There are many similarities between solar leases and solar PPAs. The terms are often used interchangeably even though they are two actually different avenues to financing solar technology installation. While both solar leases and solar PPAs can be effective at reducing your electricity bill and your carbon footprint, they offer distinct payment structures. The difference between solar leases and solar PPAs is outlined below.
The difference between solar leases and solar PPAs
There is no denying the similarities between solar leases and solar PPAs. Both options do not involve ownership of the solar technology, for example. However, the key difference between solar leases and solar PPAs involves the payment structure. With a solar lease, you pay a fixed monthly payment to “rent” the solar panels on a long term (20-25 year) basis. This amount is determined by your leasing company based on the estimated annual production of your solar system.
With a solar PPA, the customer would have an agreement to purchase power generated by the solar system at a set price per kWh instead of having to paying a fixed amount per month. This amount is typically lower than one a local utility would offer and it differs depending on the time of year. For example, a customer will most likely pay more in the summer months because that is when solar panels typically produce more electricity. A solar PPA also involves an agreement between three parties: developer, investor, and host customer. This agreement is performance-based, meaning that the customer only pays for what the system produces.
When choosing between a solar leases and solar PPAs, you should consider which payment type suits your company best. If you would rather know what payment to expect each month consider a solar lease. If you would rather have more of a guarantee that you are getting what you pay for, consider a solar PPA. It is also important to consider which states these funding options are available in. Click here to see which states have authorized PPA agreements.
Both a solar lease and a solar PPA will provide your business with savings. In fact, savings per year are virtually equal whether you are using a solar lease or a solar PPA to finance your energy project. This means that over the course of a year the monthly payments with a solar lease and the set price per kWh with a solar PPA will even out. Both a solar lease and PPA also don’t require any payments up front either.
The customer does not own the solar equipment in either agreement. This makes for an almost hassle-free experience for the customer as they won’t have to worry about the installation or maintenance of the system. However on the downside, this means that they are entitled to all government incentives like tax credits as well.
Interested in funding options for your next solar project?
With the right financing options, an energy project can be affordable to businesses of all sizes. When it comes to deciding between solar leases and solar PPAs, EnergyLink knows how to secure the best financial setup for your organization. Let our team of experts set up the financing that will bring your next solar project to life. To get started click the link below or speak to a team member at (866) 218-0380.