Solar Lease vs. PPA vs. Loan vs. Cash Purchase in California

The federal tax credit changed for a system installed now

The IRS confirms the Residential Clean Energy Credit — the 30% credit homeowners could claim for buying a solar system — is over for new installs: “You can’t claim residential clean energy credits for expenditures made after December 31, 2025.” A separate IRS FAQ on the same law is more specific about timing: “If installation is completed after December 31, 2025, the expenditure will be treated as made after December 31, 2025, which will prevent the taxpayer from claiming the section 25D credit.” Installation date controls, not when you signed the contract or made a deposit.

That credit was only ever available to the person who bought the system. The IRS describes it as a percentage of “your costs of qualified solar electric property” — a purchase cost, not a rental payment or a per-kWh charge. A lease payment or a PPA’s electricity price was never “your cost” of buying the property, so lease and PPA customers were not the ones claiming this credit even when it was active. For anyone installing now, the credit doesn’t change the cash-vs-loan-vs-lease-vs-PPA decision at all, because none of the four paths gets it anymore.

Four-way comparison

Every row below is sourced to California’s own consumer guide or the IRS — see “Sources checked” below for the full links.

Which one, when

• Cash fits if you have the capital, want to own the system with no monthly payment and no loan lien to think about, and are comfortable handling your own maintenance and repairs.
• Loan fits if you want the same ownership and maintenance responsibility as a cash purchase but need to spread the cost out. Confirm whether the loan is secured against the home before signing — some solar loans place a lien on the property, and CPUC’s guide is direct that this “could result in foreclosure” if payments are missed.
• Lease fits if a fixed, predictable monthly payment matters more than ownership, and you’d rather the provider handle all monitoring, maintenance and repairs. See how solar escalator clauses work and what happens if you stop paying a solar lease before you sign.
• PPA fits the same profile as a lease, except the payment tracks actual production instead of a flat rent — useful if you’d rather pay only for power the system produces, with the tradeoff that the payment can move with weather and system performance in a way a flat lease payment does not. See the lease-versus-PPA section below.
• The federal credit no longer separates these paths: it doesn’t apply to any of the four for a system installed now, so it isn’t a reason to prefer ownership (cash or loan) over a lease or PPA the way it was before 2026.

For more detail on any one path: buy vs. lease, in more depth, what a solar lease costs in California, or how a solar PPA works.

Solar lease vs PPA: the one difference that changes your bill

In both, the solar provider owns the system on your roof. The CPUC describes the payment difference this way: with a lease, “you will make scheduled monthly payments in exchange for all the electricity the system produces.” With a PPA, “you typically pay for all the power the solar system generates (at a fixed per-kilowatt-hour rate).” (CPUC, California Solar Consumer Protection Guide, checked September 23, 2026.)

• PPA: you pay per kWh produced. A cloudy month or a shaded array means a smaller solar bill, because you are billed on output.
• Lease: you pay the scheduled amount whatever the system produces. A shortfall is your cost unless the contract has a guarantee that pays you back for it.

That is why the CPUC’s own question list asks, “Does the solar provider offer a minimum energy guarantee (common with leases and power purchase agreements)?” The question matters more on a lease. Ask whether a guarantee measures kilowatt-hours produced or only whether the system was running, how a shortfall is paid, and whether the guarantee survives if the provider sells your contract.

Everything else people associate with either label (the rate, any escalator, the term, what happens at a sale) is a term of the specific contract, not of the word “lease” or “PPA.” If either one is offered with money down, see how a prepaid lease changes the payments or what a prepaid PPA still leaves you owing.

Solar PPA price per kWh in California: how to judge the rate

No state agency publishes a typical residential PPA price, so a “typical rate” in an ad has nothing behind it you can check. Judge the rate you are quoted against three things you can check.

1. Your utility’s price. The CPUC Public Advocates Office reported residential average rates of $0.337 per kWh for PG&E, $0.344 for SCE and $0.455 for SDG&E in June 2026, excluding the California Climate Credit (Q2 2026 Electric Rates Report). An average across the whole residential class is context, not your price. Your time-of-use plan and usage decide what each solar kWh actually displaces.
2. What happens to exported kWh. A PPA usually charges for all the power the system generates. On PG&E, SCE and SDG&E, systems that applied for interconnection since April 15, 2023 take service on the Net Billing Tariff, which credits exports at Avoided Cost Calculator values that the CPUC says are “usually lower than the retail rate” (CPUC, net energy metering and net billing, checked September 24, 2026). A kWh you pay the PPA price for and then export can earn back less than you paid for it. Ask the provider to show how much of the modeled production you use at home and how much is exported.
3. Where the rate goes. The CPUC says escalators are “typically in the range of a 1 percent to 3 percent increase above the rate you paid in the previous year” and tells you to be cautious above that. Compounding is simple arithmetic: after 24 annual increases, a 1% escalator leaves the rate about 1.27 times where it started, 2% about 1.61 times and 3% about 2.03 times. Ask for the year-by-year price schedule, not the first-year rate.

The comparison tool on this page takes the PPA’s starting price, escalator and production, so you can see the total next to a lease, loan or cash offer on the same system.

How long the contract runs, and what the savings estimate assumes

The CPUC says “a typical lease contract period is 20-25 years.” Get a PPA’s term in writing the same way. The term is how many years an escalator compounds and how many years a buyout or transfer question can come up.

Savings estimates carry a separate assumption about your utility’s future rates. The CPUC: “Solar providers are allowed to use a maximum electricity rate escalation of 10% in any calculation, as of 2025,” and “electricity bill savings estimates do not guarantee savings.” A contract escalator raises what you pay the provider. A rate-escalation assumption raises what the estimate says you would have paid the utility. Keep the two apart when you read a proposal, and ask for the estimate rerun with a lower rate assumption.

