TPO solar means third-party-owned solar: a company owns the panels on your roof, and you pay it for their use. You either lease the system for a set monthly payment, or you sign a power purchase agreement (PPA) and pay for each kilowatt-hour (kWh) the panels produce.
In 2026 this matters more than it used to. Homeowners who buy a system can no longer claim the 30% federal credit, which ended for systems completed after December 31, 2025 (IRS). The company that owns a lease or PPA system can still claim a business tax credit, but only if its system began construction by July 4, 2026 or is in service by December 31, 2027 (26 U.S.C. 48E). That credit goes on the company’s tax return, not yours.
What TPO solar means
TPO stands for third-party ownership. You are the first party, as the homeowner who hosts the panels. Your utility is the second party, because it still supplies the power the panels don’t cover. The third party is the company that owns the panels. TPO is the umbrella term for solar leases and PPAs.
You, the homeowner
Host the system, make the monthly payment, and keep paying your utility for fixed charges and any power the panels don’t cover. You don’t own the panels and can’t claim tax credits for them.
The TPO company
Owns the system, usually handles monitoring and repairs, and claims any tax credit and other incentives that go to the owner. It often uses a local installer to sell and install the system.
Third-party ownership is a big share of the market. Leases and PPAs made up 45% of U.S. home solar installed in 2024, the highest share since 2016 (Wood Mackenzie).
Not the same as TPO roofing or PTO. TPO roofing is a thermoplastic polyolefin membrane used on flat roofs. It has nothing to do with who owns your panels, although solar can be installed on a TPO roof. PTO in solar means “permission to operate,” the utility’s approval to switch a new system on.
How a solar lease and a PPA work
Both start the same way. The company designs the system, installs it at little or no upfront cost, and connects it to the grid. The difference is what you pay for. The U.S. Department of Energy describes a lease as fixed monthly payments and a PPA as buying the system’s power “at a set price per kilowatt-hour” (DOE).
| Solar lease | PPA | Prepaid lease | |
|---|---|---|---|
| You pay for | Use of the equipment | Each kWh the panels produce | Use of the equipment, paid upfront |
| Monthly payment | Set amount, may rise each year | Changes with sunshine and the price per kWh | None, or a small fee |
| Power you export | Already covered by the lease payment | You pay the PPA price for it too | Already covered by the prepayment |
| Who owns the panels | The company | The company | The company, often with a buyout option later |
| Where offered | More states than PPAs | Only where state law allows (see below) | Fewer companies so far |
The export point matters. A PPA bills you for every kWh the panels produce, including power you send to the grid (solar financing guide). If your utility credits exports at much less than your PPA price, you lose money on those kWh. Ask how much of the production you will use at home during sunny hours.
Prepaid leases are the newer product. You pay most of the contract upfront, the company keeps ownership and its tax credit, and part of that credit can come back to you as a lower price. An industry analysis from July 2026 calls them “relatively new and not yet representative” of the wider market (Tigo). Compare a prepaid lease with the cash price of the same system.
For loans and cash purchases next to leases and PPAs, see our solar financing guide.
The 2026 tax-credit clock for leases and PPAs
The 2025 federal tax law (Public Law 119-21) ended the homeowner credit but kept the business credits that TPO companies use, Sections 48E and 45Y, with new deadlines for solar. That gives a lease or PPA a tax advantage over buying in 2026, because only the company can still claim a federal credit. Each date below shows how certain it is.
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December 31, 2025
Law
The homeowner credit ends
The Residential Clean Energy Credit (Section 25D) does not apply to spending after this date (26 U.S.C. 25D(h)). If you buy a system in 2026, there is no federal credit on your return.
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January 1, 2026
Law
Foreign-supplier rules start
Solar systems and batteries that begin construction after 2025 lose the business credit if they include “material assistance” from a prohibited foreign entity (26 U.S.C. 48E). This affects which equipment a TPO company can put on your roof.
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July 4, 2026
Law
The begin-construction date passes
Solar projects whose construction began by this date are not subject to the 2027 cutoff below. IRS begin-construction guidance treats a project as on time if it is placed in service by the end of the fourth calendar year after construction began, so the end of 2030 for a 2026 start (IRS Notice 2018-59). IRS Notice 2022-61 applies that four-year safe harbor to the 48E and 45Y credits, as the IRS restated in Notice 2025-42. Large TPO financiers said in late 2025 that they had stored enough “safe-harbored” panels, inverters and batteries to last until 2030 (Solar Power World).
Certainty: the date is law. The four-year window is IRS guidance, not a rule written into the law, and the IRS can change its guidance. The financiers’ supply claim is their own statement.
