Solar Lease vs. PPA: What’s the Difference?

For many homeowners, one of the most confusing parts of going solar is understanding the type of agreement they are signing. Two of the most common options are a solar lease and a Power Purchase Agreement (PPA). While these arrangements can sound very similar, they work differently and can create very different long-term obligations.

Many homeowners are told that solar will “replace” their electric bill or save them money immediately. However, the details inside a lease or PPA contract can significantly impact monthly costs, future home sales, warranty rights, and potential legal claims if problems arise later.

Understanding the difference between these agreements is important before signing a long-term contract that may last 20 to 25 years.

What Is a Solar Lease?

A solar lease is essentially a long-term rental agreement for a solar energy system. Instead of purchasing the solar panels outright, the homeowner agrees to make monthly payments to use the equipment installed on the property.

Under most lease agreements, the solar company or financing company continues to own the system. The homeowner pays a recurring monthly fee for access to the equipment and the electricity it helps generate.

In many cases, the lease payment is fixed, although some contracts contain annual increases called escalator clauses.

For example, a homeowner may agree to:

• Pay $150 per month for 25 years
• Allow the solar company to maintain ownership of the system
• Continue paying even if utility bills do not decrease as expected

Many solar leases advertise:

• Little or no upfront cost
• Included maintenance
• Lower monthly energy expenses
• Simpler approval processes

However, homeowners should carefully review the contract language before signing. Some lease agreements contain provisions that can become problematic later, especially if the homeowner decides to move or sell the property.

Potential concerns with solar leases may include:

• Annual payment increases
• Long contract terms
• Transfer complications during home sales
• Early termination fees
• Savings projections that may not match reality
• System performance issues

In some situations, homeowners later discover they are paying both:

• A solar lease payment
• And a regular utility bill

This can happen if the system underperforms, does not offset enough electricity usage, or if energy consumption increases over time.

What Is a PPA (Power Purchase Agreement)?

A Power Purchase Agreement, commonly called a PPA, works differently from a lease. Instead of paying to rent the solar equipment itself, the homeowner agrees to purchase the electricity generated by the system.

Under a PPA, the solar company still owns the panels. However, the homeowner is billed based on the amount of electricity the system produces.

This means monthly payments can fluctuate depending on:

• Weather conditions
• Seasonal production
• System performance
• Household energy usage

For example, a homeowner may agree to:

• Purchase solar electricity at 13 cents per kilowatt-hour
• Continue buying utility electricity when needed
• Remain in the agreement for 20 to 25 years

PPAs are often marketed as a way to secure electricity rates that are lower than utility company pricing. In some cases, homeowners may initially see savings. However, actual financial outcomes depend heavily on system production and contract terms.

Potential advantages of a PPA may include:

• No large upfront investment
• Lower starting energy rates
• Maintenance included by the provider
• Potential utility savings

However, PPAs can also create long-term concerns for homeowners.

Potential issues may include:

• Variable monthly costs
• Annual rate escalators
• Lower-than-promised energy production
• Complicated transfer requirements during home sales
• Long-term contractual obligations
• Difficulty canceling the agreement

Some homeowners later discover that projected savings were based on overly optimistic assumptions about:

• Future utility rates
• System production
• Energy usage patterns

The Biggest Difference Between a Lease and a PPA

The main difference between a solar lease and a power purchase agreement (PPA) comes down to what you are paying for and who owns the solar system.

With a solar lease:

• The homeowner pays for use of the solar equipment

With a PPA:

• The homeowner pays for the electricity generated by the system

This distinction can affect:

• Monthly payment structure
• Risk exposure
• Long-term savings
• Legal responsibilities
• Potential disputes

1. Solar Lease

• What it is: You pay a fixed monthly fee to use the solar panels installed on your property.
• Ownership: The solar company owns and maintains the system.
• Your payment: Usually a flat monthly payment, regardless of how much electricity the panels produce.
• Pros: Predictable payments, maintenance is generally included.
• Cons: You do not own the system, so you don’t get tax credits or incentives, and the payments continue even if your energy production is high.

2. Power Purchase Agreement (PPA)

• What it is: You pay for the electricity the solar panels actually generate.
• Ownership: The solar company owns and maintains the system.
• Your payment: Usually calculated per kilowatt-hour (kWh) produced—so if the system produces more electricity, you pay more; if it produces less, you pay less.
• Pros: Payments match actual electricity use; maintenance is included; you avoid upfront costs.
• Cons: You still don’t own the system, so no tax credits; payment can vary month-to-month depending on solar production and weather.

