Solar Lease vs Buy vs PPA Calculator

Weighing solar financing choices (buy vs lease vs PPA)

Residential solar can reduce utility bills and your home’s carbon footprint, but the financing structure you choose often matters as much as the panels themselves. The three most common paths are:

• Buy (cash purchase): you own the equipment and its production. You typically receive available incentives (such as a federal tax credit) and you’re responsible for maintenance decisions.
• Lease: a provider owns the system; you pay a fixed monthly amount for the equipment and/or its availability. Incentives generally go to the provider.
• Power Purchase Agreement (PPA): you pay for the energy produced at a per‑kWh rate, often with an annual escalator. Incentives generally go to the provider.

This calculator estimates and compares the nominal (not discounted) total cost of each option over your chosen analysis period, and contrasts each to a simple baseline of buying the same amount of electricity from the grid.

How to use the calculator

1. Enter your system size and expected annual output (kWh) (use an installer proposal or an online PV estimator).
2. Enter your current utility rate ($/kWh).
3. Fill in the pricing terms for each option you want to compare (purchase price and incentives; lease payment and term; PPA rate and escalator).
4. Choose an analysis period (commonly 20–25 years) and calculate.

What the results mean

The calculator produces an estimated total cost for each financing path. A lower net cost generally indicates a better financial outcome under the assumptions you entered. If two options are close, small real‑world factors (utility rate changes, performance differences, contract fees) can flip the result—so treat the output as a decision aid, not a guarantee.

Methodology and formulas (simplified)

All options start from the same idea: solar production offsets electricity you would otherwise buy from the utility. The model uses your annual output and utility rate to estimate the value of avoided grid purchases.

Baseline: staying on utility power

If you produced no solar and simply bought the same amount of electricity from the grid, the baseline over Y years is:

Where E_annual is annual output (kWh) and R_utility is the utility rate ($/kWh).

Buy (purchase) net cost

The purchase path assumes an upfront cost reduced by a tax credit (or other incentive you enter), plus ongoing annual maintenance:

NetCost_buy ≈ PurchasePrice − TaxCredit + (Maintenance × Y) − (UtilityOffset × Y)

Where UtilityOffset = E_annual × R_utility.

Lease net cost

The lease path sums monthly payments for the lesser of the analysis period or the lease term, and subtracts the same avoided utility purchases:

NetCost_lease ≈ (LeasePayment × 12 × min(Y, LeaseTerm)) − (UtilityOffset × min(Y, LeaseTerm))

Some leases include maintenance; if yours does not, you can approximate it by adding it into the monthly lease payment externally.

PPA net cost (with optional escalator)

For a PPA, you pay per kWh produced. If there’s an annual escalator g, the per‑kWh price increases each year:

NetCost_ppa ≈ Σ_y=1..Y[E_annual × R_ppa × (1+g)^y−1] − (UtilityOffset × Y)

Set the escalator to 0% to model a flat-rate PPA.

Worked example (illustrative numbers)

Suppose a home expects 10,000 kWh/year of solar production and pays $0.20/kWh for utility electricity. Compare over 20 years:

• Buy: $24,000 purchase price, $7,200 tax credit, $200/year maintenance
• Lease: $140/month for 20 years
• PPA: $0.14/kWh starting rate with a 2% annual escalator

Baseline utility cost for 10,000 kWh/year: 10,000 × $0.20 = $2,000/year, or $40,000 over 20 years (again: nominal, no utility rate changes).

Under these assumptions:

• Buy upfront net: $24,000 − $7,200 = $16,800; maintenance: $4,000. Total before offsets: $20,800. Offset value: $40,000. NetCost ≈ −$19,200 (i.e., ~$19,200 better than baseline).
• Lease payments: $140 × 12 × 20 = $33,600. Offset value: $40,000. NetCost ≈ −$6,400.
• PPA energy payments start at $1,400/year and grow 2%/yr; summed payments are roughly $34,000–$35,000 over 20 years. Offset value: $40,000. NetCost ≈ about −$5,000 to −$6,000.

In this scenario, buying wins because incentives plus long-run offsets outweigh the higher upfront cost. But if you move soon, can’t use the tax credit, or receive a very low PPA rate, the ranking can change.

Comparison table (what to expect)

Assumptions & limitations (read before deciding)

• Utility rates are treated as flat unless you manually change your input and re-run scenarios. Real rates can rise (or vary seasonally and by tier/time-of-use).
• No production degradation is applied. Panels commonly degrade over time; inverters may require replacement.
• No net metering/export credit modeling: the calculator assumes each kWh produced offsets a kWh you would have bought at your entered utility rate. If your plan credits exports at a different rate, results can differ materially.
• No financing costs: if you plan to use a loan (interest, fees, dealer buy-downs), the buy option’s true cost may be higher.
• Contract details not modeled: lease/PPA buyout clauses, escalator caps, annual true-ups, minimum production guarantees, O&M coverage, insurance requirements, early termination fees, and transfer rules can change outcomes.
• Tax situation varies: tax credits depend on eligibility, tax liability, and current law. Enter only amounts you reasonably expect to realize.
• Nominal dollars: results are not discounted for the time value of money or inflation. For a more finance-heavy comparison, consider adding a discount rate and computing present value.

Practical interpretation tips

• If buy is best but cash is tight, compare to a loan quote; the “buy” result here is closer to a cash purchase than financed ownership.
• If lease or PPA wins, review the contract carefully—especially escalators, transferability when selling your home, and any fees at end of term.
• Run a sensitivity check: try higher/lower annual output and a higher utility rate to see how robust your result is.