What is a Power Purchase Agreement?

If you’re a California homeowner tired of unpredictable PG&E or SCE bills but don’t want to buy an expensive solar system, a Power Purchase Agreement (PPA) might be the solution.

A PPA allows you to go solar with zero upfront costs, enjoy predictable rates, and often pay less than your current utility rates—without ever owning the panels.

But is it worth it?

How does it compare to traditional utilities or buying your own solar system?

Let’s break it down.

What is a Power Purchase Agreement (PPA)?

A Power Purchase Agreement is a contract where a solar company installs, owns, and maintains a solar system on your property. As the homeowner, you don’t pay for the panels or installation. Instead, you agree to buy the power the system produces at a fixed or slightly increasing rate (usually locked for 20–25 years).

In simple terms:

• You don’t buy the panels.

• You only buy the electricity they produce—at a cheaper, predictable rate.

• The solar company handles installation, repairs, maintenance, and insurance.

It’s similar to the idea of leasing solar power rather than owning it.

How Does a PPA Save You Money?

⚡️Traditional utilities like PG&E or SCE charge fluctuating rates, which often rise 5–10% per year.

👉🏻A PPA locks you into a lower, predictable price per kilowatt-hour (kWh)—sometimes 20–30% lower than what you’re currently paying.

For example:

• Average PG&E residential rate (2025): $0.47–$0.58 per kWh

• Average PPA rate in California: $0.28–$0.38 per kWh

That means you could save hundreds per year, with no upfront investment.