As renewable energy adoption accelerates globally, the combination of solar power and battery energy storage systems (BESS) has become one of the most transformative solutions for sustainable growth. Solar panels harness abundant sunlight, while BESS ensures reliability by storing excess energy and supplying it during peak demand or at night. Together, they represent a clean, efficient, and future-proof alternative to conventional fossil fuels.
However, one of the biggest challenges facing both businesses and homeowners is the upfront cost of solar + storage systems. A full installation can range from tens of thousands of dollars for residential projects to millions for commercial and utility-scale systems. To overcome this barrier, innovative financing models such as leasing and power purchase agreements (PPAs) have emerged, allowing organizations to adopt solar + BESS without significant capital expenditure.
In this article, we’ll break down what it means to invest in solar + BESS, how leasing and PPAs work, the benefits and drawbacks of each model, and what decision-makers should consider when evaluating financing options.
The Rise of Solar + BESS Systems
Why Solar Alone Isn’t Enough
Solar energy is abundant and increasingly affordable—the cost of solar PV modules has dropped by more than 80% in the past decade. But solar generation is intermittent. It peaks during the day and drops off at night, which does not always align with consumption patterns.
This mismatch can create inefficiencies, forcing users to either depend on the grid or waste surplus energy. That’s where BESS comes in. By storing surplus daytime energy, BESS ensures round-the-clock power availability, greater independence from the grid, and reduced exposure to fluctuating electricity prices.
Key Benefits of Pairing Solar with BESS
- Energy Independence – Users rely less on the grid and can maintain operations during outages.
- Peak Shaving – Stored energy offsets expensive peak-hour utility rates.
- Grid Services – Large-scale BESS can provide frequency regulation, load balancing, and grid stability.
- Sustainability – Reduces reliance on fossil fuels, cutting carbon emissions significantly.
- Financial Predictability – Protects businesses and homeowners from rising utility tariffs.
For these reasons, many governments, utilities, and corporations are prioritizing solar + BESS investments. But the financial model you choose—outright purchase, lease, or PPA—can significantly impact ROI.
Investing in Solar + BESS: Ownership vs. Financing Models
When it comes to adopting solar + BESS, there are generally three financing approaches:
- Outright Ownership – The buyer pays the full upfront cost, takes advantage of incentives, and owns 100% of the energy system.
- Leasing – A third-party owns the system, and the customer pays a fixed monthly lease fee to use it.
- Power Purchase Agreement (PPA) – A third-party owns, operates, and maintains the system, while the customer agrees to buy electricity at a predetermined rate, usually lower than the local utility rate.
Let’s break down the two most popular financing models—leasing and PPAs— in detail.
Solar + BESS Leasing Model
How Leasing Works
Under a solar + BESS leasing arrangement, the developer or provider owns the system and installs it on the customer’s property. The customer then pays a fixed monthly fee (lease payment) for the right to use the electricity generated and stored by the system.
There are generally two types of leases:
- Operating Lease (Third-Party Ownership)
- Customer does not own the asset.
- Payments are treated as operating expenses.
- Lease terms usually range from 10 to 25 years.
- Customer does not own the asset.
- Capital Lease (Finance Lease)
- Structured more like an installment purchase.
- The customer has the option to buy the system at the end of the lease term.
- Structured more like an installment purchase.
Advantages of Leasing
- Low or Zero Upfront Cost – Ideal for customers unable to make large capital investments.
- Predictable Payments – Fixed lease fees make budgeting easier.
- Maintenance-Free – The leasing company handles system monitoring, repairs, and upgrades.
- Immediate Savings – Lease payments are often lower than the electricity bill offset by the system.
Drawbacks of Leasing
- No Incentives – Tax credits, rebates, and renewable energy certificates (RECs) go to the system owner, not the customer.
- No Ownership – Customers do not build equity in the system.
- Fixed Payments – Even if energy prices drop, the lease payment remains the same.
Leasing is often favored by homeowners or small businesses that want the benefits of solar + BESS without long-term ownership responsibilities.