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December 31, 2027
Law
Last day for other new solar to qualify
A solar system that began construction after July 4, 2026 earns the business credit only if it is placed in service by this date (48E, 45Y). Expect lease and PPA pricing to change once a company’s credit-eligible supply runs out.
Certainty: the date is law. The effect on prices is our reading, not a forecast.
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2033 to 2035
Law
Battery credit phases down later
The 2027 solar cutoff does not apply to energy storage. A company-owned battery keeps the full business credit if construction begins by 2033, then 75% in 2034, 50% in 2035 and nothing after (48E, 45Y(d)). The foreign-supplier rules above still apply. This gives companies a reason to add batteries to lease and PPA offers.
Court ruling, June 6, 2026: a federal court in Washington, D.C. struck down IRS Notice 2025-42, which had narrowed how wind and large solar projects could prove they had begun construction. The normal appeal deadline passed on August 5, 2026. As of September 4, 2026, the last day to ask the court for more time, the government had not filed an appeal (Clifford Chance). The IRS can still issue new begin-construction guidance. The ruling changes little for home systems: the notice had kept the older 5% cost test for solar projects of 1.5 MW or less.
Does the company’s credit lower your price?
No rule requires it. The business credit for a system under 1 megawatt is generally 30% of the company’s cost (48E(a)(2)), and how much of that reaches you depends on the contract price. The same July 2026 analysis found “little to no public evidence” that lease and PPA providers broadly cut prices because of the credit (Tigo). The only way to see it is to compare: get a lease or PPA quote and a cash quote for the same system, and add up what you would pay over the full term.
TPO contract terms that matter
A TPO contract usually runs 20 to 25 years (Solar Power World), longer than many people stay in a home. These terms decide whether it is a good deal. The Federal Trade Commission lists the same questions in its solar contract checklist.
| Term | What to look for | Why it matters |
|---|---|---|
| Escalator | The yearly increase in your payment or price per kWh, and the full payment schedule | Small percentages compound over 25 years (example below). The nonprofit Solar United Neighbors advises keeping it below expected utility rate growth (Solar Power World). |
| Starting price | Lease payment or price per kWh, next to your current utility rate | Your utility bill does not disappear. Add the TPO payment to the bill you will still get. |
| Production guarantee | A minimum yearly output and what you get if the system falls short | Some providers credit you if the system makes less than 90% of the expected power (Solar Power World). Without one, you keep paying a lease on a weak system. |
| Maintenance and roof | Who repairs the panels, inverter and battery, and who fixes roof leaks at mounting points | The company usually repairs the equipment it owns. Roof damage at the mounts is a separate question, so get it in writing. |
| Transfer | Whether a home buyer can take over, credit requirements and fees | A buyer may need to pass a credit check (FTC). Some buyers or their lenders say no. |
| Buyout | When you can buy the system and how the price is set (fixed schedule or “fair market value”) | A fixed schedule tells you the price today. “Fair market value” is set later by the company. |
| UCC filing | Whether the company records a UCC-1 fixture filing in county land records | It is a public notice that the company owns the panels. It can come up at a sale or refinance. |
| End of term | Renew, buy or have the system removed, and who pays for removal and roof repair | Panels often keep working after the contract ends, so the end-of-term option has real value. |
| Early exit | Termination fees and what happens if you stop paying | The FTC warns that ending a lease early “may be difficult and expensive.” |
| Company failure | Who services the system if the company is sold or closes | Sunnova, a large lease and PPA provider, filed for Chapter 11 bankruptcy in June 2025 (pv magazine USA). |
Already in a lease and want out, or selling a home with one? Our guide to getting out of a solar lease covers transfers, prepayment, buyouts and the UCC filing step by step.
Worked example: what an escalator adds up to
Take a made-up PPA at 14¢ per kWh for a system that produces 11,326 kWh a year, the output of the typical 7.95 kW system in our worth-it example. The example ignores the small yearly loss in panel output.
| Escalator | Price in year 1 | Price in year 25 | Average monthly cost in year 25 | Total over 25 years |
|---|---|---|---|---|
| 0% a year | 14.0¢ | 14.0¢ | $132 | $39,641 |
| 1.9% a year | 14.0¢ | 22.0¢ | $208 | $50,145 |
| 2.9% a year | 14.0¢ | 27.8¢ | $262 | $57,058 |
A 2.9% escalator adds about $17,400 over the term compared with a flat price. For scale, the cash price of a typical 7.95 kW system is about $22,976 before incentives (EcoGen Solar Cost Index, September 2026), though an owner also pays for repairs and an inverter replacement. The U.S. average home electricity rate is forecast at 18.2¢ per kWh in 2026 (EIA). A PPA only saves money while its price stays below what you would otherwise pay the utility.
