The terms solar lease and solar PPA are often used interchangeably. They're both great options for property owners looking to finance their solar power systems. There are, however, some small differences between the two that you should be aware of when making your decision. EnergySage recommends that you request quotes for both options and evaluate each to determine which is best for meeting your specific goals.
The chart below highlights these differences.
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|Solar Lease||Solar Power Purchase Agreement (PPA)|
|You “lease” or “rent” the equipment and are entitled to the benefits of using the system, i.e. the free power that the system generates.||You agree to buy the power generated by the system at a set price per kwh. This price could be fixed over the length of your agreement or the terms could include an “escalation schedule” where the price that you are paying for the power generated would increase at agreed upon rates each year.|
|Some leasing companies will guarantee the minimum production of the system. If the system does not meet its production targets, the company agrees to compensate the property owner.||The solar company estimates the production of the system installed at your property, but you are only required to pay for the actual kilowatt hours (kWh) the system produces.|
|Residential lease terms are generally for 20 years, but some leases can be shorter ranging between 10-20 years. Commercial leases also can be customized. They generally range from 7 to 15 years.||Terms are generally for 20 years, but some PPAs can be shorter ranging between 10-20 years|
|You have the option to buy the solar system at any time during the lease term and/or at the end of the term. The purchase prices will be predefined in your contract.||same|
|The leasing company will monitor the system's performance for the duration of the lease. Because they own the system, they also are responsible for maintaining and repairing it, performing periodic maintenance, replacing inverters, etc.||same|
|Most companies offer free online, smartphone, or tablet programs to track your system's performance. Many property owners choose to monitor their systems to track metrics such as energy produced, savings, SREC information, carbon avoided, etc. for their personal use or in the case of businesses, for marketing or other reporting purposes.||same|
|The benefits of owning the system, such as purchase rebates, tax credits, the ability to take depreciation, or other incentives would belong to the leasing company.
If you have a prepaid lease or PPA, many leasing companies will allow you to benefit from the sale of Solar Renewable Energy Credits (SRECs) either directly or through a reduction in the lease amount even though they are the owner of the system.
|Similar to applying for a loan, you will need to demonstrate that you have a good credit rating (>660) to qualify.||same|
|Options for terminating the lease in the event you sell your property before the term ends are spelled out in the contact. These options generally include (1) transferring the remainder of the lease to the buyer or (2) you buying the system and selling it along with the propert||same|
|At the end of the lease term, you can either (1) buy the system at the price predetermined in your contract, (2) have the leasing company remove the system at no cost to you, or (3) leave the system in place and renew the lease.||same|
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