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Get a Free QuoteThird-party ownership has become the dominant way American homes go solar in 2026. This happened because the residential tax credit expired and the commercial credit did not. Here is everything you need to know about lease, PPA, prepaid, and transitional ownership options.
Quick Answer
Solar third-party ownership (TPO) has become the dominant way US homes go solar in 2026. The shift happened because the Section 25D residential ITC expired at the end of 2025, while the Section 48E commercial ITC remains active. TPO structures allow companies to claim the 30% commercial tax credit and pass savings to homeowners. The four TPO types are: solar lease (fixed monthly), solar PPA (per-kWh), prepaid lease/PPA (upfront payment), and transitional ownership like Propel (third-party-owned with a year-5 ownership transfer designed into the loan path). The Section 48E begin-construction window closed July 4, 2026; new TPO projects still qualify but generally must be placed in service by December 31, 2027.
#1
2026's dominant financing route
30%
Section 48E base ITC
2027
Placed-in-service cutoff for new starts
4
TPO types available
The shift to third-party ownership in 2026 is not a market trend; it is a structural response to federal tax policy. Understanding why requires a brief history of the solar investment tax credit.
From 2006 through 2025, the Section 25D residential solar tax credit allowed homeowners to deduct 30% of their solar system cost from their federal income taxes. This credit made homeowner-purchased solar economically compelling. A $30,000 system effectively cost $21,000 after the credit. This drove the boom in cash and loan purchases that characterized the 2015-2025 solar market.
Section 25D expired on December 31, 2025. Homeowners who buy solar in 2026 receive zero federal tax credit. A $30,000 system costs $30,000. Period.
However, the Section 48E commercial clean energy investment tax credit is still active. This credit is available to businesses and investors who own clean energy assets. It provides a 30% base credit plus potential bonuses: 10% for domestic content (FEOC), 10% for energy communities, and 10% for low-income projects, totaling up to 70% in extreme cases but typically 30-50% for residential solar.
The math becomes obvious. If a homeowner buys solar, they get no tax credit. If a company buys the same solar system and puts it on that homeowner's roof, the company gets a 30-50% credit. The company shares some of that savings with the homeowner through lower lease/PPA/loan payments. Everyone wins compared to the homeowner buying alone.
This is why TPO went from a minority share of the residential market in 2025 to the dominant route in 2026. It is not that leasing became better; it is that buying became worse. The economics now overwhelmingly favor letting someone else own the system, at least initially.
Fixed monthly payment to use a solar system owned by a leasing company. Payment often includes annual escalator of 1.99-2.99%.
Pay per kWh of electricity your solar system actually produces. Rate is typically below utility rate with an annual escalator.
Single upfront payment covers the full lease/PPA term. No monthly payments. Lower total cost than monthly payment models.
Prepaid ESA + 25-year loan. Third-party owns for 5 years, claims ITC, then transfers ownership to homeowner automatically.
| Factor | Lease | PPA | Prepaid | Propel |
|---|---|---|---|---|
| Upfront cost | $0 | $0 | $15K-$30K | $0 |
| Monthly payment | $130-$180+ | Varies by production | $0 | $230-$270 |
| Escalator | 1.99-2.99%/yr | 1-3%/yr | None | 0% |
| Own system | Never | Never | Never | Year 5 |
| ITC captured | 30% | 30% | 30% | 30-50% |
| Dealer fees | N/A | N/A | N/A | 0% |
| Maintenance | Full term | Full term | Full term | 5 years |
| Min credit | 580-620 | 580-620 | N/A | 660 |
| Availability | Nationwide | 30+ states | Limited | ME, TX |
| Home sale | Transfer required | Transfer required | Transfer or include | Owned after yr 5 |
| Term | 20-25 years | 20-25 years | 20-25 years | 25 years |
| 25-yr total cost | $60K-$72K | $55K-$70K | $15K-$30K | $69K + own system |
Section 48E of the Internal Revenue Code is the commercial clean energy investment tax credit. Created by the Inflation Reduction Act of 2022, it replaced the older Section 48 ITC with a technology-neutral approach. Any clean energy investment that produces zero greenhouse gas emissions qualifies, including solar.
Base Credit
Available to all qualifying projects. Requires prevailing wage and apprenticeship for projects over 1MW.
Domestic Content (FEOC) Bonus
System uses US-manufactured components meeting Foreign Entity of Concern requirements. Silfab panels qualify.
Energy Community Bonus
Installation in a census tract with closed fossil fuel facilities or high fossil fuel employment. Many areas in ME and TX qualify.
Low-Income Bonus
Project located in a low-income community or on Indian land. Additional 10% for qualified low-income residential building or economic benefit projects. Most residential TPO does not qualify.
Typical Maximum for Residential TPO
30% base + 10% FEOC + 10% energy community. The low-income bonus rarely applies to standard residential installations.
Under the One Big Beautiful Bill Act, projects that began construction on or before July 4, 2026locked in the full Section 48E credit timing pathway. “Begin construction” could be met through physical work of a significant nature (installing racking or panels) or, for solar up to 1.5 MW AC, the “5% safe harbor” (paying 5% of total project cost). For residential TPO, installing companies typically met it through physical construction starts.
