Solar Loan vs Free PPA in DC: Which is Actually Better in 2026?
If you've been pitched solar in Washington DC, you've probably heard two things: "You can own your system and earn SREC income" or "Get solar for free with no monthly payment." Here's what the salesperson didn't show you.
Washington DC has one of the strongest solar markets in the country. Pepco's residential rate hit 23.9¢/kWh in 2026 — 42% above the national average — and rates have risen three consecutive years with more increases already approved. Going solar makes financial sense. The question is: which way?
Most DC homeowners are presented with two options: a solar loan where you own the system, or a free Power Purchase Agreement (PPA) where you pay nothing. Both sound good on paper. But the 20-year math tells a very different story.
What is a solar loan?
A solar loan lets you own your solar panels outright. You borrow the cost of the system — typically $30,000 to $45,000 for a 10kW system in DC — and pay it back over 20 to 25 years at an interest rate usually between 4.99% and 7.99%. In return, you own the system and can sell Solar Renewable Energy Certificates (SRECs) generated by your panels.
In DC, each MWh of solar power generates one SREC. A 10kW system producing 11,000 kWh per year generates roughly 11 SRECs annually. At today's price of around $370 per SREC, that's approximately $4,070 per year in SREC income — or about $339 per month.
In year 1, a solar loan can look very attractive. Your loan payment might be $180/month and your SREC income $339/month — meaning solar is actually putting money in your pocket.
This is exactly what solar companies show you. And in year 1, they're not wrong. The problem is what happens next.
The SREC decline nobody mentions
DC's SREC market is strong today — but it is declining. The Solar Alternative Compliance Payment (SACP), which effectively caps SREC prices, decreases every year under DC law. As more solar systems come online and supply increases, prices will fall gradually but steadily.
Here is the projected SREC price trajectory for DC based on current market forecasts:
Your loan payment stays fixed. Your SREC income doesn't. By year 10, a homeowner with a $180/month loan payment is earning roughly $183/month in SRECs — barely breaking even. By year 15, they're paying out of pocket every month.
Solar companies in DC are legally required to disclose loan terms. They are not required to show you SREC price projections. Most don't. Ask yours what their SREC income estimate looks like in year 10 and year 15 — and watch their reaction.
What is a free solar PPA?
A Power Purchase Agreement (PPA) is an arrangement where a solar company installs panels on your home at zero cost. You pay nothing upfront and nothing per month. The solar company owns the system and earns the SREC income. You get free electricity and save on your Pepco bill from day one.
In DC, a 10kW system producing 11,000 kWh per year offsets essentially your entire Pepco bill. At 23.9¢/kWh, that's a saving of roughly $220 per month — or $2,600 per year — with no loan, no debt, and no SREC risk.
Side by side: the 20-year picture
| Factor | Solar loan | Free PPA |
|---|---|---|
| Monthly payment | ~$180/mo | $0/mo |
| SREC income year 1 | +$339/mo | Goes to provider |
| SREC income year 10 | +$183/mo | Goes to provider |
| SREC income year 20 | +$152/mo | Goes to provider |
| Net cost year 1 | +$159/mo gain | $0 |
| Net cost year 10 | +$3/mo gain | $0 |
| Net cost year 15 | -$22/mo cost | $0 |
| Pepco savings (20 yr) | ~$70,000 | ~$70,000 |
| Total loan payments | ~$43,200 | $0 |
| Total SREC income | ~$55,000 | Goes to provider |
| 20-year net position | ~$11,800 ahead | ~$70,000 ahead |
The loan looks better in the early years when SREC income is high. But over 20 years, the free PPA wins decisively — because you keep 100% of the Pepco savings without any loan payments eating into them.
So why do companies push loans?
Solar companies make significantly more money on a financed sale than a PPA. A loan generates an immediate commission on a $35,000+ sale. A PPA generates revenue over time. The incentive structure heavily favors pushing loans — which is why the SREC decline conversation rarely happens in a sales pitch.
That doesn't mean a solar loan is always wrong. If you plan to sell your home soon, owning the system may add more resale value. If SREC prices stay higher than projected, the loan math improves. And if the interest rate is very low, the numbers tighten further. But for most DC homeowners planning to stay in their home for 10+ years, a free PPA is the lower-risk, higher-value option.
How to check your own numbers
Every solar quote is different. System size, production estimates, loan terms, and SREC projections all vary. Before you sign anything, run your specific numbers through our free DC solar calculator. Enter your system size, your quoted loan terms, and your current Pepco rate — and see the real 20-year picture including the SREC decline curve.
Not sure which option is right for you?
Use our free calculator to check your quote, then book a free consultation. We'll review your numbers honestly — no pressure, no obligation.
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