Power Purchase Agreements (PPA): What Are They?
Since the 30% Tax Credit expired on Jan 1, 2026, many homeowners are looking into Power Purchase Agreements (PPAs) as a cost-effective way to replace PG&E and get relief from high electric bills.
This post gives you what you need to know to make an informed decision, including real world examples and things to watch out for.
A Power Purchase Agreement (PPA) is an agreement between the homeowner and a third-party company. The third party owns the system, and you purchase the electricity the system produces at rates below what you are paying to PG&E. There are no up-front installation or permitting costs, no loans, no debt. Just a lower monthly payment for electricity.
To make a fully informed, confident decision, here is what you need to know:
What PPA Companies Are Available?
The six mainstream PPA companies are:
1) GoodLeap
2) LightReach
3) EverBright
4) EnFin
5) SunRun
6) SolWorks
PPA companies typically have very similar terms:
You sign the agreement and have a site survey.
An affiliated installer will engineer, permit, and install the system at no charge to you. They are paid by the PPA company to do this.
The PPA company will maintain the system and monitor it (though you should monitor it as well) regardless of who lives in the house for 25 years.
Which PPA company is the Best?
What many people don’t know is that different installers are given different pricing with the PPA companies depending on how much business the installer gives them.
Though the rates are often fairly competitive it helpful to know who is offering the best deal since it varies time to time. That’s why it is important to compare them.
Over the last decade I have worked with all of these PPA companies multiple times.
The top three are pretty close, it gets down to who is offering the best pricing at the particular moment.
That’s why it’s important to work with an independent broker who has access to multiple options and is familiar with the details of the pricing and the agreements.
What If I Sell My Home?
Many people have concerns with PPA’s and home sales. PPA’s are all transferable, so why does this myth persist?
I have spoken with multiple realtors to learn if this is a real issue. They have all told me the same thing:
If you go to sell your house, make sure to let the PPA company know as soon as you decide to put the home on the market.
(This is true of financed purchases as well)
Issues can arise when people don’t notify the company until they are ready to close. The PPA company does not have time to get the paperwork for the transfer, and this can delay the sale.
In my experience, if this simple rule is followed home sales go smoothly.
What is an “Escalator”?
Most PPA companies offer different options for the “escalator.” The escalator is a yearly increase in the rate that ranges from 0% (your rate never changes) to 3.59%.
The monthly payments start lower with the larger escalators but end up higher over time. The chart below shows the differences.
Unfortunately, some unethical solar sales reps do not disclose that you have different options, often only presenting the 3.59% escalator–at an inflated price (see below).
So Which Option Is Best?
There is no one right answer. When PPA customers are presented with all the options, here is what I’ve seen over the years:
Retirees often choose the 0%. Their new monthly payment is lower than what they were paying to PG&E which gives immediate relief. Plus, since they are on a fixed income, they have the security of knowing that their payment will never increase. The 0.99% is also popular with this age group since in 25yrs it will still be below their current PG&E bill.
Younger families are more mixed. Frequently the dramatic decrease in their monthly bill is what is attractive about the 2.9% or 3.5%. Given the time value of money, (money loses buying power over time), the rate increase doesn’t matter as much to them. Others prefer the stability of the 0%.
It’s important to be shown each option, rather than just being shown one.
PPA SAVINGS EXAMPLE
For an Avg PG&E Bill of $210/month
The following example is based on a moderately low average bill to PG&E of $210.
The system includes whole home battery backup (one Tesla Powerwall). This will offer basic functionality during a power out.
The system is designed to produce 130% of what the customer used in the the previous year. This 30% allows them to not worry about getting a big bill from PG&E each month. (Please See my blog post on True-Ups)
I have included the various escalator options so you can see the difference. If your monthly PG&E average is higher or lower, these numbers will be different, but the percentage savings will be about same.
AFTER SOLAR
Monthly PG&E bill: $15
Monthly Solar Payment: First Year—>. Monthly Payment Yr 25
0% Escalator: $181——————>$181
0.9% Escalator: $162——————>$200
1.99% Escalator: $146——————>$229
2.99% Escalator : $136——————>$271
3.59% Escalator: $123————--—>$282
Scroll down for which one shows the most long term savings
Monthly Payment Comparison
What Should I Watch Out For?
Sales Reps who only show you the 3.59% or 2.9% escalator.
This is a big red flag. Typically they over inflate the 3.59% price to benefit themselves. Their line often goes something like this:
“Mr. Jones, your PG&E bill average is $210 per month and your kilowatt rate is $0.42/kWh.
With this PPA, I can get you a great rate and your monthly payment will ONLY be $188-and it only goes up 3.5% per year. Did you know PG&E’s rates go up X% each per year! That’s Crazy! How does that make you feel? So it’s really a no-brainer. But more importantly, do you think there will be major changes in your usage…….etc.”
Sounds like an ok deal, and you are saving money it’s true.
But the range you should be paying for a 3.59% escalator in this scenario is ~$123, not $188.
That difference usually goes in the reps pocket. I see this way too often (see #2). Plus, you never were given the opportunity to look at the zero escalator because they never told you about it.
2. Sales Reps who don’t live in California
Many big name companies and installers fly in swarms of reps from out of state (Utah, Texas, Florida).
Many are honest hard working reps, but unfortunately they often are not familiar with how to properly size systems under PG&E’s Net Metering rules. The odds that your system will be sized incorrectly (=big PG&E bill) increase.
Plus, they will never see you again, so there is always a batch of them that just don’t care. (see #1)
3. Buyout option for the Solar System
There is always a buyout option for PPA’s should you choose to purchase it after 5 years. Typically they stipulate that it is at the “fair market value” as determined by an independent appraiser.
In the past, sometimes the PPA company would make you pay off the remaining PPA payments rather than the fair market value. This is not the practice anymore, but things change, so always check out the agreement terms.
As you can see, most of the major issues stem from the reps companies hire not necessarily the company itself. That’s why it is important to know your options and what to expect.
HOW MUCH CAN I SAVE OVER TIME?
Using the above example of $210/month to PG&E before solar-
Assuming a conservative annual PG&E yearly increase of 7% here are the savings you can expect to see over 25 years.
WITHOUT SOLAR:
Total 25yr PG&E Payments without Solar =$163,182
WITH SOLAR
0% Escalator: Total Payments: $54,324.
Total 25yr savings= $108,858
0.9% Escalator: Total Payments= $54,229
Total 25yr Savings= $108,953
1.99% Escalator: Total Payments= $55,459
Total 25yr Savings= $107,723
2.99% Escalator: Total Payments= $58,985
Total 25yr Savings= $104,197
3.59% Escalator: Total Payments = $57,910
Total Savings= $105,272
For not having invested a dime of your own money, even moderate PG&E users can save over $100,000- and have the system maintained and monitored for them. All by just switching your power company.
Can you save more if you purchase the system? Certainly. The cash price for this system would be in the range of $27,000 to $30,000 depending on the installer. But with today’s interest rates and the loss of the 30% tax credit, many people don’t have the cash on hand and don’t want to, or can’t, take out a loan of that size at high interest rates.
PPA’s allow customers to still save an enormous amount of money without having to take out a loan. Yes you pay more than if you bought it, but doing nothing and staying with PG&E is far far costlier.
