Power Purchase Agreement (PPA)

A Power Purchase Agreement (PPA) is a financing arrangement where a third-party company installs, owns, and maintains a solar system on your roof, and you agree to purchase the electricity it produces at a predetermined rate — typically lower than your current utility rate.

With a PPA, you do not own the solar panels. The solar company retains ownership and receives the tax credits and incentives. In return, you pay for the electricity the panels generate, usually at a rate 10–30% below your utility rate, with a small annual escalator (1–3% per year). PPAs typically last 20–25 years. The advantage is zero upfront cost and immediate electricity savings with no maintenance responsibilities. The downsides include not receiving the federal ITC yourself, the annual rate escalator that may eventually approach or exceed utility rates, and potential complications if you sell your home (the PPA must be transferred to the new buyer or bought out). PPAs are best suited for homeowners who want solar savings without the upfront investment and don’t qualify for or want to use the tax credit themselves. They are available in about 25 states — some states prohibit third-party ownership of solar systems.