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PPA Pros & Cons: What Homeowners Should Know

As solar energy becomes more popular, homeowners are exploring different ways to go solar without breaking the bank. One of the most common financing options is a Power Purchase Agreement (PPA). But like any contract, a PPA comes with both benefits and drawbacks. Before signing on the dotted line, it’s important to understand how it works and whether it’s the right fit for your home.

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What is a Solar PPA?

A Solar Power Purchase Agreement (PPA) is a contract where a solar company installs and owns the solar panels on your property, and you agree to purchase the electricity they produce at a set rate (usually lower than your utility’s rates).

In simple terms:

• You don’t pay for the system upfront.
• You only pay for the electricity it generates.

The solar company takes care of installation, maintenance, and repairs.

✅ Pros of a Solar PPA

1. No Upfront Costs

With a PPA, you don’t need to invest thousands of dollars to install a solar system. The provider covers the installation costs, making solar accessible for more homeowners.

2. Lower Energy Bills

Since PPAs usually offer electricity at a cheaper rate than utility companies, you’ll start saving money on your energy bills from day one.

3. Maintenance-Free

The solar company owns the system, so they’re responsible for monitoring, maintenance, and repairs—saving you the hassle and expense.

4. Environmentally Friendly

You get to enjoy the environmental benefits of renewable energy—reducing your carbon footprint and supporting clean energy—without the large investment.

5. Flexible Contracts

Many PPAs come with different term lengths (15–25 years), giving you options to fit your long-term plans.

❌ Cons of a Solar PPA

1. No Ownership Benefits

Since you don’t own the panels, you don’t qualify for tax credits or solar incentives like the Federal Investment Tax Credit (ITC).

2. Long-Term Commitment

Most PPAs are long contracts (15–25 years). If you move, you may have to transfer the PPA to the new homeowner, which can complicate a home sale.

3. Escalating Rates

Some PPAs include an annual price escalator (e.g., 2–3% per year). This means your electricity rate may rise over time, possibly reducing savings.

4. Limited Home Value Increase

Owning a solar system can increase property value, but with a PPA, the panels belong to the provider, so the value boost is minimal.

5. Less Control

Since the solar company owns the system, you have little say in panel choice, system upgrades, or how the setup looks on your roof.

Is a Solar PPA Right for You?

A solar PPA may be a great choice if:

• You want immediate savings without paying upfront.
• You don’t mind not owning the system.
• You’re planning to stay in your home for the contract term.
• You prefer a hassle-free, maintenance-free solar option.

But if you want to maximize long-term savings, claim tax credits, and boost your home value, purchasing or financing your own solar panels might be a better fit.

Final Thoughts

Solar PPAs make renewable energy more affordable and accessible, but they’re not a one-size-fits-all solution. Before deciding, compare PPA vs. solar loans vs. outright purchase to see which option aligns with your financial goals and lifestyle.

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