Prepaid Solar PPAs and Leases: How They Work

What is a prepaid solar PPA?

A prepaid solar PPA is a power purchase agreement you pay for all at once. Instead of a monthly bill for the electricity your panels make, you pay up front for the power the system is expected to produce over the whole agreement, often 25 years. Some companies call the same arrangement a prepaid lease.

The prepaid amount is worked out from the system's expected production over the term, the incentives the owner expects to collect, and the cost of building and maintaining the system. Because you pay it once, there is no rate to watch and no escalator to plan around. What you pay is fixed the day you sign.

After that single payment, you have no monthly solar bill. The company still owns the system, monitors it and handles repairs. You use the power it makes, and your utility bill drops the same way it would if you owned the panels.

It sits between buying and a standard PPA. Like buying, you pay once and you're done. Like a regular PPA, the company owns the equipment and takes care of it. Evergreen Solar offers both, along with cash, loans and leases, as covered in our guide to how to pay for solar.

Why can a prepaid PPA cost less than buying?

The difference is the federal tax credit, and it works in your favor. A company-owned home solar system qualifies for the 30% clean electricity investment credit under section 48E of the tax code, plus 10 more percentage points if the home is in a federal energy community and another 10 if the system uses enough U.S.-made equipment. That value comes to you as a discounted prepaid price, with nothing for you to file.

A homeowner who buys a system doesn't get that federal credit, because the residential credit applied only to systems installed by December 31, 2025. Owners collect state programs instead. A prepaid PPA is the way to put the federal credit to work for you while still making a single payment.

The federal credit has a deadline. Systems that begin construction after July 4, 2026 must be in service by December 31, 2027 to qualify, so ask how the company plans to meet that date.

The bonuses can make a real difference in the prepaid price. Check whether your home is in an energy community with the lookup below, and read how the federal credit works for leased and PPA solar for the details.

How does a prepaid PPA compare with buying solar with cash?

Both mean one payment and no monthly solar bill. The table shows where they differ. A useful way to compare is to price the same system both ways, for example a $30,000 sample system bought with cash next to its prepaid PPA price.

If the prepaid price is lower than the cash price minus the state incentives you would collect as an owner, the prepaid PPA usually wins. If it's close, owning gives you full control of the system from day one.

Think about upkeep too. An owner pays for any repairs after the warranties run out, while a prepaid PPA leaves monitoring and repairs with the company for the whole term. For homeowners who don't want to manage equipment, that difference is worth counting alongside the price.

Can you own the system later?

Yes. Evergreen Solar's prepaid PPA includes an option to buy the system and take ownership after five years.

The five-year mark isn't arbitrary. Under section 50 of the tax code, the investment credit has a five-year recapture period that starts when the system goes into service. If the owner sells or disposes of the system during that time, the IRS can take back part of the credit, and the amount it can take back falls by 20 percentage points each year. Once the five years pass, the company can sell the system without that risk, which is why ownership options often open then.

Before you sign, ask how the buyout price is calculated and whether it changes from year to year. Taking ownership means you become responsible for maintenance from that point on.

Ownership can make sense if you plan to stay for many more years and want the system to be part of the house outright. If you are happy with no monthly bill and no upkeep, you can simply keep the prepaid agreement to the end of its term.

What stays yours, and what does the company handle?

The power and the bill savings are yours. Net metering credits for the extra power your system sends to the grid appear on your utility bill, the same as for an owned system. With no monthly solar bill, every dollar the system takes off your utility bill stays in your pocket for the length of the agreement.

The company handles monitoring, maintenance and repairs, so you don't have to. Owner incentives, which in Massachusetts include SMART 3.0 payments and the 15% state tax credit, are built into your prepaid price. Our SMART 3.0 guide explains how those payments work.

Production matters too. Because you've paid for the power the system is expected to make, ask what production the company guarantees and what it does if the system falls short.

Insurance and roof work are worth asking about as well. The company insures the equipment it owns, but a new roof later means the panels come off and go back on, so find out who arranges that and who pays for it. If your roof is near the end of its life, it is usually better to replace it before the panels go up. Our article on the roof + solar package explains how a new roof can be included with your solar installation.

What should you ask before you prepay?

• What is the prepaid price, and what is the cash price for the same system?
• How much power is the system expected to make, and what production is guaranteed?
• When can I buy the system, and how is the buyout price set?
• Who pays to remove and reinstall the panels if I need a new roof?
• How does the agreement transfer if I sell? See selling a house with solar panels.
• What are my choices when the term ends?

Frequently asked questions