Helping Riverside County homeowners navigate SCE rates and solar options since 2020
A solar power purchase agreement -- usually called a PPA -- is one of the most misunderstood products in residential energy. Most of the confusion comes from homeowners who saw it described as a "lease" in one place and a "zero-down solar plan" in another, and are not sure what they actually signed up for. This page covers what a PPA actually is, why it became the dominant structure for California homeowners after 2025, and specifically what to look for before you sign one.
1. What Is a Solar PPA
A solar PPA is a contract between a homeowner and a solar company. The solar company installs panels on your roof. They own the equipment. You agree to buy the electricity those panels produce at a fixed per-kWh rate for a set contract term -- typically 20-25 years.
The key distinction from a purchase is ownership. When you buy solar panels, you own them. You are responsible for maintenance, you capture any tax credits available to homeowners, and you own the asset if you sell the house. With a PPA, the installer owns the asset throughout the contract term. You are buying power, not panels.
The key distinction from a lease is what you pay for. A solar lease charges a fixed monthly fee for the use of the panels, regardless of how much power they produce. A PPA charges you a per-kWh rate for the power actually produced. If the system underproduces one month, your PPA payment is lower. On a lease, you pay the same amount regardless.
In practical terms for a Temecula homeowner with an SCE bill averaging $250/month, a PPA at 15 cents/kWh on a 9 kW system producing roughly 14,000 kWh/year would cost about $175/month in solar payments versus roughly $400/month if that same electricity came from SCE at 34.5 cents/kWh. The gap is the monthly savings, before accounting for any power that still comes from the grid.
2. Section 48E: Why PPAs Still Work in 2026
The most common question Temecula homeowners ask in 2026 is: "I heard the solar tax credit expired -- does that mean solar is not worth it anymore?"
The answer depends on which tax credit and which financing structure. Section 25D, the residential investment tax credit that allowed homeowners to deduct 30% of the purchase price from their federal taxes, expired December 31, 2025. That credit applied only to homeowners who bought the system outright. It is gone.
Section 48E is a separate credit. It applies to commercial solar investments -- including solar systems owned by companies, installed on residential roofs, under PPA agreements. Section 48E is active through at least 2032 at 30%.
How Section 48E passes value to PPA customers
- 1.A solar company installs a $30,000 system on your roof under a PPA. They own it.
- 2.The company claims Section 48E -- a 30% commercial ITC worth $9,000 on that install.
- 3.Competition between installers forces them to pass some of that credit through as a lower per-kWh PPA rate.
- 4.You receive a rate of 14-18 cents/kWh instead of the 22-25 cents/kWh that would be needed without the credit.
This is why PPAs remain the most financially practical structure for most SCE customers in 2026. The tax benefit still exists -- it just runs through the installer, not the homeowner. When you get a PPA quote, ask the installer directly: "Has Section 48E been factored into the rate you are offering?" A competitive installer will say yes.
For more detail on the tax credit transition, read the federal solar tax credit deadline page, which covers what Section 25D was, what Section 48E does, and what changed for California homeowners at the end of 2025.
3. NEM 3.0: Self-Consumption Over Export
Net Energy Metering 3.0 is the current billing policy at SCE for solar customers. It replaced NEM 2.0 in April 2023. The change that matters most: what SCE pays for power you send back to the grid dropped from roughly 30 cents/kWh under NEM 2.0 to 5-8 cents/kWh under NEM 3.0.
For PPA customers, this changes how the system should be sized and designed. Under NEM 2.0, it made financial sense to install a large system and export the excess -- you got near-retail credit for every kWh sent to the grid. Under NEM 3.0, exporting power means selling it at 5-8 cents and buying it back at 34.5 cents or more when you need it. That is a bad trade.
The right system design in 2026 for a PPA customer looks different from 2022:
For more on how NEM 3.0 interacts with PPA economics, see the PPA vs buying solar panels comparison, which covers both structures side by side under current SCE rules.
4. What to Watch in the PPA Contract
PPA contracts are typically 20-25 pages. Most homeowners sign them after a 15-minute meeting. Here are the five terms that will determine whether the contract works in your favor over a 20-year period.
PPA rate (cents/kWh) in year 1
This is your starting solar rate. Typical range for a competitive California PPA in 2026 is 14-18 cents/kWh. Compare it directly to your current SCE rate. If the PPA rate is higher than your SCE rate, there is no case for signing.
Annual escalator percentage
The escalator compounds. A 2.9% escalator on a 15 cent/kWh starting rate reaches 21.5 cents/kWh by year 15. Ask for the full year-by-year rate schedule for all 20-25 years and compare it to historic SCE rate increase data. If SCE increases outpace the escalator, your savings grow over time.
Production guarantee and compensation
A production guarantee means the installer commits to a minimum annual kWh output. If the system produces less, they compensate you -- typically with a credit on your account. Without a production guarantee, you absorb all weather and equipment underperformance risk.
