What is a solar PPA (Power Purchase Agreement)?

A Solar PPA is an agreement where a third party installs solar panels on your home at no upfront cost, and you agree to buy the electricity they produce at a set rate (typically 10–30% below your utility rate) for 20–25 years. You don't own the panels but get cheaper electricity. The PPA rate often escalates 2–3% annually.

Is a solar PPA a good deal?

PPAs offer immediate savings without upfront investment, which is attractive for homeowners who can't afford or don't want to purchase a system. Note: the federal residential ITC expired December 31, 2025, so this advantage of ownership is no longer a differentiator. However, PPA customers still miss out on home value increase and the superior long-term savings that come with owning. Over 25 years, PPA customers typically save 30–50% less than purchasers with equivalent systems.

What is a solar PPA and how does it work?

A Power Purchase Agreement (PPA) is a contract where a solar company installs panels on your roof at no cost and sells you the electricity they produce at a fixed per-kWh rate, usually 10–20% below your utility rate. You don't own the panels; you simply buy the power. PPAs typically run 20–25 years with 0–3% annual rate escalators.

Is a solar PPA better than a lease or purchase?

PPAs offer no upfront cost and guaranteed savings from day one. However, like leases, the installer keeps the tax credit and most long-term economic value. Over 20 years, purchasing (cash or loan) typically generates 2–3x more total financial benefit than a PPA. PPAs make the most sense when you cannot use the tax credit (e.g., low tax liability) or cannot qualify for financing.

Solar PPA Calculator

Calculate whether a solar Power Purchase Agreement saves you money versus paying retail utility rates. Compare total PPA cost against projected utility bills over the full contract term.

PPA Rate ($/kWh)

Utility Rate ($/kWh)

Monthly Usage (kWh)

Term (yrs)

About This Calculator

A Power Purchase Agreement (PPA) lets you host solar panels on your roof with no upfront cost — a third-party company owns and maintains the system, and you agree to buy the electricity it produces at a fixed per-kWh rate, typically 20–30% below your current utility rate. This calculator compares total PPA cost against what you would have paid the utility over the same period, accounting for the PPA's annual rate escalator and your utility's projected rate increases. The result tells you whether the PPA is genuinely a good deal over its full term.

The PPA escalator is arguably the most important number in the contract. A 2.9% annual escalator means your PPA rate doubles in about 25 years. If utility rates also escalate at 3%+ per year, you stay ahead. But in states where utility rates are relatively flat or regulators cap increases, the PPA escalator can eventually close — or eliminate — your savings. The "rate crossover" year shown here is when your PPA rate would exceed the projected utility rate, which signals the point at which the PPA stops saving you money and starts costing more than the alternative.

Before signing a PPA, read the full contract carefully for: annual escalator rate, term length (typically 20–25 years), end-of-term options (extend, buyout, or removal), what happens when you sell your home (transfer, buyout, or relocation options), and performance guarantees. Ask for the projected first-year kWh production so you can verify the PPA bill estimate here matches what you will actually pay. Compare that against your current utility bill to confirm immediate savings.

PPAs remain most attractive in states with high and rising utility rates (California, Massachusetts, Connecticut) where the initial discount is large and utility escalation is reliable. In low-rate states, the value proposition is thinner — and purchasing with a solar loan typically delivers substantially better long-term financial outcomes for most homeowners.

Calculations based on NREL solar modeling data and industry-standard assumptions, built and maintained by the independent SolarToolsOnline research team.

Estimates only — not financial, tax, or legal advice. Verify important results with a licensed solar installer or financial professional before making decisions.