The financing panorama in residential photo voltaic has largely change into outlined by third-party possession (TPO) as that market section’s federal funding tax credit score (25D) expired on the finish of 2025. Leased residential photo voltaic tasks can nonetheless qualify for the business funding tax credit score (48E), however array possession is declining from it.
“Within the higher a part of the final decade, that was a extra fashionable technique to go photo voltaic in comparison with shopping for outright,” mentioned Ben Delman, editorial director for Solar United Neighbors, a PV shopper advocate. “I feel as extra financing choices got here alongside and the value of photo voltaic got here down, you began to see extra those who search for completely different buying choices.”
Based on the “2026 Aurora Solar Snapshot,” practically two-thirds of surveyed photo voltaic gross sales firms anticipate most of their tasks to be TPO in 2026. Moreover, 55% of installers reported that TPO has change into their most-used mission financing state of affairs.
Pay as you go leases have risen to prominence as a means for householders to purchase a photo voltaic mission after a short-term of their leasing association. These lease-to-own eventualities bridge the hole between TPO and outright mission possession, whereas nonetheless seeing financial savings from that once-missing 30% tax credit score.
Third-party to personal possession
TPO is a mission association the place householders lease the gear or lease their roofs for photo voltaic arrays. TPO suppliers will personal the mission and preserve them over an agreed interval. Leases and energy buy agreements are the commonest TPO preparations. On the finish of that time period there’s a likelihood to purchase the array, however most lease agreements are 25-year phrases.
A household stands in entrance of their photo voltaic mission constructed from a bulk buy program from Photo voltaic United Neighbors. Credit score: Photo voltaic United Neighbors
“With conventional PPAs and leases, you actually don’t have to have lots of up-front cash to get into photo voltaic,” mentioned Jess Lyons, employees product supervisor at Aurora Solar, a design and financing platform. “Then you will have a constant month-to-month cost. Whereas with pay as you go leases and PPAs, lots of the instances of us both have that cash up entrance or they’re in a position to safe it by means of a mortgage.”
In the course of the time period of a pay as you go lease the TPO firm would supply the identical companies as an everyday lease with no month-to-month cost, and the client has the choice to purchase out the mission after simply 5 or 6 years. After that, the home-owner is chargeable for array repairs.
“You don’t must be an professional on the factor in your roof straight away,” Lyons mentioned. “You’ve gotten 5 to 6 years to determine it out.”
To finance a pay as you go mortgage, clients should prepare a mortgage separate from the TPO firm, until they’ll afford to pay for the pay as you go lease outright.
Early days for pay as you go leases
Since pay as you go leases are an rising TPO mannequin, a few of their finer particulars are nonetheless being decided. They’re accessible in choose states, they usually’re nonetheless coming into new markets. Take part Vitality, a photo voltaic leasing firm, is at present providing pay as you go leases in simply Arizona, California, Colorado, Hawaii, Idaho, New Jersey, New York, Texas and Utah.
Photo voltaic United Neighbors revealed a consumers’ guide to TPO photo voltaic in April, which features a part on pay as you go leases. One disclaimer the group contains is about manufacturing ensures. These are written into contracts for photo voltaic leases and require the TPO firm to compensate a lessee if the system underperforms. By paying for the lease up entrance, the information claims that clients can have much less monetary leverage over the TPO firm if an array underperforms.
“Just be sure you’re studying by means of your contracts so that you simply perceive what your choices can be,” Delman mentioned. “Be sure to perceive what duties you do have and be sure you’re conscious of any escalators that may be in your contract. What you’re paying in month one could also be completely different than what you’re paying in month 36 or 48.”
Pay as you go leases’ nascence additionally raises questions on how they work with actual property transfers.
“The one factor is that they’re actually new. I haven’t seen lots of examples of somebody getting a pay as you go lease or PPA mission on their roof after which promoting their house,” Lyons mentioned. “In an ordinary PPA or lease construction, while you go to place your own home in the marketplace, you will have a lease switch course of. What does that appear like while you’re promoting your private home one or two years earlier than buyout? I don’t know. It’s very completely different than 15 years earlier than your buyout phrases.”
The residential and business markets are approaching a July 4 deadline this yr to safe harbor photo voltaic tasks for the 48E tax credit score. Then that credit score expires fully on the finish of 2027. Market developments are signaling that TPO will achieve extra traction whereas this federal photo voltaic subsidy nonetheless exists.
The possibility of shopping for a photo voltaic mission as a residential buyer decreased when 25D expired. Pay as you go leases are comparatively new to the market, so the following few years will decide their viability in rising photo voltaic homeownership.
“However there’s quite a bit to be found as to what that appears like in six years. Which, to be honest, can also be true of PPAs and leases, as a result of we’re perhaps not even 10 years into that 25-year journey,” Lyons mentioned.
Trending Merchandise
