A Power Purchase Agreement (PPA) is a solar financing arrangement where a third-party company installs, owns, and maintains solar panels on your property, and you agree to purchase the electricity they produce at a predetermined rate — typically lower than your current utility rate.
Unlike a solar lease where you pay a fixed monthly fee regardless of production, a PPA charges you only for the actual kilowatt-hours of electricity the panels generate. This means your costs naturally align with production — you pay more in sunny summer months and less during darker winter periods.
PPAs typically last 15 to 25 years and often include an annual price escalator of 1–3%. Even with escalation, the PPA rate usually remains below retail utility prices for the duration of the agreement, providing consistent savings.
The PPA provider handles all system maintenance, monitoring, and repairs at no additional cost to you. They have a financial incentive to keep the system running efficiently since their revenue depends on electricity production.
As with solar leases, you cannot claim state tax credits under a PPA — those benefits go to the system owner. And if you sell your home, the buyer must either assume the PPA or you may need to negotiate a buyout.
PPAs are most popular in states where they are explicitly permitted by law. They offer a genuinely zero-down path to solar with immediate electricity savings and no maintenance responsibilities, making them attractive to homeowners who want simplicity and lower energy costs without the commitment of ownership.