Commercial Solar Lease vs. Ownership: Which Is Right for Your Portfolio?

The Two Paths to Commercial Solar

Every commercial solar project comes down to two structures:

• $0-CapEx (Lease/PPA): A third party funds, installs, owns, and maintains the system on your property. You buy the power at a fixed, discounted rate — or receive a lease payment. No upfront cost.
• Direct Ownership: You (or your entity) purchase the system outright or finance it. You own the asset, capture the tax benefits directly, and keep all the energy savings.

When $0-CapEx Makes Sense

The lease/PPA model dominates commercial solar for good reason. It works best when:

• You want savings without capital outlay. Ideal for operators who'd rather deploy capital elsewhere — or don't have $500K+ sitting around for a solar project.
• Your entity can't use tax credits. REITs, nonprofits, municipalities, and tax-exempt organizations can't directly monetize the Investment Tax Credit (ITC). Leasing lets a tax-equity investor capture the credit and pass savings to you through lower rates.
• You want predictable costs. Fixed PPA rates lock in your electricity cost for 20–25 years. In markets with rising utility rates, this hedge can be worth more than the tax benefits of ownership.
• You have limited internal resources. The developer handles permitting, interconnection, insurance, monitoring, and maintenance. Your team's involvement is minimal.

When Ownership Makes Sense

Direct ownership delivers higher total returns — if you have the capital and tax appetite:

• You can monetize the 30% ITC. The federal Investment Tax Credit alone can offset nearly a third of the project cost in year one.
• You want accelerated depreciation. MACRS depreciation lets you write off the remaining basis over 5 years — creating significant tax shelter.
• You're building long-term asset value. Owned solar systems increase property value and can be factored into NOI calculations.
• You want to retire RECs. If ESG reporting matters, owning the system means you own the Renewable Energy Credits and can retire them against your carbon footprint.

The Numbers: A Side-by-Side Example

For a 500 kW rooftop system on a warehouse in Massachusetts:

• Ownership: ~$750K installed cost. After ITC ($225K) and 5-year depreciation (~$150K in tax value), effective cost is ~$375K. Annual savings of ~$85K. Simple payback: ~4.5 years. 20-year ROI: ~350%.
• Lease/PPA: $0 upfront. PPA rate of $0.08/kWh vs. utility rate of $0.14/kWh. Annual savings of ~$40K. 20-year savings: ~$800K. No payback period — savings start month one.

Ownership wins on total return. Leasing wins on accessibility and risk profile. The right answer depends on your capital position and tax situation.

Questions to Ask Your Energy Advisor

1. What's my entity's tax appetite — can we actually use the ITC and depreciation?
2. What's the all-in installed cost vs. the PPA rate comparison over 20 years?
3. Are there state incentives (SRECs, SMART, etc.) that change the math?
4. What's the impact on property value and NOI under each scenario?
5. Can we start with a lease and buy out later?

How PPEG Approaches This

We model both scenarios for every project — because the right structure varies by property, entity type, and portfolio strategy. Most of our clients choose the $0-CapEx path because it eliminates risk and frees up capital. But for those with the tax position and investment thesis, ownership can deliver significantly higher returns.

Let us model both options for your property →