Solar PPA vs Lease: What's the Difference?

The difference between a solar lease and solar PPA is simple: With a lease, you pay a fixed monthly “rent” in return for use of the system equipment. Under a PPA (power purchase agreement), you pay a fixed price per kWh for the power generated.

Rising energy costs can feel overwhelming for many families. Big upfront price tags often keep people from exploring alternative energy options.

The good news? You can enjoy reliable, predictable power in an affordable way. Traditional energy models give you very little control over energy costs, making a solar PPA or lease all the more important.

Most folks who go solar notice their need for electricity from the utility is greatly reduced within the first year. Flexible options make it possible to get a solar energy system up and running without a huge upfront payment.

Taking control of your energy is highly accessible when you partner with experts. We will share simple definitions and a direct comparison below to guide your decision when evaluating a solar PPA vs a lease.

How does solar lease work?

A solar lease is a very straightforward concept for homeowners. You rent the advanced solar system and equipment for a fixed monthly fee, with no upfront costs. 

The solar company fully owns and maintains the solar system on your roof at no extra cost under this third-party ownership model. You simply get to use the energy it produces every single day.

As noted by consumer advocates, typical residential solar leases last for 15 to 20 years and require no down payment during the lease term.¹ Sunrun’s leases last 15 years in Illinois and Puerto Rico and 25 years in all other available states. This solar lease setup makes household budgeting incredibly easy and stress-free, as you’ll have a predictable monthly payment for your solar energy and equipment. With a solar lease, the third-party owner handles ongoing technical maintenance.

Your fixed monthly payment generally covers everything from hardware to maintenance throughout the entire lease term. Many leases often have an escalator outlined in your agreement, showing that the monthly cost will increase at a predictable amount, somewhere between 1 and 5 percent, each year.² 

Understanding the typical lease term helps families plan their financial futures with absolute confidence before committing to installing solar equipment.

Whether you live on the coast or inland, leasing solar panels with battery storage helps you have reliable energy at a predictable cost. At Sunrun, upfront costs are eliminated while you enjoy abundant power from the sun and 24/7 monitoring as part of your solar leasing program.

How do solar power purchase agreements work?

A solar power purchase agreement (PPA) is a slightly different approach to residential solar energy compared to a solar lease. You buy the actual power produced rather than renting the solar system and equipment.

With a solar PPA, you pay a fixed price per kWh for power generated by the panels. Depending on your state and utility company’s rules and regulations, we offer either a PPA or a lease, whichever is appropriate given your geographic location. 

Sunrun securely installs and maintains the hardware on your property, acting as the third-party owner. Under a solar PPA, you only pay for the exact energy the panels generate each day. A pay-as-you-produce energy model means that your monthly solar bill would vary, as solar production is greater in the summer months and lower in the winter. 

To account for this variation, Sunrun provides a levelized PPA that spreads your estimated annual solar production evenly across each month. This way, based on your KWh rate, you have a predictable monthly bill. If your system produces less than Sunrun predicted, you may be eligible for a Production Guarantee that compensates you for the difference between what we guaranteed and what the system actually produces.³

Sunrun also offers a unique PPA plan called Sunrun Flex, where you start by paying for the energy you use. With this plan, you have a minimum monthly bill, and any solar energy you use above that minimum will be charged at a Flex rate on your monthly bill. If you use less energy than your monthly minimum, you’ll receive a credit to apply towards future solar bills. This plan helps you have sufficient solar energy to meet growing needs, without relying more on the utility or paying for unneeded solar energy. 

According to industry research, in some solar PPA contracts, the rate is fixed for the duration of the solar power purchase agreement. In other power purchase agreements, there are delineated escalators that increase the rate in future years, ranging from 1 to 5 percent.²

This structured solar PPA framework often provides lower electricity costs compared to traditional rates. Homeowners searching for premium solar and battery options will benefit from power purchase agreements.

You secure a customized cents-per-kWh rate for all generated solar electricity under your solar PPA. Insurance is baked directly into your solar power purchase agreement to protect your peace of mind. Overall, power purchase agreements provide robust consumer protections.

