A question that came up in a solar forum I follow recently: someone shared a Facebook ad for a “free solar” program and asked whether it was a scam. The answers ranged from “absolutely, run” to “it depends.” That kind of confusion is exactly what solar salespeople count on. So let’s talk about solar PPAs — what they are, the genuine red flags, and the questions you absolutely need answered before signing.
What Is a Solar PPA?
A Power Purchase Agreement (PPA) is a solar financing structure where you don’t own the panels — a solar company installs them on your roof and you buy the electricity they generate at a contracted rate, typically for 20–25 years. The company owns the system, claims the tax credits, and profits from the difference between what they pay to install and maintain the system and what you pay them per kilowatt-hour.
PPAs aren’t inherently scams. For some homeowners — those who can’t use the tax credit (because they don’t have enough tax liability), can’t qualify for a loan, or just want zero upfront cost and simplicity — a PPA can make sense. But the terms vary wildly, and some PPA contracts are genuinely terrible for the homeowner. Here’s how to tell the difference.
Red Flag #1: An Annual Escalator Above 2%
Most PPAs include an annual price escalator — your rate per kWh goes up every year by a set percentage. Salespeople often pitch this as “you’ll still beat utility rates because utility rates go up too.” That’s only true if the escalator is low enough.
An escalator above 2–2.9% should make you nervous. At 3.5% or higher, your PPA rate may actually exceed utility rates within 10–12 years — leaving you locked into a contract where you’re paying more for solar than you would for grid power. Ask for the year-by-year rate comparison over the full contract term.
Red Flag #2: You Can’t See the Full Contract Before Signing
This sounds obvious, but solar sales often happens at a kitchen table with a tablet, under time pressure. If a salesperson resists giving you the full contract to review (not a summary, not the highlights — the actual agreement) before you sign, that’s a hard stop. Walk away.
Any legitimate solar company will give you the full contract and be fine with you taking a few days to review it. Urgency tactics (“this price is only good today”) are a classic high-pressure sales signal.
Red Flag #3: Unclear Home Sale Terms
PPA contracts attach to the property, not to you personally. When you sell your home, one of three things has to happen: the buyer agrees to assume the PPA, you buy out the contract, or you have the system removed. Each of these has costs.
Some contracts make buyout prohibitively expensive, especially in years 1–5. Some contracts make system removal the homeowner’s financial responsibility. And buyer assumption isn’t guaranteed — if a buyer doesn’t want to assume a 20-year solar contract, your home sale can get complicated.
Ask directly: “What are the exact terms and costs if I sell my home in year 3, year 7, and year 15?” Get that in writing, in the contract, before signing.
Red Flag #4: “Free Solar” Claims Without Explaining the Mechanism
The “free solar” ad the forum member saw is almost certainly a PPA or solar lease marketed in the most misleading possible way. The panels are installed at no upfront cost to you — that part is true. But you’re committing to buying electricity from that system for 20–25 years. That’s not free; it’s a long-term purchase agreement with a misleading headline.
Legitimate solar companies explain their model clearly. If the marketing obscures the mechanism, trust your instincts.
Red Flag #5: System Size That’s Too Small to Matter
Some PPA providers propose undersized systems because smaller systems cost them less. If the proposed system only offsets 40–50% of your usage, you’re still paying significant utility bills on top of your PPA payment. Run the actual math: PPA cost per year + remaining utility cost per year vs. current utility cost per year. If the savings are thin, the risk isn’t worth it.
Questions to Ask Every Solar Salesperson
Whether you’re considering a PPA, lease, loan, or cash purchase, these questions separate good operators from bad ones:
- What is the annual escalator, and can you show me a year-by-year rate comparison?
- What happens to this contract if I sell my home?
- Who owns the system and who is responsible for maintenance and repairs?
- What is the production guarantee, and what happens if the system underproduces?
- Can I see the full contract today, before I sign anything?
- What is your company’s history — how long have you been in business and who are your installers?
Is a PPA Ever the Right Choice?
Yes — if you can’t use the tax credit, don’t want debt, and can find a PPA with a 0–1.5% escalator and clear home sale terms, it can work. But in most cases, a solar loan beats a PPA financially over the life of the system. You own the panels, you keep the tax credit, and you’re not locked into a multi-decade contract with a third party.
The best thing you can do before any solar conversation is get multiple quotes and understand all three financing options. I’ve found that a real-time solar monitoring system is worth having regardless of how you finance — it keeps your installer accountable to their production estimates from day one.
Know what you’re signing. Take your time. And if anything feels off, it probably is.