Solar + BESS Power Purchase Agreements (PPAs)
How PPAs Work
A Power Purchase Agreement is similar to leasing but with one key difference: instead of paying a fixed lease fee, the customer pays only for the electricity consumed, typically at a rate lower than the utility’s price.
Here’s how it works:
- A developer installs and owns the solar + BESS system on the customer’s property.
- The customer signs a long-term contract (usually 10–25 years) to buy the electricity generated.
- The customer pays based on actual energy usage, not the system’s capacity.
Advantages of PPAs
- No Capital Expenditure – The developer finances, installs, and maintains the system.
- Guaranteed Savings – Customers typically pay less per kWh compared to utility rates.
- Performance Incentive – The developer has a vested interest in ensuring the system performs efficiently.
- Environmental Benefits – Customers can claim green energy usage without owning the asset.
Drawbacks of PPAs
- Long-Term Commitment – Contracts often lock customers in for decades.
- Limited Control – The developer makes most decisions regarding system operation and maintenance.
- Escalation Clauses – Some PPAs include annual price escalations, which may reduce savings over time.
- No Ownership of Incentives – Like leasing, tax credits and RECs go to the developer.
PPAs are especially attractive for large businesses, municipalities, and non-profits that want renewable energy savings without taking on the responsibilities of ownership.
Leasing vs. PPA: Key Differences
| Feature | Leasing | Power Purchase Agreement (PPA) |
| Payment Structure | Fixed monthly lease fee | Pay per kWh consumed |
| Ownership | Third-party owns system | Third-party owns system |
| Upfront Cost | Low or zero | Low or zero |
| Maintenance | Provided by lessor | Provided by developer |
| Access to Incentives | Goes to system owner | Goes to system owner |
| Customer Benefit | Predictable payments, long-term use | Pay-as-you-go savings, performance-driven |
| Best For | Homeowners, small businesses | Large corporations, municipalities, NGOs |
ROI Comparisons: Ownership vs. Leasing vs. PPA
When evaluating whether to buy, lease, or sign a PPA for solar + BESS, decision-makers must weigh return on investment (ROI), cash flow impact, and long-term savings.
1. Ownership ROI
- Pros: Highest lifetime savings. Owners capture all tax credits, rebates, and renewable energy certificates. They also enjoy free electricity after the payback period (typically 5–8 years for commercial projects, 8–12 years for residential).
- Cons: High upfront cost, which can run into hundreds of thousands for large projects. Maintenance and performance risk fall on the owner.
2. Leasing ROI
- Pros: Zero or low upfront cost. Customers can achieve savings immediately if lease payments are lower than offset utility bills. Predictable cash outflows.
- Cons: Limited financial upside. Since customers don’t own the system, they can’t benefit from tax credits, accelerated depreciation, or long-term free energy.
3. PPA ROI
- Pros: Pay only for energy consumed, typically at rates lower than the local utility. No upfront cost. Developers maintain performance, which aligns incentives.
- Cons: Contracts may include escalation clauses, meaning savings diminish if utility rates stabilize. Long-term commitments may complicate property sales or organizational changes.
Key Insight:
- Ownership delivers the highest lifetime ROI but requires capital and risk tolerance.
- Leasing provides steady, predictable savings but caps financial upside.
- PPAs strike a balance—ideal for organizations prioritizing savings without ownership risks.
Case Studies in Solar + BESS Financing
Residential Example: Leasing for Homeowners
A homeowner in Singapore wants to install a 10 kWp solar system with a 13.5 kWh BESS. The outright cost is around SGD 30,000. Instead of paying upfront, they choose a solar lease with zero down payment and a 20-year contract at SGD 180/month.
- Monthly energy savings average SGD 220.
- Net benefit = SGD 40/month, or SGD 9,600 across the lease term.
- No responsibility for maintenance, inverter replacement, or battery performance.
While the homeowner saves less than outright ownership, the low barrier to entry makes leasing attractive for middle-income households.
Commercial Example: PPA for a Manufacturing Plant
A factory consumes 1,000,000 kWh annually and opts for a solar + BESS PPA. A developer installs a 2 MW solar PV system with a 5 MWh battery, valued at SGD 3 million.
- PPA rate = SGD 0.15/kWh vs. utility rate of SGD 0.22/kWh.