Solar PPA pros include starting with zero down and preserving your personal capital. Furthermore, you can benefit from a seamless agreement transfer for your solar PPA when you eventually sell your home. A third-party owner manages the technical complexities so you can simply relax.

Solar PPA vs lease: Side-by-side showdown

Now that you know what a solar lease and PPA are, it’s worth looking at why they can sometimes be a better fit than buying a system outright. Here’s the rundown:

• Get started for as little as $0 down.

• Skip the hassle of ownership. Sunrun will handle installation, maintenance, monitoring, and insurance for the life of the agreement.

• Rain or shine, you can have guaranteed solar system performance.  

• Sell your home with ease. Sunrun has a team of Service Transfer experts to help you with a seamless transfer of the agreement to the new buyer.   

Both options offer a wonderful path to energy reliability without the stress of system ownership. 

Sunrun also provides prepaid lease and PPA options. This means that if you’d prefer to enjoy the benefits of Sunrun’s warranties and maintenance, without the hassle of ownership, you can do so by paying for the system equipment/energy cost upfront. By doing so, you forgo the annual escalator and will not have a monthly solar bill. 

Both solar leases and PPAs, whether prepaid or monthly, remove the heavy hassle of system maintenance completely from your shoulders. 

What are other solar financing routes?

Beyond solar leases and PPAs, the other financing routes are cash purchases (highest ROI) and solar loans (combine ownership benefits with monthly payments and potential tax credits).

Some homeowners prefer to own solar panels completely outright from day one. This system ownership path requires more responsibility but offers unique long-term benefits for your property.

Buying your system means you handle maintenance eventually over the decades, unlike the hands-off nature of power purchase agreements or a solar lease.

However, system ownership can increase your property's overall value over the long run compared to a solar lease. Homeowners exploring outright purchases can get a quote for a PPA or lease alongside an owned system to determine what makes the most sense for their needs. 

Understanding the overall cost helps you plan your financial future effectively, whether you choose system ownership, a solar lease, or power purchase agreements.

Cash purchases yield the highest return on investment but require the highest upfront costs, whereas a solar lease requires as little as zero down. 

Both traditional methods remain powerful and effective choices today for families seeking energy independence, though many still prefer the simplicity of residential solar leases or PPAs offered by a solar company. A prepaid lease, or PPA, can give you the best of both worlds if you have the capital to pay upfront and want to minimize the overall cost of going solar without the responsibility of ownership. 

Adding energy storage is another excellent way to enhance your security alongside your solar lease or PPA. Integrating a powerful solar battery system keeps your lights on during unexpected grid outages and lets you use stored solar energy after the sun goes down.

This extra layer of protection is invaluable during severe weather events or regional grid failures, whether you have power purchase agreements or outright ownership.

Solar made simple, backed by Sunrun

Both a solar lease and a solar PPA option remove upfront financial hurdles completely from your plate. Power purchase agreements and residential solar leases provide homeowners with reliable, predictable power for decades to come. 

You get 25 years of absolute peace of mind guaranteed by our dedicated experts under your solar lease or solar power purchase agreement. 

You deserve abundant solar energy without the traditional hassles of outright system ownership. Sunrun provides human-centered support at every step of your solar lease or power purchase agreement.

We handle the heavy lifting as the third-party owner, so you can simply relax and enjoy more control over your electricity bills. Contact our expert team today to discuss your options. Let us see which customized solar lease or PPA plan works best for your unique home energy profile.

Sources:

1. https://www.consumerfinance.gov/data-research/research-reports/issue-spotlight-solar-financing/

2. https://www.epa.gov/green-power-markets/solar-power-purchase-agreements 

3. Production Guarantee terms are outlined in your Sunrun agreement. Florida and Hawaii contracts are not eligible

4. https://solaractionalliance.org/solar-financing/solar-power-purchase-agreement-ppa/

5. https://www.nahb.org/advocacy/public-toolkits/a-builders-toolkit-for-solar/solar-system-financing