Incentives & Policy

Solar Lease

A solar lease is a financial arrangement where you pay a fixed monthly fee to a third-party company that installs, owns, and maintains a solar system on your property. Unlike a PPA where you pay per kilowatt-hour consumed, a solar lease charges a flat monthly amount regardless of how much electricity the system produces. You use all the solar electricity generated, but you do not own the equipment.

Solar leases typically run 20-25 years with monthly payments that are designed to be lower than your current electricity bill savings, providing immediate net savings from day one. The lease may include an annual escalator of 1-3% per year or may be fixed for the entire term, depending on the contract structure.

The leasing company retains ownership, claims the federal ITC and any state incentives, handles all maintenance and repairs throughout the lease term, and typically monitors system performance. At the end of the lease, you usually have three options: renew the lease, purchase the system at fair market value, or have the equipment removed at no cost.

Like PPAs, solar leases provide a low-barrier entry to solar energy for homeowners who cannot or prefer not to make a large upfront investment or take on a solar loan. The trade-off is identical — reduced total savings compared to system ownership because the financial benefits (tax credits, long-term energy value, home value increase) accrue to the leasing company rather than the homeowner.

Solar leases have become less popular as solar loan products have improved, offering homeowners the ability to own their system with zero down payment while still capturing the full financial benefits including the federal ITC. However, leases remain relevant for homeowners with limited tax liability or credit constraints.

Frequently Asked Questions

What is the difference between a solar lease and a PPA?

A lease charges a fixed monthly payment regardless of production. A PPA charges per kilowatt-hour actually produced. In a high-production month, a PPA costs more; in a low-production month, it costs less. A lease provides payment predictability, while a PPA aligns your cost with actual solar benefit. Both result in third-party ownership of the system.

Should I lease or buy solar panels?

Buying (through cash or loan) provides significantly higher total financial return because you capture the ITC, all energy savings, and home value increase. Leasing makes sense only if you cannot qualify for a loan, have insufficient tax liability for the ITC, or need truly zero upfront commitment with no risk of maintenance costs.