What Homeowners Should Know Before Signing a Solar Lease in 2026

Your electricity bill is higher than it was five years ago. According to the U.S. Energy Information Administration, the average residential rate rose from 13.15 cents per kilowatt-hour in 2020 to 17.30 cents in 2025, a 32% increase in half a decade. That trend is not slowing down. The EIA's 25-year historical average shows residential electricity prices climbing at roughly 2.85% per year, and in states like California, the increase has been far steeper: 91% over the past ten years, averaging 6.78% annually.

At the same time, the federal residential solar tax credit (Section 25D) expired on December 31, 2025. For homeowners who had been weighing solar, the window to capture a direct tax benefit on a purchased system has closed. But a different path has opened. Third-party ownership structures, specifically leases and power purchase agreements (PPAs), remain the clearest route to locking in lower electricity costs for the next 25 years. The catch: these are long contracts with compounding terms, and the details buried in the fine print determine whether you save $15,000 or regret the decision when you sell your house.

This guide walks through everything you need to evaluate before signing. No sales pitch. Just the math, the tradeoffs, and the red flags.

Your Electricity Bill Is Rising Faster Than You Think

Most homeowners underestimate how much their electricity costs have grown because the increases arrive gradually, a few dollars per month, easy to absorb without noticing. But the compounding effect over a 25-year solar contract period is significant, and understanding it is the foundation for evaluating any solar financing offer.

The EIA's Table 5.03 data tells the story clearly. In 2020, the average U.S. residential electricity rate was 13.15 cents per kilowatt-hour. By 2025, that figure reached 17.30 cents. That 32% increase happened during a period of historically low interest rates and relatively stable natural gas prices. Looking forward, the structural drivers of electricity cost increases, grid infrastructure upgrades, coal plant retirements, transmission congestion, and growing demand from data centers and EV charging, are all accelerating.

The J.D. Power 2025 Utility Customer Satisfaction Study measured the fallout: customer satisfaction hit 499 out of 1,000, the lowest score in the survey's history. The average monthly residential electricity bill reached $189, up 34% from 2020. Homeowners are paying more, getting the same service, and growing increasingly frustrated with a system they cannot control.

Solar leasing works because it offers homeowners an alternative to that trajectory. The question is whether the specific lease terms you are offered actually deliver on that promise over the full 25 years.

The 2026 Tax Credit Reality

Here is the policy landscape as of January 2026. The Section 25D residential clean energy credit, the tax incentive that allowed homeowners to deduct 30% of the cost of a purchased solar system from their federal income taxes, expired on December 31, 2025. It is gone. Homeowners who purchase systems outright in 2026 receive no federal tax credit.

The commercial Investment Tax Credit (Section 48E), however, remains in place at 30% through at least 2032. This is the credit that third-party system owners, the companies that provide leases and PPAs, use to reduce their cost of deploying solar. When a TPO provider installs a system on your roof under a lease, they own the system, they claim the 30% ITC, and they pass part of that benefit to you through a lower monthly rate. This is why the Solar Energy Industries Association projects that TPO will account for nearly 70% of residential installations in 2026.

SEIA also projects a 19% contraction in the overall residential solar market in 2026, driven primarily by the 25D expiration. Fewer homeowners will buy systems outright because the economics without the credit require more upfront capital and longer payback periods. That contraction will disproportionately affect the cash-purchase and loan segments. TPO is positioned to grow its share precisely because it insulates homeowners from the tax credit mechanics entirely.

Understanding Escalator Rates: The Most Important Number in Your Contract

Every solar lease and most PPAs include an annual escalator, a fixed percentage by which your monthly payment increases each year. Common escalator rates in the market are 0.99%, 1.99%, and 2.99%, according to Solar.com. Some providers offer fixed-rate leases with 0% escalation, though these typically start at a higher monthly payment to compensate.

The escalator is the single most consequential number in your contract because it determines whether your solar savings grow or shrink over time. The logic is straightforward: if your utility rate increases faster than your lease escalator, your savings widen every year. If your escalator exceeds your utility rate increases, your savings narrow and can eventually disappear.

EnergySage's analysis is direct on this point: anything above 3% risks exceeding utility rate increases in many markets. Given that the national 25-year average utility increase is 2.85% per year (EIA via SolarReviews), an escalator at or below 2.99% gives homeowners a reasonable margin of protection. At SunRaise, the standard escalator is 2.99%, deliberately calibrated below projected utility increases in our active markets. A good lease starts with day-one savings of 10-30% below your current utility rate and preserves that gap through a disciplined escalator.

Run the math yourself. If your utility charges $0.17/kWh today and increases at 3.5% annually, you will pay roughly $0.34/kWh by year 20. If your lease starts at $0.14/kWh with a 2.99% escalator, you will pay roughly $0.25/kWh in year 20. The spread between those two numbers, $0.09/kWh, applied across 10,000-12,000 kWh of annual consumption, is $900-$1,100 in savings in that single year. Over 25 years, the cumulative difference is tens of thousands of dollars.

