit or other ownership-related incentives.

PPAs can also create complications when selling a home. In many cases, the buyer must agree to assume the PPA, qualify with the solar provider, or negotiate another arrangement before the sale can move forward. If a buyer is unwilling to take over the agreement, the transaction may become more difficult.

Finally, homeowners should remember that they are entering into a relationship with a solar company that may change over time. The PPA may be sold, assigned, or transferred to another company, meaning the organization servicing the agreement years from now may not be the same company that originally sold the system.

Solar Loan vs. Lease vs. PPA

Feature	Solar Loan	Solar Lease	Solar PPA
Homeowner owns system?	Yes	No	No
Monthly payment	Loan payment	Fixed lease payment	Based on electricity production
Eligible for tax credits?	Often yes	Usually no	Usually no
Builds equity?	Yes	No	No
Third party owns system?	No	Yes	Yes
Typical term	10-25 years	20-25 years	20-25 years

For many homeowners, ownership is the biggest distinction.

When you finance a solar system with a loan, you are working toward ownership. With a lease or PPA, you are generally paying for the use of a system that someone else owns.

Why Are More Solar Companies Selling Leases and PPAs?

Over the last several years, we have seen a significant increase in lease and PPA sales.

One reason is simple: the company or investment group that owns the system often receives valuable tax incentives and long-term revenue streams. The homeowner receives the electricity, but the ownership benefits remain with the third-party owner.

We have also spoken with homeowners who were told they were receiving “free solar,” participating in a “government program,” or replacing their utility company altogether.

Those statements are often misleading.

A lease or PPA is still a binding contract with payment obligations that can last decades. Homeowners should carefully review any agreement before signing and understand exactly who owns the system and how payments are calculated.

What Happens If the Solar Company Goes Out of Business?

This is one of the most common concerns we hear.

The answer depends on the structure of the agreement.

With loans, homeowners generally still own the system even if the installer closes its doors. However, warranty disputes, service issues, and lender relationships can become complicated.

With leases and PPAs, the situation can be even more complex because the homeowner does not own the equipment. The lease or PPA may be transferred to another company, investor, or servicing entity. Service obligations, maintenance responsibilities, and communication channels may change.

Why Doesn’t Prevost Law Firm Take Lease or PPA Cases?

This is another question we receive frequently.

The short answer is that lease and PPA cases involve a very different legal framework than solar loan cases.

Our practice is currently focused on helping homeowners who purchased solar systems through cash purchases or financing agreements. These cases often involve:

• Breach of warranty
• Breach of contract
• Misrepresentation
• Hidden dealer fees
• Consumer protection claims
• Holder Rule-related issues involving lenders

When a homeowner owns the solar system, there are often stronger and more direct legal avenues available.

Lease and PPA agreements create additional layers of complexity because the homeowner does not own the equipment. The legal relationships between the homeowner, solar company, investors, servicing companies, and system owner can be significantly different. As a result, we are not currently accepting solar lease or PPA cases.

That decision is not a reflection of the seriousness of those situations. It is simply a reflection of where we believe we can currently deliver the strongest results for our clients.

Before You Sign Any Solar Agreement

Whether you’re considering a loan, lease, or PPA, ask these questions before signing:

• Who owns the solar system?
• Who receives the federal tax credit?
• How long is the agreement?
• Does the payment increase over time?
• What happens if I sell my home?
• What happens if the solar company goes out of business?
• Who is responsible for maintenance and repairs?
• What happens if the system underperforms?

Understanding these answers upfront can help prevent years of frustration later.

Frequently Asked Questions About Solar PPAs

Is a solar PPA the same as a solar loan?

No. With a solar loan, you own the solar system and make payments toward ownership. With a PPA, a third party owns the system and you pay for the electricity it produces.

Do I own the solar panels in a PPA?

No. In most PPAs, the solar company or an investment company owns the equipment throughout the term of the agreement.

Can I get the federal solar tax credit with a PPA?

Generally, no. Because the homeowner does not own the system, the tax credit is typically claimed by the system owner rather than the homeowner.

Can a solar PPA affect the sale of my home?

It can. Many PPAs require the buyer to assume the agreement or meet certain qualifications before the contract can be transferred, which may complicate a home sale.

Does Prevost Law Firm handle solar PPA cases?

At this time, Prevost Law Firm focuses on cases involving purchased solar systems, including cash purchases and financed systems. We do not currently accept solar lease or PPA cases.

Final Thoughts

A solar loan, solar lease, and solar PPA can all help a homeowner install solar panels with little or no upfront cost. However, they are fundamentally different arrangements.

• Loan: you are generally buying a system.
• Lease: you are renting a system.
• PPA: you are buying the electricity generated by a system someone else owns.

Understanding that distinction can make all the difference when evaluating long-term costs, ownership rights, tax benefits, and potential legal remedies.

If you financed and purchased your solar system and feel misled during the sales process, bought a system not properly installed, or pay for a system that does not work as promised, Prevost Law Firm may be able to help.

Go here for a no-cost case review.