Glossary
PPA (Power Purchase Agreement)
A PPA (Power Purchase Agreement) is a contract where a company installs and maintains solar panels on your roof, keeps ownership of the system and charges you for every kWh it produces at an agreed price. You do not buy the equipment: you buy the energy. Typical terms run 20 to 25 years, almost always with an annual escalator.
What a PPA is
It is the “pay per use” version of third-party solar. The company puts up the capital, installs, monitors and repairs; you pay each month for the kWh the system produced, at a per-kWh rate set in the contract. If the system produces a lot, you pay more; if it produces little, you pay less. The idea is that this per-kWh price sits below your utility’s.
It differs from a solar lease in how you are billed: a lease is a fixed monthly payment; a PPA bills by production. In both, the third party owns the system and usually keeps the 48E tax credit.
Why it matters in Florida
With the 25D credit for buyers ended for systems placed in service after 2025, PPAs and leases are the only routes where the federal incentive still enters the equation, because the system owner captures it and, in theory, passes it into the price. Always confirm with your tax preparer.
The catch is the escalator: the per-kWh price rises every year by a fixed percentage. If your utility’s rate rises less than the escalator, at some point in the contract you pay more for solar than for grid power.
Common mistake
Signing a PPA based only on the first-year rate. Ask for the full table: price per kWh year by year through the end, estimated annual production, and what happens if the system underproduces. And check the transfer terms if you sell the house, because the buyer has to take on the contract. We compare the options in solar lease and PPA explained.
Full guide: Solar lease and PPA explained: ownership, escalator, buyout and 48E in 2026 →
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