Commercial Solar Lease Programs in California: Equipment Leases and Roof Leases

A commercial solar lease in California is one of two different deals. In an equipment lease, a leasing company owns the system on your building and you pay it a fixed amount to use it. In a roof lease, you rent roof or parking space to a developer who owns the system and sells the power. Leases are the smaller share: most third-party-owned business systems in California run on PPAs.

This page covers both kinds of lease and the property-owner questions that come with them. For how a lease compares with buying, a loan or C-PACE, see the commercial solar financing options; for every business guide on this site, start at the commercial solar hub. Sources were checked September 23, 2026.

Two deals called a “commercial solar lease”

Sales material often mixes the two. Before comparing numbers, get the proposal to say who owns the equipment, who uses the electricity and which way the money moves.

How an equipment lease works

The lessor buys, installs and owns the system. You pay a scheduled amount for its use, whatever the panels produce, often with an annual escalator. A PPA is the close cousin: the provider also owns the system, but you pay per kilowatt-hour delivered. With a lease you carry the production risk; with a PPA the provider does.

Prepaid leases are common at the small end of the market. In the CPUC's DGStats interconnection data, 284 of the 286 prepaid leases on non-residential systems connected in 2025 were in the commercial sector, with a median size of 32 kW DC. PPAs ran larger, at a median of 121 kW. Berkeley Lab's 2026 data update shows the same national pattern: third-party ownership is more common on large non-residential systems than small ones.

Tax. The federal clean electricity investment credit, 26 U.S.C. §48E, goes to the owner of the property, and under an equipment lease that is the lessor. Section 50(d)(5) carries a special rule for leased property, so a lease can be written to route the credit differently. Ask for the tax treatment in the contract itself, and let your tax professional read it. The commercial solar tax credit guide covers the rates and the 2027 deadline that apply to whoever owns the system.

End of term. Expect three exits: renew, buy the system, or have it removed. The price and method of a buyout, and who pays to take the array down and patch the roof, belong in the signed lease, not a side letter.

Tax-exempt hosts: why PPAs usually win over leases

Schools, churches, nonprofits and public agencies meet a rule that businesses do not. Section 50(b)(3) and (4) deny the investment credit for property used by a tax-exempt organization or a government unit, except under a lease shorter than six months. A long equipment lease to one of those hosts can leave the lessor with no credit to price into the payment.

A PPA is treated differently. Section 7701(e)(3) treats a contract to sell electricity from an alternative energy facility as a service contract rather than a lease, unless the customer operates the facility, bears a significant financial burden if it does not perform, gets a significant financial benefit if its operating costs come in below the contract standards, or holds an option to buy it at a fixed price other than fair market value. The 2025 California data reflects this: 116 of the 124 third-party-owned systems at educational, nonprofit, government and military sites were PPAs.

The third route is ownership. Tax-exempt organizations and state and local governments are applicable entities under 26 U.S.C. §6417, which lets them elect to receive the credit as a payment. When they do, §6417(d)(2) has the credit determined without regard to §50(b)(3) and (4)(A)(i). The church solar guide and the school solar guide compare that route with a PPA.

Leasing your roof or parking lot to a developer

A roof lease pays rent instead of cutting your bill. The developer needs a buyer for the output, and in California that usually means a wholesale or local procurement program rather than your own meter. Those programs pay wholesale prices. MCE's Feed-In Tariff Plus, for example, offers standardized 15-year contracts for 1 to 5 MW projects in its service area and lists $60 per MWh (6 cents per kWh) in its current pricing condition, and it requires solar projects to include battery storage. That revenue sets the ceiling on the rent a developer can offer.

Most business systems are far smaller than that. The median non-residential system connected by the three utilities in 2025 was 61 kW DC, and 139 of the 3,607 were over 1 MW. On a typical building the more realistic third-party deal is a PPA in which the developer sells the power to you or your tenants. Read what a solar developer does and how to vet one before signing either.

Get these points into any roof or site lease:

• A term no longer than the roof's remaining life, or a funded plan to remove and reinstall the array when you reroof.
• Who pays to relocate the array for a reroof, and whether rent stops while it is off.
• Access rules, insurance, indemnity and repair of any roof damage caused by the developer.
• Removal, restoration and a decommissioning security at the end of the term or on default.
• Your lender's consent, and what happens if you sell or refinance the property.
• Who is assessed and pays property tax on the equipment.

On that last point, California's new-construction exclusion for active solar systems becomes inoperative on January 1, 2027; systems that qualified before then stay excluded until the property changes ownership, according to the Board of Equalization's Letter to Assessors 2026/034. The letter does not address third-party-owned systems, so ask your assessor or tax adviser how a leased system on your property will be treated. The commercial roof guide covers roof life and reroofing.

If you own commercial real estate

On a leased building the question is whose bill falls. If tenants pay their own utility accounts, a system on the owner's meter helps only the common areas. Owners typically choose among three setups: serve the house meter and keep the savings, sell power to tenants under a PPA-style arrangement, or use a multi-meter tariff to share credits across accounts. The guide to VNEM and meter aggregation explains which multi-meter option a property can use, and the retail solar guide covers landlord consent when the business is the tenant.

Whatever the setup, align the solar contract with your leases. A 20-year solar agreement on a building with five-year tenant leases needs clear terms on who pays if a tenant leaves, and a sale of the building needs a buyer willing to take the agreement over.

What to compare before signing a lease

1. The monthly or prepaid amount, the escalator and the full term, totaled over the term.
2. A cash price for the same system, so you can see what the lease is charging for.
3. The production estimate the payment assumes, and what happens if the system underperforms.
4. Maintenance, monitoring, insurance and inverter replacement: who does and pays for each.
5. Buyout dates and method, assignment on sale of the business or building, and removal terms.
6. Who claims the tax credit and depreciation, stated in the contract.

Then run the same comparison for a PPA and a purchase. The PPA versus purchase guide walks through that, and the commercial financing document checklist lists the paperwork to collect.

When a lease is the wrong fit

If your business can use the credit and depreciation and has the cash or credit to buy, owning usually keeps more of the value than paying a lessor who claims it. A lease is also a poor fit if you may move, sell or reroof within the term and the contract has no clear exit. And a roof lease is a poor fit for a building you expect to redevelop: the array and its easement will be in the way.

Frequently asked questions

California Rate Relief is a referral service. We are not a licensed contractor. It does not lease, own or finance solar equipment, and nothing on this page is tax or legal advice.

Sources

Checked September 23, 2026.

• California Public Utilities Commission, California Distributed Generation Statistics, Interconnected Applications Data Set (data through May 31, 2026). Counts are CRR's tabulation of PV systems approved in 2025 in non-residential sectors.
• LBNL, U.S. Distributed Solar and Storage: 2026 Data Update (August 2026)
• 26 U.S.C. §48E, §50, §6417 and §7701, Office of the Law Revision Counsel (text in effect September 23, 2026)
• MCE, Feed-In Tariff Plus
• California State Board of Equalization, Letter to Assessors 2026/034 (September 1, 2026)