Ownership
- Solar loans: You own the system outright, similar to a home loan. This makes you responsible for maintenance and repairs.
- PPAs: A third-party provider owns and maintains the system, and you purchase the energy it generates.
Financial Structure
- Solar loans:
- Upfront costs: Higher initial investment (though loans often cover 100% of installation costs).
- Monthly payments: Fixed loan payments (typically lower than pre-solar electric bills).
- Balloon payments: Some loans require a lump sum (e.g., 30% of the loan) within 12–18 months tied to the federal tax credit.
- PPAs:
- Upfront costs: Usually $0.
- Payments: Variable based on energy usage at a set rate per kWh, often with annual price escalators.
Incentives and Savings
- Solar loans:
- Qualify for federal solar tax credit (26-30% of system cost).
- Potential home value increase (like home renovations).
- PPAs:
- No tax incentives (since you don’t own the system).
- Savings depend on the PPA rate vs. local utility rates.
Long-Term Flexibility
- Solar loans:
- Full ownership after repayment.
- Can sell excess energy via net metering.
- PPAs:
- Contracts typically last 20–25 years.
- Early termination fees may apply.
Key Considerations
| Feature | Solar Loan | PPA |
|---|---|---|
| Ownership | Yes | No |
| Tax Credits | Eligible | Ineligible |
| Maintenance | Owner’s responsibility | Provider’s responsibility |
| Payment Type | Fixed loan payments | Variable per kWh |
| Contract Duration | 6–20 years | 20–25 years |
For most homeowners, solar loans offer greater long-term savings and financial benefits, while PPAs provide low-risk, maintenance-free energy with no upfront costs.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-main-differences-between-solar-loans-and-power-purchase-agreements/
