Incentives & Policy

Power Purchase Agreement (PPA)

A power purchase agreement (PPA) is a financial arrangement where a third-party developer installs, owns, and maintains a solar system on your property, and you agree to purchase the electricity it produces at a predetermined rate per kilowatt-hour — typically lower than your current utility rate. You do not own the panels, you do not pay upfront installation costs, and you do not claim the tax credits (the developer does).

PPAs are structured as long-term contracts, usually 15-25 years, with a fixed or escalating rate for the solar electricity. A fixed-rate PPA locks in your solar electricity price for the entire contract term. An escalating PPA starts at a low rate and increases annually by a predetermined percentage (typically 1-3%), betting that utility rate increases will outpace the PPA escalation.

The appeal of a PPA is zero upfront cost and immediate savings — your electricity bill drops from day one because the PPA rate is set below current utility rates. The developer handles all maintenance, monitoring, and repairs throughout the contract term because they own the equipment and earn revenue from your electricity purchases.

The trade-off is reduced total savings compared to owning the system outright. When you own your solar system, you capture the full economic benefit — federal and state tax credits, all energy savings, SREC revenue, and increased home value. With a PPA, those benefits go to the developer, and your savings are limited to the difference between the PPA rate and the utility rate.

PPAs can complicate home sales because the contract transfers to the new buyer or must be bought out. Buyers may be hesitant to assume a long-term PPA obligation, potentially affecting the sale process. Review the PPA contract's transfer and buyout provisions carefully before signing.

Frequently Asked Questions

Is a PPA better than buying solar?

Buying (with cash or a solar loan) delivers significantly higher total savings over the system's lifetime because you capture all financial benefits — tax credits, energy savings, SRECs, and home value increase. A PPA is better if you cannot qualify for financing, do not have sufficient tax liability for the ITC, or want zero upfront cost with guaranteed maintenance.

What happens to a solar PPA when I sell my house?

The PPA contract typically transfers to the new homeowner, who assumes the remaining payment obligations. Some contracts offer a buyout option if the buyer does not want the PPA. Real estate agents experienced with solar can help navigate PPA transfers during home sales. Review the transfer provisions in your PPA contract before listing your home.