What Is a Prepaid Solar Lease? A Colorado Homeowner's Guide for 2026

If you've looked into solar in Colorado recently, you've probably run into a term that didn't come up a year ago: the prepaid lease. It's become one of the most common ways homeowners are going solar in 2026, and for good reason — it's currently the most effective path to capturing federal incentives that are no longer available to homeowners directly.

Here's what it is, how it differs from the financing options you already know, and how to tell whether it makes sense for your home.

Why prepaid leases exist in 2026

For years, the 30% residential clean energy credit let homeowners who bought a system claim 30% of the cost back on their federal taxes. That credit is no longer available for homeowner-owned residential solar.

What did not go away is the commercial-side incentive. A business that owns solar equipment can still claim the investment tax credit and depreciation benefits. The prepaid lease is built on that distinction: a third-party owner holds the system briefly, claims the incentives it's eligible for, and passes the value to you as a discount on the price.

In practical terms, it's a structure that lets Colorado homeowners keep accessing federal incentive value that they can no longer claim on their own return.

How a prepaid lease actually works

The name causes some confusion, so it's worth being precise. A prepaid lease is not a monthly lease and it's not a power purchase agreement. Here's the sequence:

• You pay a single upfront amount — already reduced by the incentive value, typically 26% to 36% below the standard cash price.
• A third party owns the system for a short initial period, usually about five years, and claims the commercial incentives.
• You use 100% of the power the system produces during that time. Nothing about how solar works on your home changes.
• Ownership transfers to you at the end of the period. No balloon payment, no buyout, no additional cost.

After the transfer, you own the system outright — the same as if you had paid cash on day one, just for meaningfully less money.

The discount: 26% or 36%?

You'll see both numbers, and the difference comes down to location. The standard discount is 26%. Homes located in what the federal government designates an energy community qualify for a larger credit, which pushes the discount up to as much as 36%.

Energy community designations generally cover areas with a history of fossil fuel employment or closed coal facilities — and a fair number of Colorado communities qualify. It's worth checking, because on a $30,000 project the difference between 26% and 36% is roughly $3,000.

Prepaid lease vs. the other options

Here's how the prepaid lease compares to the paths most Colorado homeowners are choosing between:

If you have the cash available, the prepaid lease is currently the lowest lifetime-cost way to end up owning solar in Colorado.

Who a prepaid lease suits

This structure is a strong fit if you:

• Have the cash available to pay upfront and want the lowest total cost
• Want to own your system rather than rent power indefinitely
• Plan to stay in your home long enough to see the return
• Would rather not take on a solar loan and its dealer fees

It's probably not the right fit if you:

• Don't have upfront capital available — a PPA or loan will serve you better
• Are uncomfortable with a third party holding title for the initial period
• Expect to sell within the first few years, which adds a transfer step

What to watch for

Not every prepaid lease is structured the same way, and the details matter. Before signing, confirm:

• The transfer is automatic. There should be no balloon payment, buyout price, or additional fee to take ownership.
• The equipment isn't downgraded. A discount means nothing if it comes with lower-tier panels or inverters. Ask exactly what's being installed.
• The warranties carry through. Equipment and workmanship coverage should be unaffected by the ownership structure.
• Your discount is verified. Have your installer confirm whether your address qualifies for the energy community adder before you assume 36%.

Where Solar Wave lands on it

We offer the prepaid lease because, for a large share of the homeowners we talk to, it's simply the best math available right now. It delivers a real discount, uses the same equipment we'd install on any other project, and ends with you owning the system.

That said, it isn't the answer for everyone. We also install standard cash-purchase systems at discounted equipment pricing and offer a PPA for homeowners who need a $0-upfront path. Which one fits comes down to your capital, your timeline, and how long you plan to stay — and that's a conversation, not a sales pitch.

Frequently asked questions

Is a prepaid lease the same as a PPA?

No. With a PPA you pay $0 upfront and then buy the power the system produces for 20 to 25 years, and you never own the equipment. With a prepaid lease you pay once upfront, have no monthly payment, and take ownership after the initial period.

Do I have to pay anything to take ownership?

Not with a properly structured prepaid lease. Ownership transfers automatically with no balloon payment or buyout. Confirm this in writing before signing.

Can I add a battery later?

Yes. Adding storage after the fact is common, and it's one of the advantages of a structure that ends in ownership — you have the flexibility to expand.

What happens if I sell my house during the initial period?

The agreement can be transferred to the new homeowner. It adds a step to the sale, so if you expect to move within a few years, mention it early and we'll walk you through it.

Does the discount apply to the battery too?

In most cases the incentive value applies to qualifying solar and storage equipment together. We'll break out exactly what's covered in your proposal.

Steven Weaver

Steven is the founder of Solar Wave and has dedicated the last seven years of his career to the solar industry. After consulting for multiple solar companies across the US he founded Solar Wave in Denver, Colorado. Solar Wave is on a mission to continue the rapid deployment of residential and commercial solar in Colorado by offering the best solar equipment and installation services at the lowest prices possible.