Solar leases and power purchase agreements, or PPAs, are two options for financing a solar panel installation. Although these two terms are often used interchangeably, there is one major difference between a solar lease and a PPA: the payment structure.
A solar lease is designed to keep your monthly payments consistent and steady. You will pay your solar company the same amount of money month to month, regardless of how much electricity your solar panels generate. On the other hand, with a PPA, your monthly payment is based on the actual electricity produced by your solar panel system. Instead of a fixed monthly bill, you pay a fixed rate for the electricity produced by your solar panels, meaning your monthly payments will vary month to month.
Importantly, contracts for both solar leases and PPAs typically include an annual escalator: every 12 months, either your fixed monthly payment or your fixed rate for solar production will increase.
Whether you choose a solar lease or PPA, it’s likely that your total annual payments will be very similar. A solar lease is a better option if you prefer predictable payments, while PPAs are a good option if you only want to pay for the electricity your solar panel system generates.
Keep in mind that solar leases and PPAs aren’t the only financing option available for those looking to go solar at no upfront cost; many solar loans also allow you to finance a system with no money down, while reaping all the benefits of owning a solar panel system. It’s a good idea to compare monthly payments and total savings between multiple financing options before deciding which option is best for you.