- Annual savings = SGD 70,000.
- Contract length = 20 years, guaranteeing over SGD 1.4 million in savings.
The factory enjoys clean energy, grid stability, and significant cost reductions without investing capital upfront.
Utility-Scale Example: Hybrid Financing
A municipal utility in the U.S. installs a 50 MW solar farm paired with 200 MWh of storage. To manage risk, it uses blended financing: partial ownership with debt financing for the solar farm, combined with a long-term PPA for the BESS.
This hybrid structure allows the utility to capture renewable energy credits from solar ownership while minimizing risk exposure for the newer, more expensive storage technology.
Risk Considerations in Leasing and PPAs
While both financing models offer benefits, it’s important to understand the risks and contract nuances.
1. Contract Length and Flexibility
- Leases and PPAs often last 10–25 years. Early termination can involve heavy penalties.
- Customers planning to move, sell property, or change operations should ensure contracts are transferable.
2. Escalation Clauses
- Many PPAs include an annual price escalation (1–3%). This ensures developer ROI but can reduce customer savings if grid rates rise slower than expected.
3. Performance Guarantees
- Not all contracts guarantee system performance. Without clear terms, customers may pay even if the system underperforms.
- Negotiating minimum performance guarantees protects the buyer.
4. Ownership of Environmental Credits
- Under leases and PPAs, renewable energy certificates (RECs) often go to the developer, not the customer.
- Organizations seeking ESG certifications or carbon neutrality claims should ensure they retain RECs.
5. End-of-Term Options
- Leases may offer a buyout option at the end.
- PPAs often provide renewal, buyout, or system removal choices.
- Clarifying these options early ensures smoother transitions.
The Future of Solar + BESS Financing
The financing landscape is evolving rapidly as solar and storage become mainstream.
1. Green Financing and ESG Pressures
Banks and investors increasingly fund renewable energy projects at favorable rates. Many corporations also adopt solar + BESS to meet Environmental, Social, and Governance (ESG) requirements. This is pushing demand for flexible financing models.
2. Declining Battery Costs
Lithium-ion battery prices have fallen by nearly 90% since 2010, and further reductions are expected as solid-state and sodium-ion technologies mature. As costs decline, PPAs and leases may shorten in duration while delivering stronger savings.
3. Virtual Power Plants (VPPs)
As distributed solar + BESS networks grow, they can be aggregated into virtual power plants, selling excess energy back to the grid. Financing models may evolve to include profit-sharing arrangements between system owners and utilities.
4. Policy and Incentives
Government policies will continue to shape adoption. Tax credits, subsidies, and carbon pricing all tilt the financial equation in favor of renewables. In Asia-Pacific, feed-in tariffs and corporate procurement agreements are accelerating growth.
Key Takeaways for Decision-Makers
- Solar + BESS is a strategic investment – offering energy independence, sustainability, and long-term financial savings.
- Ownership delivers the highest ROI but requires capital and assumes performance risks.
- Leasing offers accessibility and predictability – a good fit for homeowners and smaller businesses.
- PPAs are ideal for large organizations – ensuring guaranteed savings without ownership risks.
- Contract details matter – escalation rates, performance guarantees, and end-of-term options significantly affect long-term outcomes.
- The market is evolving quickly – with falling battery costs and rising ESG commitments, solar + BESS financing will only become more attractive.
Conclusion
Investing in solar + BESS systems is no longer a question of if but how. The combination of clean solar generation and reliable battery storage is the cornerstone of modern energy strategy. However, the financing model—ownership, leasing, or PPA—can make the difference between modest savings and transformative ROI.
For homeowners, leasing provides a low-risk, low-cost way to enjoy renewable energy without upfront expenses. For businesses, PPAs unlock long-term savings and sustainability benefits, while shifting risk to the developer. And for those with the capital to invest, outright ownership offers the most powerful long-term returns.
As battery costs continue to decline and governments roll out more supportive policies, solar + BESS adoption will accelerate. By choosing the right financing strategy, businesses and households can not only cut energy costs but also future-proof their operations against rising energy prices and growing climate challenges.