Which financing option allows a user to pay for solar energy based on their actual usage?

The financing option that allows a user to pay for solar energy based on their actual usage is a Power Purchase Agreement (PPA). In a PPA, a third-party solar provider installs a solar energy system on the customer’s property, and the customer agrees to purchase the electricity generated by the system at a predetermined rate. This rate is often lower than the local utility rate, allowing the customer to save money on their energy bills.

One of the key advantages of a PPA is that the customer is only responsible for paying for the energy produced, not for the overall system installation or maintenance costs. This pay-per-use model aligns the customer’s costs directly with their actual energy consumption, leading to a more budget-friendly and flexible financing solution, especially for those who may not want to incur upfront costs or take on debt through loans.

In contrast, a loan requires the borrower to pay back the total amount borrowed regardless of how much energy is produced or used, a lease usually involves fixed payments for the use of the solar system regardless of output, and a cash purchase entails a one-time upfront payment for the entire system, which does not account for the variable nature of energy usage.