A residential power purchase agreement is similar to a lease, except that you pay for each kilowatt-hour the panels produce instead of a fixed monthly rent. The provider owns, insures and maintains the system and claims any owner incentives. Your savings depend on the gap between the PPA price and what your utility would charge, and that gap can narrow if the PPA price escalates each year faster than utility rates. Some utilities and jurisdictions restrict third-party power sales; Austin Energy, for example, does not allow residential solar PPAs. As with a lease, check the escalator, the end-of-term options and how the agreement transfers when you sell.
Related terms and pages
- Solar lease: An agreement to rent panels a company owns and installs on your roof, for a fixed monthly payment.
- Net billing: Billing in which exported solar is credited at a rate below what you pay for power.
- Lease vs. buy