PPA vs Buying vs Leasing Solar in San Diego

You Have Options — But Which One Is Actually Best?

So you've decided solar makes sense for your San Diego home — but now you're staring at three completely different ways to pay for it, and every sales rep you talk to seems to have a different "best" answer.

You're not alone. The PPA-vs-loan-vs-lease question is one of the most confusing parts of going solar, and frankly, the right answer depends on your situation. There's no universal winner.

This post breaks down each option in plain English so you can make an informed decision — not just the one a salesperson is pushing.

The Three Ways to Go Solar in San Diego

Before we compare, here's a quick overview of what each option actually means:

Cash Purchase — You buy the system outright. You own the panels, the inverter, the whole setup. It's yours.

Solar Loan — You finance the purchase with a loan. You still own the system, but you make monthly payments until the loan is paid off. For comparison purposes, we're grouping this with "buying" because the economics are similar — you just spread the cost over time.

Power Purchase Agreement (PPA) — A third party owns and installs the system on your roof. You don't own anything. Instead, you buy the electricity the panels produce at a per-kWh rate, typically lower than SDG&E's rate.

Solar Lease — Similar to a PPA in that you don't own the system, but instead of paying per kWh, you pay a fixed monthly amount. Some leases include an escalator that increases the payment each year.

PPAs and leases are often lumped together because they share key characteristics (no ownership, low or no upfront cost), but there are meaningful differences we'll get into.

Cash Purchase: Own It Outright

How It Works

You pay for the entire system upfront. The equipment is yours, the electricity is free (beyond minimal maintenance), and you capture 100% of the savings and incentives.

Pros

• Maximum long-term savings. With no interest or payments, every kWh your panels produce goes directly toward offsetting your SDG&E bill. Over 25 years, this typically yields the best return.
• Full ownership. The system adds value to your home. If you sell, the buyer gets a paid-off solar system — a real selling point in San Diego's market.
• Eligible for tax credits and incentives. Homeowners who purchase may qualify for the federal Investment Tax Credit (ITC), which can offset a significant portion of the cost. State or local incentives may also apply. ⚠️ ITC percentage and eligibility rules change over time. Consult a tax professional for current details.
• No monthly payments. Once it's paid for, it's paid for. No loan, no power bill for that portion of your usage.
• Full control. You choose the equipment, the installer, and the system size. You're not locked into anyone else's terms.

Cons

• High upfront cost. A typical San Diego residential system could cost anywhere from $15,000–$30,000 before incentives, depending on size and equipment. That's a big check to write.
• Maintenance is on you. Panels are generally low-maintenance, but if the inverter fails after year 10 or a panel cracks, that's your expense. Most systems come with warranties, but warranty terms vary.
• Opportunity cost. That money could be invested elsewhere. Depending on your financial situation, tying up cash in solar may or may not be the best use of capital.

Best for: Homeowners with available cash, who plan to stay in their home long enough to recoup the investment (typically 6–10 years, though this varies based on system cost, electricity usage, and rate changes).

Solar Loan: Own It Over Time

How It Works

You finance the system with a loan — often marketed as "$0 down solar." You own the equipment from day one, but you make monthly payments to the lender instead of paying upfront.

Pros

• Ownership with manageable payments. You get the benefits of ownership (tax credit eligibility, home value boost, full savings after payoff) without the upfront hit.
• Tax credit eligible. If you finance, you may still claim available tax credits, which can reduce your effective cost. ⚠️ ITC eligibility for financed purchases follows specific rules. Consult a tax professional.
• Fixed payments. Most solar loans have fixed rates, so your monthly payment stays predictable — unlike SDG&E rates, which have a history of increasing.
• Savings can offset the payment. In many scenarios, the reduction in your electric bill plus tax benefits can be close to or greater than the loan payment, especially in the early years. But this depends heavily on your usage, loan terms, and SDG&E rate changes.

Cons

• Interest adds cost. Over the life of the loan, you'll pay more than the cash price. The longer the term and higher the rate, the more interest you accumulate.
• You need decent credit. The best rates go to borrowers with strong credit. If your credit is average, the loan terms may be less favorable.
• Dual payment period. While you're paying off the loan, you have both the loan payment and whatever residual electric bill remains. If the system doesn't cover 100% of your usage, you're paying both.
• Maintenance is still on you. Same as cash purchase — you own it, you maintain it.

Best for: Homeowners who want ownership benefits but can't or prefer not to pay cash upfront, and who have good enough credit to qualify for favorable loan terms.

PPA (Power Purchase Agreement): Pay for Power, Not Panels

How It Works

A solar provider installs a system on your roof at no upfront cost. You agree to purchase the electricity it produces at a set rate per kWh — typically lower than SDG&E's current rate. The provider owns and maintains the system.

Pros

• No upfront cost. This is the biggest draw. You get solar on your roof without writing a check.
• Low maintenance responsibility. The provider owns the system and is typically responsible for repairs, monitoring, and inverter replacement.
• Predictable per-kWh cost. Your rate is defined in the contract. Some PPAs have a fixed rate; others include an annual escalator (e.g., 2–3% per year). Either way, you know what you'll pay per kWh over the contract term.
• Lower barrier to entry. Credit requirements are generally less strict than solar loans, making PPAs accessible to more homeowners.
• Potential immediate savings. If the PPA rate is lower than your current SDG&E rate, you could save money from day one. ⚠️ Actual savings depend on the specific PPA rate, your usage pattern, and SDG&E rate changes.