Key distinction:

• Lease = fixed monthly rent for the panels.
• PPA = pay-per-use electricity generated by the panels.

Solar Lease vs. PPA Comparison

Feature	Solar Lease	PPA
What you pay for	Solar equipment	Electricity produced
Monthly payment	Usually fixed	Varies by production
Ownership	Solar company owns system	Solar company owns system
Upfront cost	Usually low or none	Usually low or none
Maintenance	Often included	Often included
Payment increases	Possible	Possible
Savings predictability	More predictable	Depends on production

What Homeowners Should Watch For

Many solar contracts contain complex language that homeowners may not fully understand during the sales process. In some cases, homeowners later report that key details were minimized or not clearly explained.

Before signing a lease or PPA, homeowners may want to carefully review:

• Whether payments increase over time
• The total contract length
• Estimated versus guaranteed savings
• What happens if the system underperforms
• Who is responsible for repairs
• Whether there are cancellation penalties
• What happens if the home is sold
• Whether warranties are transferable
• What happens if the installer goes out of business

Homeowners should also keep copies of:

• Sales presentations
• Savings estimates
• Emails and text messages
• Contracts and disclosures
• Performance guarantees
• Warranty documents

These materials may become important if disputes arise later.

What Happens if the Solar Company Goes Out of Business?

In recent years, several large solar companies have shut down, filed bankruptcy, or significantly reduced operations. When this happens, homeowners are often left with serious questions about:

• Warranty coverage
• Repairs and maintenance
• Performance guarantees
• Existing payment obligations

Some homeowners are surprised to learn they may still be obligated to continue making payments even if:

• The installer is no longer operating
• Repairs are delayed
• Warranty support becomes difficult to obtain

This can become especially complicated when multiple companies are involved, including:

• Installers
• Loan providers
• Servicers
• Equipment manufacturers
• Warranty administrators

Why the Solar Industry Started Pushing More Leases and PPAs

As interest rates increased and traditional solar loan approvals became more difficult, many solar companies shifted toward leases and Power Purchase Agreements (PPAs).

For some companies, leases and PPAs allowed deals to continue moving forward even when homeowners could no longer qualify for large solar loans with favorable terms.

These agreements also created recurring long-term revenue streams for solar companies and financing groups. Instead of receiving a one-time payment from a loan, companies could continue collecting monthly payments for years through lease or energy production agreements.

At the same time, higher utility costs and changing lending conditions made “no upfront cost” offers more attractive to many homeowners, especially during periods of economic uncertainty.

Why Prevost Law Firm Typically Does Not Handle Solar Lease Cases

Prevost Law Firm primarily focuses on solar loan-related claims rather than solar lease or PPA disputes.

Many of the firm’s cases involve homeowners who financed solar systems through loans tied to allegations involving misrepresentation, incomplete installations, system failures, or warranty-related issues.

Lease and PPA agreements can involve different legal structures, arbitration requirements, ownership arrangements, and damages calculations than traditional solar loan cases. Because of this, not every lease or PPA situation may fit within the firm’s current case focus.

However, homeowners dealing with serious solar-related issues should still preserve:

• Contracts and agreements
• Warranty documents
• Sales materials and savings promises
• Inspection reports
• Repair records
• Communications with the installer or financing company

These records may become important if legal options arise in the future.

Final Thoughts

Solar leases and PPAs are not the same thing, even though they are often marketed similarly. A lease generally involves paying for use of the equipment, while a PPA involves paying for the electricity generated by the system.

Both types of agreements can carry long-term financial obligations and potential risks that homeowners may not fully understand at the time of signing.

Carefully reviewing the contract, understanding payment terms, and keeping records of all sales representations may help homeowners protect themselves if problems arise later.

Concerned About Your Solar Agreement?

If you believe you were misled about solar savings, system performance, warranties, financing terms, or long-term costs, it may be important to understand your legal options sooner rather than later.

Prevost Law Firm focuses on helping homeowners dealing with serious solar-related problems involving loans, installations, system failures, and misleading sales practices.

You can request a no-cost claim review to learn whether your situation may qualify.

Get Your No-Cost Claim Review Today →