Lease and PPA Escalator Clauses
Your solar rate starts 20% below the utility's and only goes up a little each year, much slower than utility rates.
What's actually true
Escalators of 2.9% to 3.9% a year nearly double or more than double your payment over 25 years. If utility rates rise more slowly than your escalator, your solar price can end up higher than buying from the utility.
Most solar leases and PPAs include an escalator: your payment or price per kWh rises by a set percentage every year. Common escalators are 0.99%, 1.99% or 2.99% a year, and some providers use about 3%. That sounds small, but it compounds for 20 to 25 years. A 2.9% escalator nearly doubles your payment by year 25. Whether that’s a good deal depends entirely on how fast your utility’s rates rise, which nobody can promise.
Why salespeople bury it
A low starting price is the headline. The escalator makes the starting price possible. Reps pair it with a high utility rate forecast so the solar line always looks cheaper. See inflated rate increases. For context, U.S. residential prices rose about 3.1% a year from 2005 to 2025, per EIA. That’s the national average; your utility could be higher or lower.
A worked example: a lease payment
Starting payment of $150 a month for 25 years.
| Escalator | Payment in year 10 | Payment in year 25 | Total over 25 years |
|---|---|---|---|
| 0% | $150 | $150 | $45,000 |
| 2.9% | about $194 | about $298 | about $64,800 |
| 3.99% | about $213 | about $384 | about $74,900 |
A flat $180 a month with no escalator would total $54,000, about $10,800 less than the $150 lease with a 2.9% escalator, even though it looks more expensive on day one.
A worked example: a PPA rate
A PPA starts at 15¢ per kWh with a 2.9% escalator. Today’s U.S. average utility rate is about 18.3¢ (EIA, July 2026).
| Utility rate grows | Utility rate in year 25 | PPA rate in year 25 |
|---|---|---|
| 2% a year | about 29.5¢ | about 29.8¢ |
| 3.1% a year (20-year average) | about 37.8¢ | about 29.8¢ |
If your utility follows the long-run average, the PPA stays cheaper. If rates rise more slowly, the PPA can catch up and pass the utility. With a 3.99% escalator, the PPA would reach about 38.4¢ by year 25, above the 3.1% utility path.
How it shows up in the contract
- “Monthly payment will increase by 2.90% on each anniversary of the in-service date”
- A payment or price table by year, often in an exhibit near the end
- “Price per kWh: $0.150, escalating at 2.99% annually”
- A buyout or “purchase option” schedule that depends on the remaining payments
Questions to ask
- “What is the annual escalator, and is it on the payment or the per-kWh rate?”
- “Show me my payment in years 1, 10, 20 and 25.”
- “Do you offer a 0% escalator? What’s the starting price?”
- “What utility rate increase are you assuming in the savings estimate?”
- “If I sell my house, does the buyer inherit the escalated payment?”
When an escalator can be fine
A low escalator (under about 2%) with a starting price well below your utility rate leaves a buffer. A prepaid lease or PPA has no ongoing escalator on payments at all. EnergySage found prepaid leases and PPAs much cheaper per kWh than cash in H1 2026, largely because the provider’s tax credit is passed through.
What to do next
Run both versions in the lease vs. buy tool and look up your utility’s history with the electricity rate history tool. Our guide to solar escalator clauses and solar lease buyouts cover the details.
Bottom line: Compare total payments over the full term, not the first bill. A 0% escalator at a higher starting price often wins.
Where to report it
If the escalator was hidden or misrepresented, report it to your state attorney general and the FTC at reportfraud.ftc.gov.
Related red flags
A Lease or PPA Sold as a "Purchase" or "Program"
In a lease or power purchase agreement (PPA), the company owns the panels. You rent the equipment or buy its power for 20 to 25 years. That affects who gets tax credits, what happens when you sell your house, and who fixes the system.
"Electric Rates Go Up 6% to 8% Every Year"
From 2005 to 2025, average U.S. residential electricity prices rose about 3.1% a year, or about 0.5% a year after inflation (EIA and BLS data). Some years and some states spike higher, but a 6% to 8% yearly assumption for 25 years inflates savings a lot.
"Transferring the Lease Is Easy When You Sell"
A lease transfer usually requires the buyer to apply and pass a credit check with the solar company. Some buyers don't want the payment, and the UCC-1 filing can raise questions with mortgage lenders. If the transfer fails, you may have to buy out the lease or pay to move the system.
"Free Solar" and "Government Solar Programs"
No federal or state program installs free panels door to door. "Free" or "no-cost" almost always means a $0-down lease, PPA or loan with 20 to 25 years of payments.
Inflated 25-Year "Lifetime Savings" Numbers
Lifetime savings headlines usually add up 25 years of future dollars as if they were worth the same as today's, assume you stay the whole time, and sometimes count tax credits or inflated rate increases as savings. The real value is usually much smaller and depends on what else you could do with the money.