Solar PPA vs Lease: How To Decide Which One Is Better For You

While solar power is undoubtedly growing in adoption rates for commercial and industrial facilities, not all businesses can afford to install a solar panel system outright. Buying solar panels is a good investment for companies so that is why there are solar financing options available like solar leases and PPAs or power purchase agreements. In these financing scenarios, you don’t own the solar energy installation itself but have full access to the solar electricity generated. 

This article will explain what a solar Power Purchase Agreement (PPA) and a solar lease are and also look at their pros and cons. Read further into this solar PPA vs lease article to find out which one is right for you and your facility.

What is a solar Power Purchase Agreement (PPA)?

A solar Power Purchase Agreement (PPA) is a financial agreement between the PPA company and the customer. The PPA provider will design, build, and install a commercial solar photovoltaic (PV) system on the customer’s property for little to no cost. 

The PPA company will also maintain the panels. The PPA provider will then sell the energy the solar PV system produces back to the customer at a fixed monthly rate or for the electricity they use, depending on the agreement. The fixed rate is usually reduced and lower than their current utility rate. A PPA contract will last anywhere from 10 to 25 years. 

What is a solar lease?

A solar lease is a financing option where you don’t own the solar panels, but pay a fixed monthly lease payment to the solar company for use of the solar system. With a solar lease, the solar installer will be responsible for the design and installation of the solar energy system. 

The solar developer will also take care of the necessary maintenance of the solar system. You essentially are swapping out your utility bill for the fixed monthly payments to the solar leasing company. A solar lease term can last anywhere from 2 to 20 years. 

Solar lease vs PPA

A solar PPA and solar lease are similar so they sometimes can be mistaken for the same thing. With both solar PPAs and leases, you won’t have to deal with any upfront costs since you won’t be buying the solar panels. 

You also won’t own the solar equipment or solar array, which means the solar company you work with will be responsible for the design, build, installation, permitting, and maintenance of the solar system on your site. In both cases, you can lock in your utility rate as per your agreement with the commercial solar company you choose to partner with. 

There is one main difference between the two: with a solar PPA, you pay a third party for the solar electricity produced, while with a solar lease you pay a third party for the solar system itself. 

What are the pros and cons of solar leases and PPAs?

Since solar PPAs and leases are extremely similar financing options their pros and cons are relatively the same. It just comes down to whether you prefer to pay for the solar power generated from the system or pay for the solar system itself. 

The pros of solar leases and PPAs are:

  • No upfront costs.
  • No maintenance costs.
  • Limited risk.
  • Easy installation process.
  • Can lock in a lower energy rate.
  • Can often see positive cash flow from day one.

The cons of solar leases and PPAs are:

  • You don’t own the solar system on your property.
  • You don’t get to take advantage of solar tax rebates or incentives, including the federal solar investment tax credit (ITC).
  • You don’t qualify for solar renewable energy credits (SRECs).

Solar Loans

There is a third solar financing option that we should touch on here in this article so you get the full picture of your solar financing options.

Another option that can mean lower upfront costs is a solar loan. Unlike a PPA or a solar lease, the property owner owns the solar panels once the loan is paid off.

A solar loan works just like any other loan for goods and services. Some loan providers will offer zero-down solar loans so that you can avoid huge upfront costs. Unlike a PPA or solar lease, you will own the panels eventually. This means you will be responsible, as opposed to the solar leasing company, for the installation and maintenance of the solar system.

What is the best option for your facility: PPA solar lease?

As you can see from the above lists, leasing solar panels or going through a solar Power Purchase Agreement are both excellent ways to avoid a large initial investment and still be able to reap the benefits of solar energy. Solar leases and PPAs work for commercial and industrial facilities because a fixed cheaper rate for solar electricity and not having to worry about ownership of the solar PV system outweighs any of the cons. 

At the same time, going through a solar lease or PPA ensures the whole process will be quick and painless. Since the solar company you work with will be taking care of the entire commercial solar installation, you can just sit back and watch it all come together. On top of all the above-mentioned benefits, you also won’t have to worry about the maintenance and upkeep of the solar system. 

WattLogic is a commercial solar company dedicated to its customers and their goals for energy efficiency. WattLogic is a dedicated solar provider that strives to take care of all the heavy lifting when it comes to installing energy-saving technologies at its customers’ commercial and industrial facilities. WattLogic’s clients save time and money while improving quality control and productivity.

WattLogic offers both solar leases and PPAs and can help you further decide which one is best for you. Please reach out to us if we can help: (800) 834-8737.