What Is PPA (Power Purchase Agreement)?

Under a PPA, the homeowner never owns the equipment on their roof. A third party, typically the installer, a dealer, or a dedicated financier, owns and maintains the system and sells the electricity it produces back to the homeowner at an agreed rate, usually lower than their utility rate, with built-in annual escalators in many contracts. The homeowner's savings come from the gap between that PPA rate and the utility rate, not from eliminating a power bill entirely.

PPA sits alongside lease as the two main TPO structures, and both have surged since the Section 25D residential tax credit expired December 31, 2025. Because the 30%-equivalent Section 48E credit is claimed by the system's owner, not the homeowner, TPO structures like PPA are now the only realistic path to that tax benefit for most residential buyers, which is a large part of why 44% of solar reps reported more than half their 2025 volume in TPO deals, expected to climb to 65% in 2026.

For a sales org or setter, PPA framing changes the appointment itself. The pitch shifts from owning the system and eliminating a power bill outright to paying a lower, predictable rate for power with no upfront cost and no ownership responsibility, which is a genuinely different conversation and a different qualification profile than a cash or loan sale.