Paying for solar works differently in 2026 than it did a year ago. The residential Section 25D credit expired December 31, 2025, so a homeowner who buys a system gets no federal credit. The commercial Section 48E credit is still available for solar under current law to the company that owns a leased or PPA system, and a project that begins construction after July 4, 2026 must be placed in service by December 31, 2027 to qualify. Below, one worked example runs all four ways to pay, cash, loan, lease and PPA, against a fifth option every homeowner has: keep buying the same electricity from the utility.
The example: one 8 kW system, five ways to pay for its electricity
Every figure in the comparison comes from the inputs below. Some come from public data, and the rest are illustrative assumptions that we label as such. Your roof, your rate and the quotes you receive will differ, so use the example to see how the options compare with each other, not as a forecast for your home. These are not offers or quotes, and Solrova does not lend money, lease systems or sell electricity.
| Input | Value in the example | Where it comes from |
|---|---|---|
| System size | 8 kW | Illustrative, close to the 7.7 kW median U.S. home system in 2025 (Lawrence Berkeley National Laboratory, 2026 Data Update) |
| Production | 11,200 kWh in year one, down 0.5% a year | Illustrative 1,400 kWh per kW. PVWatts V8 estimates about 1,420 for a south-facing roof at a 20 degree tilt in Atlanta. The 0.5% yearly loss is the Solar Design Studio's assumption. |
| Electricity rate | $0.173 per kWh in year one, up 2.6% a year | 2025 U.S. residential average, preliminary (EIA). The 2.6% is the 2010–2024 U.S. trend in EIA data and the Studio's default. |
| Cash price | $26,560, or $3.32 per watt | U.S. cash price before dealer fees, about the 25th percentile of host-owned home systems in Solrova's analysis of Lawrence Berkeley National Laboratory's Tracking the Sun data (2024 Edition). The Solar Design Studio uses the same figure. |
| Inverter | One $2,000 replacement near year 13, owners only | Illustrative. String inverter warranties commonly run 10 to 15 years (Enphase). |
| Lease | $0.10 per kWh of year-one output, set in advance and up 2% a year | Marketplace estimate compiled from provider filings, not a quote. No government dataset of lease prices exists. |
| PPA | $0.13 per kWh produced, up 2% a year | Marketplace estimate on the same basis |
| Term | 25 years for every option | Illustrative |
Over 25 years the system makes about 263,800 kWh. The results below are what each option costs for that electricity.
| Option | Paid upfront | Year-one cost | 25-year total |
|---|---|---|---|
| No solar (utility) | $0 | $1,938 | About $62,800 |
| Cash | $26,560 | $0 after the purchase | About $28,600, including the inverter |
| Loan | Depends on the loan | Depends on the loan | $26,560 plus interest and any dealer fee, plus the inverter |
| Lease | $0 in this example | $1,120 | About $35,900 |
| PPA | $0 in this example | $1,456 | About $43,700 |
The example values every solar kWh at the retail rate. Where exported power earns less, as under California's net billing tariff, each solar option saves less against the utility than shown. It also counts only the electricity the system makes, not the rest of your bill.
What the example shows
Cash has the lowest lifetime cost. The system and one inverter replacement come to about $28,600 over 25 years, against about $62,800 to buy the same 263,800 kWh from the utility. The purchase pays for itself in about 12 years, and the electricity after that is power you have already paid for. You also own the equipment and carry the repairs once warranties end.
A lease and a PPA cost more than cash over 25 years, about $35,900 and $43,700, but both cost less than the utility and neither asks you to buy equipment. In year one the lease runs $818 below what the utility would have charged for the same electricity, and the PPA runs $482 below. The gap grows each year in the example because the utility rate is assumed to rise 2.6 percent a year while both contracts rise 2 percent. By year 25 the utility rate in the example reaches about $0.32 per kWh against about $0.21 for the PPA.
A loan buys the same system as cash, so the kWh and the utility bill it replaces are identical. What changes is the price: the $26,560 plus every dollar of interest, plus any dealer fee folded into the financed amount. The Consumer Financial Protection Bureau found that those fees typically run 10 to 30 percent of the cash price and can exceed 50 percent (Issue Spotlight: Solar Financing, August 2024). Whether a loan costs more or less than a lease or PPA over 25 years depends on the rate and fee you are offered. Ask the lender for the total of payments, and put that number next to the lease and PPA totals.
Why lease and PPA prices carry the 48E credit
The Section 48E credit, generally 30 percent of the system's cost for a home-sized project, goes to the company that owns a leased or PPA system. That company can price part of the value into what you pay, and the example's marketplace estimates assume it does. A PPA bills for each kWh the system delivers, so the bill moves with production. A lease sets the payment in advance, whatever the system produces. In both, the company that owns the system keeps it and is usually responsible for maintenance, so read that section of the contract.
Under current law a solar system that begins construction after July 4, 2026 has to be placed in service by December 31, 2027 for the owner to claim the credit. Lease and PPA pricing for systems finished after that date could change.
What happens at the end of a solar lease or PPA term?
Lease and PPA contracts typically run 20 to 25 years, and the paperwork you sign now decides what happens when that term ends. Most contracts offer some combination of the same options. You can renew, usually in a short extension block at a rate the contract sets or the third-party owner offers at the time. You can ask the solar company that owns the system to remove its equipment, and the contract spells out who pays for removal and any roof restoration. Or you can buy the system outright, at either fair market value or a price schedule written into the agreement.
The details are not standard across the industry, and they matter. Some contracts commit the owner to removing equipment at no charge to you, and others bill you for it. Some price the end-of-term buyout at fair market value determined by an appraiser, which is hard to predict decades in advance. Before you sign, find the end-of-term section of the contract and read the actual language on renewal and removal, and on how any buyout would be priced. If a rep summarizes it verbally, ask them to point to the clause.
Can you buy out a solar lease early?
Usually yes, after an initial period. Most lease and PPA contracts include an early buyout provision that becomes available after a set number of years, commonly around year five or six, and the contract controls the exact timing. The price is not a bargain. It is typically the remaining payments on the contract plus a premium, or a buyout schedule printed in the agreement that steps down over time.
The common reasons to buy out early are a home sale where the buyer does not want to assume the contract, or a homeowner who decides ownership now beats a payment stream. Whatever the reason, get the payoff quote from the third-party owner in writing before you make any decision, and check it against the buyout schedule in your contract. A verbal number from a call center is not a payoff quote. If you are selling, the buyer's lender will want the written figure anyway.
How to choose between the four paths
Start with cash. If the full price is not available and you would rather not borrow, the choice narrows to a lease or a PPA, and the question becomes which contract costs less over its full term. If the cash is available, compare what else it could do, such as paying down higher-interest debt.
Next, weigh your time in the home. The example's cash purchase takes about 12 years to pay for itself, so the longer you stay, the more ownership's lower lifetime cost counts. If you expect to move sooner, a lease or PPA avoids the payback question, but a buyer has to qualify for and agree to take over the contract, so read the transfer terms first.
Last, weigh upkeep. Owning means paying for repairs once warranties end, including an inverter replacement at some point. With a lease or PPA you call the company that owns the system.
On the example's numbers, ownership has the lowest lifetime cost and a lease or PPA has the lowest upfront cost. A higher electricity rate raises what the utility would charge for the same power: at California's 2025 average of about $0.325 per kWh (EIA), the no-solar column in the example rises to about $118,000, though exported power earns less under California's net billing tariff. None of these choices is cheap to reverse, so run your own rate and quotes before you sign anything. The Solrova Solar Design Studio estimates your roof's kWh production and a typical cash price for your design, a baseline to hold each quote against.