Solar power purchase agreements, explained for property owners.
Under a power purchase agreement (PPA) a third party owns the solar system on your property and sells you, or your tenants, the power it makes at a contracted rate. NOI models a PPA and an owned system side by side so the structure follows the numbers.
Someone else owns the system. You buy the power.
The provider owns it
The PPA provider funds, owns and maintains the system and claims any federal credit it qualifies for, which is reflected in the PPA price.
You buy the output
The property, or its tenants, pays a contracted rate per kWh for the power the system produces, over a long term.
The roof or lot is licensed
The agreement grants the provider access to the roof or parking area for the term, with removal at the end.
Read these four before anything else.
The rate
The $/kWh price compared with what the property pays the utility today, on the same tariff basis.
The escalator
How the rate rises each year. An escalator tied to an uncapped index is a red flag.
Buyout options
Whether and when you can buy the system at fair market value during the term.
Roof and warranty
The provider should indemnify roof damage caused by its equipment and coordinate with any active roof warranty.
When each structure tends to fit.
PPA tends to fit
A shorter hold before sale or refinance, a high cost of capital, little appetite for tax credits or depreciation, and no wish to run the equipment.
Owned tends to fit
A long hold, the ability to use the federal credit and depreciation, and a goal of maximizing value at exit. Tax-exempt and public owners may use elective pay where they own the asset.
Red flags in any PPA
No production guarantee, uncapped escalators, assignment without your consent, and no end-of-term removal obligation.
What NOI checks for power purchase agreements (ppa)
- Hold period and refinance plans
- Cost of capital and appetite for capex
- Ability to use the federal credit and depreciation
- Rate, escalator, buyout and removal terms
- Roof condition and warranty
- Tenant billing, if tenants buy the power
Related: Commercial solar, How owners earn from on-site energy, Battery storage, FAQ.
Power purchase agreements (PPA): articles from the NOI blog
Commercial Solar PPAs, Explained for Real Estate Owners
A PPA is a 20-year contract. Sign the wrong one and you're locked into below-inflation revenue for two decades. Here's the checklist.
PPA vs. Owned Solar for Rental Properties: Which Wins for Landlords?
There is no universally right answer — only the right answer for *your* hold period, tax situation, and cap rate. Here's the cleanest way we've found to think about it.
Zero-Down Solar Financing for Landlords: How It Actually Works
If a vendor is willing to install a six-figure system for free, you should understand exactly how they're going to get paid back. Let's open the hood.
The Commercial ITC in 2026: Section 48E for Solar and Storage, Explained
The investment tax credit is still the largest single incentive in most commercial solar and storage projects. The rules changed in 2025, and solar and storage now run on different clocks.
Power purchase agreements (PPA): common questions
What is a solar PPA?
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A power purchase agreement: a third party owns and operates the solar system on your property and sells the power to you or your tenants at a contracted rate for a long term.
Is a PPA better than owning the system?
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It depends on the hold period, cost of capital and tax position. A PPA avoids owning the equipment; ownership keeps the credit, depreciation and the full output value. We model both on the same production and the same tariff.
Who claims the tax credit under a PPA?
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The owner of the system, which under a PPA is the provider. It should be reflected in the PPA price. Confirm your position with your tax adviser.
Does NOI offer PPAs?
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Projects are delivered owner-funded, financed or third-party funded. Which structure applies, and who pays, owns the equipment and receives the benefit, is set in the project agreement after underwriting.
More questions? Read the full FAQ or talk to us.
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