What is Solar PPA and how does it operate?

With the rising cost of fuels like natural gas and propane, homeowners are starting to favor more environmentally friendly solutions like solar panels. But there are many things to think about when installing a solar system in your house, including how you want to pay for it. There are several financing alternatives available in many places, including as purchasing your system outright, leasing it, or working with an installer to set up a solar power purchase agreement (PPA).

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Solar PPA: What Is It?

Under a solar PPA, the homeowner gives permission for a company to install solar panels on their land. The owner only pays for the electricity they really use, as opposed to leasing or buying the system. PPAs can last for a variety of lengths, up to the lifespan of the house’s solar panels.

How Do Solar PPAs Operate?

With a solar PPA, the homeowner is relieved of all maintenance obligations for the solar panels in lieu of buying them or signing a long-term lease that frequently includes a buyout option at the conclusion of the lease. A firm that installs and maintains them is the owner of them.

This is where things become a bit more intricate. Based on measured metering, the firm will charge the homeowner for the power produced by the panels. Though it’s not always the case, these costs are often far less than what a homeowner would pay for their utility-related electrical consumption. The owner will also get a charge from their utility provider in the event that the panels are unable to generate enough power to meet their demands.

The owner may or may not receive a credit against their energy bill if the home’s solar panels are able to generate more electricity than needed on bright days. To be certain, they must review their agreement.

How Much Can a Solar PPA Save You?

Given the frequent fluctuations in power rates, it is difficult to estimate the precise amount of money you would save with a solar PPA. The majority of setups, meanwhile, are made to enable financial savings; otherwise, the person receiving the solar electricity would not benefit greatly.

The quantity of power you consume, the amount the panels generate, your negotiated rate, and any additional costs will all affect how much you save. This is the reason it’s important to shop around and compare prices from a few different PPA providers before selecting one.

Pros and Cons of Solar PPAs

Selecting a solar PPA might be challenging, but there are a few advantages and disadvantages to take into account:


The system is free of charge for you. For many people who want to go solar today, the idea of not having to invest thousands of dollars for a solar system is very alluring.

You are well aware of the cost of your electricity. Your electricity cost per watt will be detailed in your PPA, so you will always know precisely how much you will spend. This might be a reassuring concept if your electricity bills have been shifting a lot.

You take on very little systemic risk. The owner is in charge of making any necessary repairs and part replacements for the malfunctioning components of the system. It’s comforting to know that, should something go wrong, the solar system you’re utilizing is not your concern.


You are not the system’s owner. Not owning your home’s solar system might not seem like a huge concern, but it also means you have very little control over how and when it is used. If you don’t own the system, you won’t be qualified for any solar tax credits either.

They could make it more challenging to sell your house. Many prospective homeowners won’t want to take over your PPA, even if some individuals truly desire solar electricity. Because of this, selling a house with a PPA attached may be challenging.

They may also raise the taxable value of your house. People may be wary of the PPA you signed, but whether you own solar panels or not, the tax authorities view them as an integral element of your home. This can result in a revaluation of the value of your house and an increase in taxes.