Warranty entity and legal backing
After SunPower's 2024 bankruptcy, this is no longer hypothetical. Ask which specific legal entity holds the workmanship warranty and panel warranty. Ask whether there is a warranty insurance policy or third-party backstop. Get it in writing before signing.
Transfer terms if you sell the home
Most PPA contracts allow transfer to a qualified buyer. The buyer must meet the installer's credit requirements. If they do not qualify, you may need to buy out the remaining contract at the time of sale. Ask for the buyout formula before you sign so you can model it against a likely home sale date.
5. Who Qualifies for a Solar PPA in California
Most owner-occupied homes in SCE territory qualify. The checklist is straightforward:
For SW Riverside County homeowners specifically: Temecula, Murrieta, Menifee, Lake Elsinore, and Wildomar are all in SCE territory. The area averages 5.5-6.0 peak sun hours per day, which is higher than coastal Southern California and makes solar economics stronger here than in coastal markets.
Quick math for a typical Temecula home:A 9 kW system at 5.7 peak sun hours produces roughly 18,000 kWh/year. At a PPA rate of 16 cents/kWh, that is $2,880/year in solar power. The same power at SCE's 34.5 cent/kWh average would cost $6,210. The annual difference is roughly $3,330. The specific numbers for your home depend on your roof, orientation, usage, and the quote you receive -- but the directional math holds for most Temecula properties.
6. Frequently Asked Questions
What is a solar PPA and how does it work in California?
A solar power purchase agreement (PPA) is a contract where a solar company installs panels on your roof at no upfront cost. The company owns the equipment. You agree to buy the electricity the panels produce at a fixed per-kWh rate -- typically 14-18 cents/kWh -- compared to SCE's current average of 34.5 cents/kWh. You pay less for the power you use, and the installer earns revenue from the difference. The contract typically runs 20-25 years.
Is Section 25D still available for California homeowners in 2026?
No. The Section 25D residential investment tax credit expired December 31, 2025. Homeowners who installed solar before that date could claim 30% of the system cost as a federal tax credit. That credit is no longer available for new residential purchases. Section 48E, the commercial ITC, is still active through 2032 at 30%. It applies to systems owned by businesses, including solar companies that own panels installed under PPAs -- which is why PPAs remain financially attractive in 2026.
How does Section 48E make PPAs better for California homeowners?
Section 48E is the commercial investment tax credit. It gives the solar company -- not the homeowner -- a 30% federal tax credit on the cost of the system they install and own under a PPA. Because installers compete for customers, they pass some of that tax savings through as a lower per-kWh PPA rate. A homeowner who signs a PPA in 2026 benefits from Section 48E indirectly, through the rate they are offered. This is a key reason PPA rates in 2026 are competitive even though Section 25D is gone.
What is NEM 3.0 and why does it matter for PPA customers?
NEM 3.0 is SCE's current net energy metering policy. Under NEM 2.0, SCE credited you roughly 30 cents per kWh for solar power sent back to the grid. Under NEM 3.0, that export credit dropped to about 5-8 cents per kWh. For PPA customers, this means the system should be designed to maximize self-consumption -- using solar power directly in your home -- rather than overproducing and exporting. A battery paired with a PPA helps you store excess power for evening use instead of exporting it at a low rate.
Who qualifies for a solar PPA in California?
Most California homeowners qualify. Key requirements: you must own your home (renters cannot sign a PPA because they do not own the roof), your roof must be in good condition with at least 10 years of remaining life, your credit score is typically 640 or higher (varies by installer), your home must be in SCE, PG&E, or SDG&E territory, and your roof must have adequate south or west-facing area without significant shading. HOA approval may be required. California AB 2188 limits HOA restrictions on solar, but approval is still needed in most cases.
What is a PPA rate escalator and is it bad?
A PPA rate escalator is a contractual annual percentage increase in your per-kWh solar rate. Common escalators run 1.9 to 2.9 percent per year. Whether this is good or bad depends on how it compares to SCE rate increases. SCE rates have historically increased at roughly 3-5% per year. If your escalator is 1.9% and SCE rates increase at 4%, you fall further behind SCE pricing each year, which means your savings grow over time. If your escalator matches or exceeds SCE increases, savings stay flat or shrink. Always ask for the full year-by-year rate schedule before signing.
What happens if the solar company goes out of business during my PPA?
This is a real risk after SunPower's 2024 bankruptcy. Before signing, ask: who holds the equipment title, is there a warranty backstop or insurance policy behind the workmanship and panel warranties, and if the company is acquired or reorganized, what entity do I make payments to? PPA contracts typically include assignment clauses allowing the contract to transfer to a successor company. That is standard, but ask for the specific language. Also ask whether the panels themselves carry a manufacturer warranty separate from the installer.
See What a PPA Would Cost vs Your SCE Bill
Use the free calculator to compare your current SCE rate against a typical PPA rate for SW Riverside County. Or call me for a site-specific estimate based on your actual roof and usage.
No obligation. Temecula-area homeowners only.