Cons

• You don't own the system. This is the fundamental trade-off. No tax credits, no asset on your home, no equity value. When you sell the house, the buyer must assume the PPA or you may need to buy out the contract.
• Escalator risk. Many PPAs include a rate escalator that increases your per-kWh cost each year. If SDG&E rates stay flat or drop (unlikely but possible), the PPA could become less favorable over time.
• Long contract terms. PPAs typically run 20–25 years. Getting out early usually requires buying out the system, which can be costly.
• NEM considerations. Under current California NEM rules (Net Billing Tariff), the economics of any solar arrangement — including PPAs — may shift. Make sure you understand which NEM version applies to your situation. ⚠️ NEM export rates and rules have changed significantly in California. Current NEM terms affect how PPA savings are calculated.

Best for: Homeowners who want solar savings with no money down and minimal maintenance responsibility, and who are comfortable with a long-term contract without ownership.

Solar Lease: Fixed Monthly Payment

How It Works

Very similar to a PPA, but instead of paying per kWh, you pay a fixed monthly amount. The provider owns and maintains the system.

Pros

• No upfront cost. Same as PPA — $0 down.
• Predictable monthly payment. You know exactly what you'll pay each month, regardless of how much the system produces. This can be easier for budgeting than a per-kWh PPA.
• Low maintenance. The leasing company handles repairs and equipment issues.
• Easier qualification. Like PPAs, leases typically have more lenient credit requirements.

Cons

• You don't own the system. Same trade-off as a PPA — no tax credits, no home value increase, no asset.
• Escalators. Many leases include annual payment increases. Over 20+ years, a 2–3% annual escalator can significantly raise your monthly cost.
• Production mismatch risk. If the system underperforms, you're still paying the fixed monthly amount. With a PPA, you pay only for what's produced. With a lease, you could pay the same monthly amount for less electricity than expected.
• Selling complications. Buyers may be hesitant to assume a lease. If they won't, you may need to buy out the lease to sell the home.

Best for: Homeowners who want predictable monthly costs and zero maintenance responsibility, and who plan to stay in the home for the lease term.

Side-by-Side Comparison

⚠️ Every cell in this table is a generalization. Your actual numbers depend on system size, loan terms, PPA/lease contract details, SDG&E rate changes, and your personal electricity usage. Use the calculator below to get a sense of your specific scenario.

How to Choose: Key Questions to Ask Yourself

Still unsure? Run through these questions honestly:

1. Do you have cash available?

If yes, a cash purchase typically offers the best long-term return. If not, a loan, PPA, or lease keeps solar accessible.

2. How long do you plan to stay in your home?

If you might move in 5–7 years, the math shifts. A PPA or lease might be simpler, but be realistic about transferability and buyout costs. A purchase may still make sense if home value appreciation covers your investment.

3. What's your credit situation?

Strong credit opens up better loan terms. If your credit is less than ideal, a PPA or lease may be easier to qualify for.

4. Do you want to deal with maintenance?

Panels are reliable, but inverters, monitoring systems, and occasional issues come up. If "set it and forget it" appeals to you, a PPA or lease shifts that burden to the provider.

5. How important is ownership to you?

Some homeowners value owning their power source. Others prioritize low upfront cost and simplicity. Neither preference is wrong.

6. Have SDG&E rates convinced you yet?

San Diego has some of the highest electricity rates in the country, and they've trended upward for years. ⚠️ Past rate increases don't guarantee future ones, but they're part of the reason solar makes sense for many local homeowners.

Common Pitfalls to Watch For

Regardless of which option you choose, watch out for these:

• Pressure to sign on the spot. A good solar deal doesn't expire tonight. Take your time.
• Unclear escalator terms. Whether it's a PPA rate escalator or a lease payment escalator, understand exactly how much your cost increases each year and compare that to realistic SDG&E rate projections.
• Overstated savings claims. ⚠️ No one can guarantee exact savings. Your actual savings depend on production, usage, rate changes, and NEM terms. If a rep guarantees you'll save X%, get a second opinion.
• Confusing loan structures. Some "$0 down" loans roll fees into the principal, increasing your total cost. Read the fine print on APR, total interest, and whether dealer fees are included.
• NEM version confusion. ⚠️ California's NEM rules have changed multiple times. Make sure you understand which NEM version applies to your system and how it affects your export credits.
• Buyout clauses. For PPAs and leases, understand the buyout schedule before signing. You may need this option if you sell your home.

Final Thoughts

There's no single "best" solar option for every San Diego homeowner. The right choice depends on your finances, how long you plan to stay in your home, your comfort with contracts, and your priorities.

• Want maximum savings and don't mind the upfront cost? Cash purchase is typically the strongest long-term play.
• Want ownership without the upfront hit? A solar loan can get you there — just watch the interest.
• Want low risk and no maintenance? A PPA or lease can make sense, as long as you understand the contract terms and escalators.

The worst option is the one you choose without understanding the trade-offs. And the best option is the one that fits your actual situation — not someone else's.

Related

Read our breakdown of why SDG&E bills are so high in San Diego to understand the rate structure driving homeowners toward solar in the first place.

Also read our NEM 3.0 guide for San Diego homeowners to understand how the Net Billing Tariff affects your solar savings under the new rules.

Free Solar Consultations helps San Diego homeowners understand their options and connect with trusted solar providers. We serve the entire SDG&E service territory. Call (619) 396-7530 or book your free consultation online.