The Importance of Solar Panel Maintenance
December 5, 2025Prepaid PPA Solar: How Homeowners Can Secure Solar Savings in 2026 & Beyond
On December 31, 2025, the 30% federal solar tax credit that offered homeowners major solar savings officially expired. This is a major blow to the solar industry and to homeowners looking to make the switch to clean energy. While things will certainly look different in 2026 and beyond, nobody really knows exactly how they will look. Is going solar still worth it? Are there still ways to save financially when going solar?
Solar companies everywhere have started to look for creative ways to help homeowners continue to earn savings in a post-solar tax credit world. Among them is the use of a prepaid power purchase agreement (PPA), also known as lease-to-own solar, which offers the option to lease a solar system through a third-party lease company that temporarily owns the system before the homeowner gets full ownership. By doing so, the lease company can capture remaining tax credit eligibility and provide solar credits to the homeowner.
There’s a bit more to it than that—and we’ll explain it in more detail below—but the gist of it is that homeowners will still be able to save significant amounts of money in the same ballpark as the solar tax credit. Lease-to-own solar is designed to preserve, at least in part, the value of the tax credit; convert incentives into upfront savings; and ensure that homeowners still own their solar system in the long term.
The Federal Solar Tax Credit in 2026 & Beyond
In 2022, Congress passed the Inflation Reduction Act (IRA), which included federal tax incentives to encourage the adoption of clean energy solutions. Among them was the Residential Clean Energy Credit, which offered a 30% federal tax credit on the cost of a solar system installation to homeowners. This tax credit was set to run through the end of 2032; however, with the passing of the One Big Beautiful Bill in 2025, it officially expired on December 31, 2025.
While homeowners will no longer be able to claim this tax credit for installations starting in 2026, incentives tied to third-party ownership models (such as leases or power purchase agreements) remain available for systems placed in service by the end of 2027. In those cases, the lease company claims a different federal tax credit and may pass savings on to the homeowner through pricing or discounts. The tax credit is designed to promote domestic products, so when domestic products are used in an installation, companies can transfer the credit back to homeowners by using a prepaid lease.
What is a Prepaid PPA?
A prepaid power purchase agreement (PPA) is designed as a workaround to continue to provide savings to homeowners in place of the expiring solar tax credit. In these arrangements, a third-party company, such as a leasing company, will temporarily own the solar system in order to claim the tax credit. Part or all of those savings can then be passed on to the homeowner. As opposed to traditional solar leases, there are no monthly lease payments, as payment is made upfront the same way it would be if the system was purchased via cash or financing. Additionally, ownership of the system transfers automatically at the end of the term, which is typically six years.
How Does a Prepaid PPA Work?
- Step 1: Temporary Ownership by Lease Company. The lease company is listed as the system owner at installation, allowing them to claim the federal tax credits still available to them.
- Step 2: Solar Credit Value is Shared. The lease company claims the eligible tax credit, allowing Solar Discovery to provide a 20-30% upfront discount to its customers. Homeowners benefit from the discount without having to file for the solar tax credit.
- Step 3: Six-Year Lease Term. The system is leased to the homeowner for a six-year period. The lease exists for ownership and tax purposes. Payment for the system is made upfront in cash or via solar financing as if the homeowner is purchasing it outright, so there are no monthly payments that need to be made. During this period, there is a 6-year production guarantee. Any repairs or services needed are provided by the leasing company to provide the homeowner peace of mind.
- Step 4: Ownership Transfer. At the end of the six-year lease, full ownership of the system is transferred to the homeowner at no additional cost. The homeowner now owns the system outright.
Prepaid PPAs differ from traditional solar options in a number of ways. Unlike cash purchases, ownership of the system is delayed, but the owner does not need to qualify for tax credits. Instead, they get the discount upfront when paying for the system. When compared to solar loans, prepaid PPAs differ in a few main ways. Solar loans require monthly payments, while a prepaid PPA arrangement only requires an upfront payment or a monthly loan payment if the system is financed. Traditional solar leases are generally long-term programs that last 25 years and often don’t lead to ownership by the homeowner, while this agreement guarantees ownership after a six-year lease period.
Benefits of Prepaid Solar PPA for Homeowners
This alternative arrangement has many potential benefits for homeowners looking to go solar and maximize their savings in the process. These include:
- Access to solar savings after the solar tax credit expires
- Large upfront discount without having to wait for tax refunds
- No eligibility requirements for tax credits
- Short-term lease with path to ownership
- Works with both upfront cash and financed purchases
Frequently Asked Questions
Is a prepaid solar PPA the same as a normal solar lease?
No. Traditional leases involve monthly payments and long-term agreements. A prepaid PPA is a prepaid, short-term lease that ends with full ownership.
Do I make monthly lease payments with a prepaid PPA?
No. The system is paid upfront through cash or financing. The lease exists only for ownership and tax purposes.
Why can’t I just claim the tax credit myself?
After 2025, homeowners will no longer qualify for the solar tax credit. Lease companies can still claim it, however, and pass the savings on to homeowners.
What happens during the six-year lease period?
You will not pay monthly lease payments. You will use your solar system normally and benefit from lower utility bills. The only difference is that the system is considered a lease system until ownership is transferred.
Why is this new arrangement being offered now?
This option is being offered now as a way to offset the ending of the residential solar tax credit. Until now, homeowners and leasing companies had the same option to benefit from the solar tax credit. This arrangement is now being put in place as homeowners will no longer be eligible for it.
Go Solar with Solar Discovery
In an ever-changing and unpredictable solar landscape, it’s important to have a reliable solar company at your side that continues to adapt to make going solar affordable and accessible. Solar Discovery now offers prepaid solar PPAs to ensure that going solar remains a sustainable and smart decision. Contact us today to learn more and get started on your solar journey.
