Savings and payback
Compare a fixed loan payment against a PPA's per-kWh production-based charge, in year one and over the full 25 year picture.
Current status: the 30% federal residential solar tax credit (Section 25D) expired for systems placed in service after December 31, 2025. If you're buying with cash or a loan in 2026 or later, use your full system price with no credit subtracted. Only subtract 30% if your system was placed in service by the end of 2025.
How it works
Step 1
Use the same fields as the cash vs loan comparison if you've already worked these out.
Step 2
The tool computes the PPA's effective savings from the rate discount, then compares both options in year one and over 25 years, similar to how the cash vs lease comparison checks escalator risk.
In this example, a PPA nets about $228 in year one savings, while the loan runs about $647 negative in year one, since the larger loan payment on a $22,000 system exceeds the savings it's meant to offset. The PPA has no separate payment to make, only a discounted per-kWh rate. The loan still wins over the long run, netting about $8,290 over 25 years versus roughly $7,780 for the PPA, though the margin is far tighter than it once was, because loan payments stop once the loan is paid off while PPA payments and their escalator continue for the full contract term. The US Energy Information Administration's electricity data show how retail rates have moved, which is the starting point for any savings estimate.
Under a PPA, you pay a per-kWh rate for electricity your system actually produces, typically 10% to 20% below your utility's retail rate. Because production varies seasonally, actual monthly PPA payments swing higher in summer and lower in winter, unlike the flat monthly payment of a loan or the fixed lease payment covered elsewhere, or the upfront-only structure in the cash vs loan comparison. To compare paying cash, borrowing, leasing, or signing a PPA, the Department of Energy's guide to solar financing, leases, loans, and PPAs lays out each option.
Most PPAs include an annual escalator on the per-kWh rate, typically 1% to 3%, similar to lease escalators. The same crossover risk applies if the escalator outpaces the utility rate growth it's meant to track, so it's worth checking your specific contract's escalator against realistic utility rate assumptions. If your production estimate feels uncertain, the tracking vs fixed mount output comparison gives you a second check on annual output.
The loan option builds ownership and equity in the system, and unlike a PPA, remains eligible for any applicable tax credits. See the net present value calculator for a more complete accounting of the loan's full financial picture including the time value of money. For a business install, the numbers work differently, and the commercial solar lease vs loan comparison runs the same math with business tax rules.
Questions
A loan gives you ownership and a fixed monthly payment regardless of production, while a PPA has you pay a per-kWh rate for electricity actually generated, so your payment fluctuates with the seasons and system performance.
In this example, a PPA nets about $228 in year one savings, while the loan runs about $647 negative in year one, since the larger loan payment on a $22,000 system exceeds the savings it's meant to offset. The PPA has no separate payment to make, only a discounted per-kWh rate.
The loan still wins over the long run in this example, netting about $8,290 over 25 years versus roughly $7,780 for the PPA, though the margin is far tighter than it once was, because loan payments stop once the loan is paid off while PPA payments and their escalator continue for the full contract term.
Yes, most PPAs include an annual escalator on the per-kWh rate, typically 1% to 3%, similar to lease escalators. The same crossover risk applies if the escalator outpaces the utility rate savings it's meant to track.
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