Commercial Solar PPAs, Explained for Real Estate Owners

What a PPA is

A third party (the PPA provider) owns the solar system, installs it on your roof, and sells the electricity to you or your tenants at a contracted rate. You pay $0 upfront. Term is typically 20–25 years.

The four terms that matter

1. $/kWh rate. Should be 25–40% below your local utility retail rate at signing.
2. Escalator. 1.5–2.9% is market. Anything above 3% erodes the tenant discount over time.
3. Buyout options. Look for fair-market-value buyouts at year 7 and year 15 — this is your optionality.
4. Roof warranty coordination. The PPA provider must indemnify roof damage caused by their equipment and coordinate with any active roof warranty.

Red flags

• No production guarantee.
• Escalators tied to CPI without a cap.
• Assignment clauses that let the PPA provider sell your contract to any third party without your consent.
• No end-of-term removal obligation.

Alternatives

If your entity can use the ITC (30% tax credit), owned solar with a loan often produces better long-run economics than a PPA. Non-profits, HOAs, and non-taxable structures usually stick with PPAs or use direct-pay.

Want to see what your roof could earn? Estimate your NOI lift or talk to our team.