The CPUC also says lease, PPA and loan customers “will also receive a monthly bill from a loan company or solar provider.” The utility bill does not go away; it shrinks, and a second bill starts.

What a solar PPA costs in total

A PPA has no sticker price, because you buy electricity, not equipment. Its cost is the sum of every year’s bill from the provider: that year’s price per kWh times the kWh the system produces, for the whole term. The CPUC says the contract “will specify the kilowatt-hour rate you pay in the first year and every year after that” (CPUC), so you can add it up before you sign. Ask for three numbers:

1. The year-by-year price schedule, which shows the escalator in dollars rather than as a percentage.
2. The estimated production for each year, and how a shortfall is handled.
3. The total of all payments over the term, which the CPUC lists as the first question to ask about any lease or PPA.

Then add what stays on your utility bill, and compare the total with a cash or loan price for the same system. If the PPA is offered prepaid, the upfront payment is that total paid early; see what a prepaid PPA still leaves you owing. How PPA companies differ, and what to ask each one, is in how to compare solar PPA companies. Ending early has its own price: the CPUC says buying out a lease or PPA “can cost thousands of dollars,” and what happens at a home sale is in selling a home with a solar lease or PPA.

Leasing solar panels in California now

Leases have become the exception. California Distributed Generation Statistics shows that of residential solar projects at PG&E, SCE and SDG&E with permission to operate in 2025, about 3% were leases and about 42% PPAs; the rest were owned by the homeowner (DG Stats, data through May 31, 2026). The 2025 federal tax law added 26 U.S.C. § 48E(i), which denies the business credit when the owner rents or leases to a third party property “described in paragraph (1) or (4) of section 25D(d)”: solar water heating and small wind. Rooftop solar electric property is paragraph (2), which the subsection does not list (26 U.S.C. § 48E, checked September 24, 2026). What the tax law means for a given offer is for the provider to explain.

• Choosing a leasing company: how to compare solar leasing companies.
• What a lease costs, how it ends, and getting out early: renting solar panels for your home, which covers what sets the payment, renewal, buyout and removal, and what happens if you stop paying.
• Buy or lease: the 2026 buy-or-lease decision.

Property tax and resale with a leased or PPA system

Property tax. The Board of Equalization says a qualifying system “is excluded whether it is leased or owned,” and “there is no form or filing required to receive the exclusion” (BOE FAQs). The exclusion is “not an exemption,” and “the statute is now scheduled to sunset on January 1, 2027” (BOE, both checked September 23, 2026). The details are in whether solar raises California property taxes.

Resale. Berkeley Lab’s only California study of homes sold with third-party-owned solar looked at 20,106 sales from 2011 to 2013, including 113 with a lease or PPA, and “fails to uncover statistically significant premiums for TPO PV homes nor for those with pre-paid leases as compared to non-PV homes” (LBNL-1007003, January 2017). That is an absence of evidence, not proof of no effect. At a sale, the CPUC says you “will have to pay the solar provider the remainder of the value of the lease or PPA or transfer the contract to the new property owner.” See what solar does to a California home’s value.

A fair PPA-versus-ownership comparison

Use the same annual production, self-consumption, battery configuration and remaining utility bill. For a PPA, multiply the quoted price per kWh by the electricity the contract charges you for. Check the escalator and ask for a schedule of payments through the full term. For ownership, include the purchase or loan payments plus maintenance and replacements.

Then add the remaining utility bill to each option. A payment below today’s bill does not establish total savings when another electric bill remains.

What to ask about an escalator

Is it zero or positive? Is the increase applied to the power price or the payment? Does the production estimate change over time? Ask for the contract’s schedule, not a verbal estimate, and compare the total over the years you expect to keep the home.

What happens when the roof or ownership changes?

Ask who pays to remove and reinstall equipment for roof work, what a buyer must do to assume the agreement, and how a buyout is priced. Match every promised warranty or service obligation to the responsible company named in the paperwork.

Questions to ask before you sign

The sections above already cover escalator questions and what happens to the contract on a roof change or ownership change. Beyond those, ask:

1. Is this a standard solar loan, or a PACE assessment repaid through your property tax bill? If it’s PACE, the DFPI requires the program administrator to get your oral confirmation of the key terms and check your reasonable ability to repay before work begins.
2. Is the loan secured against your home? CPUC’s guide flags this directly — some solar loans place a lien on the property, and missed payments “could result in foreclosure.” See UCC-1 liens on solar loans for what that filing actually attaches to.
3. What is the APR, and will this loan make it harder to sell or refinance the home? Both are CPUC’s own suggested questions to put to a lender.
4. If a salesperson mentions a federal tax credit, ask for the exact installation completion date it would apply to. The residential credit doesn’t apply to any system with expenditures made after December 31, 2025, regardless of financing type.
5. How exactly is a lease or PPA buyout priced if you sell before the contract ends? CPUC’s guide confirms a buyout is possible but sets no formula — get the actual number from the provider, in writing, before you sign. See what happens to a solar lease when you sell your home.
6. What’s your right to cancel? California gives you at least three business days to cancel a solar contract for any reason, five if you’re 65 or older — see your right to cancel a solar contract for the full mechanics.

Put the quotes on the same basis

A smaller monthly payment can hide a longer contract, less equipment or a larger remaining electric bill. Ask each bidder to fill the same gaps.

Keep incentives outside the base comparison

Start with the actual price and payment schedule. Any incentive claim needs its own current eligibility and ownership review. Do not count a provider’s business tax benefit as cash received by the homeowner.

The bill and quote calculator provides simple cash arithmetic. It does not calculate financing returns or validate a contract.