Where TPO solar is allowed
Leases are widely available. PPAs are not, because some states treat selling electricity to a homeowner as something only a utility may do. The May 2026 DSIRE map lists at least 29 states plus Washington, D.C. and Puerto Rico that authorize or allow third-party solar PPAs (DSIRE, NC Clean Energy Technology Center).
- Leases allowed, PPAs restricted: Florida, Louisiana, Mississippi, North Carolina and South Carolina.
- PPAs with size limits: Colorado (up to 120% of yearly use), Nevada (150%) and Texas (100%).
- Limited to some customers or utilities: Arizona (schools, governments and nonprofits), Arkansas (tax-exempt groups, though leases are allowed) and Virginia (certain utilities and customer types).
Even in a state that allows PPAs, a municipal utility may not. Ask the company which contract type it offers at your address.
Who TPO solar fits
A lease or PPA trades ownership for a low upfront cost and less responsibility. Whether that trade works depends on your situation.
| Your situation | Lease or PPA? | Why |
|---|---|---|
| No cash to spare and no good loan offer | Often a fit | Solar with little upfront cost, and the company still has a tax credit you can’t get. |
| You don’t want to handle repairs | Often a fit | The company usually monitors and repairs the system. Check the roof terms. |
| You can pay cash or get a low-rate loan | Compare carefully | Owning often costs less over 25 years. Put the full TPO total next to the cash price. |
| You may sell within a few years | Proceed with care | The buyer must qualify and agree to take over, or you pay to buy it out. |
| Your utility pays little for exports | Lease over PPA, or size it small | A PPA charges for exported power at the full PPA price. |
| Your electricity rate is low | Often a poor fit | With an escalator, the TPO price can pass your utility rate within the term. |
| Your roof needs replacing soon | Fix the roof first | Removing and reinstalling panels mid-contract costs money and needs the company’s approval. |
If you are leaning toward a lease or PPA, ask at least two companies for a TPO quote and a cash quote for the same system. That shows how much of the tax credit and savings you actually get.
Compare lease, PPA and purchase quotes for your home from local solar installers
Questions about TPO solar
What does TPO mean in solar?
Third-party ownership. A company owns the solar panels on your home, and you pay it through a lease (a set monthly payment) or a power purchase agreement (a price per kWh produced).
Is TPO solar the same as a TPO roof?
No. A TPO roof is a thermoplastic polyolefin membrane on a flat roof. TPO solar is about who owns the panels. Solar can go on either kind of roof.
Can I get the 30% solar tax credit with a lease or PPA?
No. The homeowner credit ended for systems completed after December 31, 2025, and with a lease or PPA the company owns the system anyway. The company may claim a business credit under Section 48E if the system began construction by July 4, 2026 or is placed in service by December 31, 2027.
Is a lease or a PPA better?
A lease gives you a predictable payment. A PPA ties your payment to production, so you pay less in a cloudy year but also pay for power you export. Where exports earn little, a lease usually carries less risk.
Can I buy out a TPO solar system?
Often, at set times. The contract says whether the price follows a fixed schedule or “fair market value.” A 2026 buyout earns no federal homeowner credit.
What happens to a TPO contract when I sell my house?
The buyer usually takes it over after the company approves them, or you buy out or prepay the contract. Our solar lease exit guide explains each path.
What if the solar company goes out of business?
Your contract does not simply end. Another company may take over billing and service, and service can slow down during the change. Before you sign, ask who services the system if the company is sold or closes, and keep copies of every document.
Sources
- IRS, FAQs on Public Law 119-21: Residential Clean Energy Credit (Section 25D) end date.
- 26 U.S.C. 25D, 45Y and 48E as amended by Public Law 119-21 (Cornell Legal Information Institute).
- IRS Notice 2018-59 and IRS Notice 2025-42 (vacated June 6, 2026), beginning of construction and the Continuity Safe Harbor.
- Clifford Chance, “Wind and solar projects in the US: The vacatur of Notice 2025-42” (September 4, 2026).
- Solar Power World, “How do third-party-owned rooftop solar projects work?” (November 2025).
- Tigo Energy, “TPO vs. Cash: Financing Trends and Why Ownership Still Matters” (July 7, 2026).
- Wood Mackenzie, “US residential solar turbulence persisted through 2024” (April 2025).
- DSIRE / NC Clean Energy Technology Center, 3rd Party Solar PV Power Purchase Agreement map (May 2026).
- U.S. Department of Energy, Homeowner’s Guide to Going Solar. Federal Trade Commission, Solar Power for Your Home (April 2022).
- U.S. Energy Information Administration, Short-Term Energy Outlook (October 2026).
- pv magazine USA, “Sunnova files for bankruptcy” (June 10, 2025).
- EcoGen Solar Cost Index, September 2026 edition (methodology).
- Read how we work in our editorial standards and how we make money.