Lease vs. PPA vs. Loan vs. Cash in 2026

The expiration of the 25D credit changes the math for every financing path. Here is how each option stacks up in the current environment.

The solar loan path deserves specific attention because it looks attractive on the surface but has hidden costs. The median solar loan rate in H1 2025 was 7.5% according to EnergySage. That is the advertised rate. What many borrowers do not see until closing is the dealer fee, a lump sum (often 30% or more of the system cost, per CFPB analysis) that the installer pays to the lender and passes through to the homeowner as a higher total loan balance. A $30,000 system with a 30% dealer fee becomes a $39,000 loan. Without the 25D credit to offset part of that cost, the monthly payment on a solar loan in 2026 is frequently higher than the utility bill it was supposed to replace.

Cash purchases still make financial sense for homeowners with available capital, low opportunity cost, and a long time horizon in their current home. But without the tax credit, the simple payback period stretches to 10-12 years in most markets, and the capital is locked into a non-liquid asset on your roof.

What Happens When You Sell Your Home

This is where the conversation requires honesty, because the data is not favorable to leased systems when it comes to home value.

Homes with owned solar systems sell for 6.9% more than comparable homes without solar, according to Zillow's 2025 analysis. For a $400,000 home, that translates to a $25,000-$29,000 premium. SolarReviews reports similar findings. This premium exists because the buyer is acquiring a productive asset with no ongoing payments.

Leased solar, by contrast, adds no measurable premium to home value. A 2017 Lawrence Berkeley National Laboratory study found that homes with third-party-owned solar systems showed no statistically significant price increase compared to homes without solar. The reason is straightforward: the buyer is not acquiring an asset. They are inheriting a 15-20 year payment obligation to a third party.

That does not mean a lease is a bad decision. It means you need to plan for the home sale scenario before you sign, not when you list the property. Three things to confirm with your provider upfront:

• 1. Transfer process. Can the lease transfer to a new buyer without fees or credit re-qualification? How long does the transfer take? A good provider completes transfers in 2-4 weeks.
• 2. Buyout option. What is the early termination or buyout price? EnergySage reports that buyouts typically range from $10,000 to $40,000 depending on the remaining contract term and system size. Get the buyout schedule in writing before you sign the lease.
• 3. Buyer refusal. What happens if the buyer declines the transfer? Are you responsible for system removal? Who pays for roof restoration? Some providers handle removal at no cost; others charge $5,000-$10,000.

One additional consideration for anyone planning to refinance: FHA loans count the solar lease payment toward your debt-to-income ratio. Depending on the monthly amount, this can reduce your borrowing power by $25,000-$30,000. Conventional loans handle this differently, but it is worth confirming with your mortgage broker before signing a lease if refinancing is in your near-term plans.

Red Flags and How to Protect Yourself

The solar industry has a fraud problem. The FTC received over 7,000 solar-related complaints in 2025 alone. State attorney general offices reported that solar complaints increased 500% between 2018 and 2023 (FTC data). Most complaints involve misleading savings projections, undisclosed fees, and high-pressure door-to-door sales tactics.

Here are ten warning signs that should prompt you to walk away or at minimum get a second opinion before signing:

One practical protection that many homeowners do not know about: the FTC's cooling-off rule gives you three business days to cancel any contract signed through a door-to-door sale. This applies to solar leases signed at your home. If a company sent a rep to your door, you have 72 hours to review the contract with a clear head and cancel without penalty. Use that window.

The Bottom Line

Solar leasing makes financial sense for the majority of U.S. homeowners in 2026. The combination of rising electricity costs (up 32% in five years and climbing), the expiration of the residential tax credit, and the availability of $0-down structures through TPO providers creates a clear opportunity to lock in lower energy costs for 25 years.

But the opportunity only works if the contract terms are right. A lease with a 2.99% or lower escalator, transparent buyout pricing, included maintenance, and a clear transfer process is a fundamentally different product than a lease with a 3.5% escalator, hidden fees, and vague language about what happens when you move. Both are called "solar leases." The outcomes they produce are not comparable.

Before you sign anything, do three things. First, pull your last 12 months of utility bills and calculate your actual cost per kilowatt-hour and total annual spend. Second, ask the provider for their escalator rate, the full buyout schedule, the transfer process documentation, and a savings projection with all assumptions clearly stated. Third, compare the year-10 and year-20 projected costs under the lease against your utility's historical rate trajectory. If the lease still saves you money in year 20 under a conservative utility increase scenario, it is a good deal.

SunRaise structures every residential lease with the 2.99% escalator benchmark, day-one savings of 10-30% below the prevailing utility rate, and full transparency on buyout and transfer terms. We built the platform that way because the math has to work for 25 years, not just the first three.