When deciding whether to lease solar panels or enter into a power purchase agreement (PPA), homeowners must consider various factors. Both options allow for the adoption of solar energy without the high upfront cost of purchasing a system, but they differ significantly in structure, benefits, and long-term implications.

Solar leases are akin to renting a solar system. Homeowners pay a fixed monthly fee to use the solar panels, which are owned by a third party. This fee is typically lower than their usual electricity bill, leading to immediate savings on energy costs. Leases often include maintenance, repair services, and guarantees on system performance since the leasing company retains ownership and has a vested interest in the system’s functionality.

Advantages of solar leases include little to no upfront costs, predictable payments, potential inclusion of maintenance and repairs, and no worries about system performance. However, since the homeowner does not own the panels, they do not qualify for federal tax credits or rebates associated with solar panel ownership. Furthermore, leases usually come with long-term contracts — around 20-25 years — which can complicate selling the home since the lease must be transferred to the new owner or bought out.

Power Purchase Agreements offer a different approach. With a PPA, homeowners agree to purchase the power generated by the solar panels installed on their property at a set per-kilowatt-hour rate from the provider, who owns, installs, and maintains the system. This rate is typically lower than local utility rates and may escalate at a predetermined rate over time. Like leases, PPAs can lead to immediate reductions in electricity costs without initial investment.

PPAs have similar benefits to leases in terms of no upfront costs and including maintenance services. They also share some downsides like long-term contracts and issues related to transferring agreements during home sales. However, unlike leases, PPA payments vary each month based on how much power is produced; resulting in less predictable billing than a lease.

Deciding which is better depends on individual circumstances such as financial situations, energy needs, tax incentives eligibility considerations, and personal preferences regarding long-term commitments and predictability in billing. Homeowners should seek quotes for both options along with an estimate of energy savings over time to compare potential financial outcomes before making a decision.