That window has now closed — but the credit did not disappear. TPO projects starting today, including leases, PPAs, and Propel, still qualify for the 30% Section 48E credit; they generally must be placed in service by December 31, 2027. The practical takeaway for homeowners: the TPO tax-credit route remains open, but it is time-bound, and installation scheduling is what protects it.
The Section 48E ITC is subject to a 5-year recapture period. If the system owner sells, transfers, or otherwise disposes of the system within 5 years, a prorated portion of the credit must be repaid to the IRS. The recapture decreases by 20% per year: 100% in year 1, 80% in year 2, 60% in year 3, 40% in year 4, 20% in year 5, and 0% after year 5. This is why Propel's ownership transfer is designed for year 5, not earlier. For lease and PPA companies that maintain ownership for the full term, recapture is not an issue under normal operations.
Acquired Vivint Solar. Offers both lease and PPA. 2.99% typical escalator.
Highest efficiency panels on the market. Higher starting lease payments reflect premium equipment.
Subscription model starts at $50/month in some markets. Powerwall integration. Limited availability.
Strong regional presence, especially Texas. Offers multiple financing paths.
Digital-first model. Competitive pricing. Rapid national expansion since 2023.
One program under several company names: SolSource (a TriBeam company) owns the system and provides the guaranty, Concert Finance funds it with 0% dealer fees, Greentech distributes it, and NuWatt installs it. Ownership option after year five; the Concert loan path pre-funds the year-5 buyout, subject to the agreement terms.
You may see Propel called Concert Finance Propel, SolSource, or TriBeam Propel— these are one third-party-ownership program, not several. SolSource (a TriBeam company) owns the system and provides the performance guaranty, TriBeam's Concert Finance program provides the fixed-payment financing (loans by Medallion Bank), Greentech Renewables distributes it, and installers like NuWatt build it with Enphase hardware and FEOC-compliant Silfab panels. You prepay with a Concert loan (which pre-funds the year-5 buyout, subject to the agreement terms) or with cash (with an ownership option after year five). NuWatt offers Propel in ME and TX today.
Reality: Solar leases are legitimate financial products used by millions of homeowners. They are not a scam, but they have terms (escalators, no ownership) that homeowners should understand before signing. The issue is not leasing itself; it is signing without reading the contract.
Reality: In 2026, this advice is outdated. With no residential ITC, buying solar means paying full price. TPO captures 30-50% in commercial ITC. For many homeowners, TPO provides better economics than buying outright. The optimal choice depends on your specific situation.
Reality: Solar leases and PPAs typically file a UCC-1 fixture filing, not a lien. This is a notice that the solar company owns equipment on your property. It does not encumber your property like a mortgage lien. Propel uses a standard loan secured by the equipment, not the property.
Reality: You can sell a home with a solar lease. The lease transfers to the buyer, or you can buy it out before selling. While lease transfers add some friction, millions of homes have been sold with solar leases. Most real estate agents are experienced with the process.
Reality: TPO is a category, not a product. Leases, PPAs, prepaid models, and transitional ownership (Propel) have fundamentally different economics, ownership paths, and long-term outcomes. Comparing TPO products carefully is as important as comparing TPO to purchasing.
TPO's dominance in 2026 assumes current tax policy remains unchanged. Several factors could shift the market in either direction.
While Section 48E value remains capturable: TPO share will likely keep growing. More companies will launch TPO products, increasing competition and lowering homeowner costs. Propel-style transitional ownership models may become more common as a middle ground between leasing and buying.
If a new residential ITC is enacted: The market would shift back toward homeowner purchases. However, the lesson of 2025-2026 is that TPO works. Even with a restored residential credit, many homeowners may prefer the $0 down, managed experience of TPO over the complexity of tax credits.
If Section 48E is repealed or significantly modified:TPO would lose its economic advantage. Homeowner purchases would return to parity. However, complete repeal is unlikely given the solar industry's lobbying power and the jobs created by IRA-funded manufacturing.
Regardless of policy changes, existing installations are locked into their agreement — future policy changes do not retroactively affect systems already in place. The Section 48E begin-construction window closed July 4, 2026; TPO projects that began construction on or before that date locked in the full credit timing pathway, and new projects still qualify for the 30% credit if placed in service by December 31, 2027.
If you are considering solar in 2026, TPO is almost certainly the right financing approach. The math is clear: letting a third-party owner capture the Section 48E ITC and sharing the savings with you produces better economics than buying solar outright at full price.
Within the TPO category, our recommendation depends on your situation. If you qualify for Propel (660+ FICO, ME or TX), it offers the best long-term outcome: ITC capture, fixed payments, zero dealer fees, and ownership at year 5. If Propel is not available to you, a solar lease or PPA from a reputable provider still delivers excellent savings. If you have cash and want the lowest total cost with ITC benefits, a prepaid lease/PPA is the mathematically optimal choice.
The one thing we strongly advise against: doing nothing and waiting for a “better deal.” Electricity rates increase 3-5% annually. Solar equipment prices may rise with tariffs. And the Section 48E begin-construction window has already closed (July 4, 2026), so new projects must now be placed in service by December 31, 2027 to capture the 30% credit. Every month you wait costs money in higher utility bills and narrows that placed-in-service window.
NuWatt offers Propel, standard loans, and can compare lease and PPA options. Get a personalized recommendation based on your credit, location, and goals.