A 1.99% solar escalator is usually a reasonable middle ground for a homeowner with a solar lease. A $150 monthly payment grows to about $241 by year 25, and over the full 25-year term you'd pay about $12,581 more than at a fixed rate of $150. That's real money, but it's a far gentler climb than 2.9% or 3.5%.
The catch is the starting payment. A lower escalator usually comes with a higher first bill, so the real question is whether that slower climb is worth paying a bit more up front. If you want the basics first, here's how a solar escalator works.
What a 1.99% solar escalator means for your solar lease
A 1.99% annual escalator raises your lease payment by just under 2% each year. On a solar lease, it applies to your monthly payment. On a PPA, it applies to the price per kilowatt-hour. The solar panels and the solar energy they make don't change. Only the payment structure does. Among typical escalator rates on solar leases and PPAs, 1.99% sits near the low end.
Many solar companies offer 1.99% as one option on a menu, next to 0% and 2.9%. It often isn't the first number you see during the sales process, and many homeowners never think to ask for it by name.
Where the escalator clause hides in a 1.99% solar contract
The escalator clause usually sits in the pricing section or payment schedule of the solar contract. It might be labeled an annual adjustment, annual increase or escalation instead. Solar contract terms vary from one solar provider to the next, so read that section closely. In plain terms, the clause increases your monthly payment by a fixed percentage, here 1.99%, on the same date each year.
A good solar agreement spells out your payment in year 10, year 20 and the final year, not just the starting rate. The rate is locked in at signing, and that same percentage every year applies for the life of the contract. Request the escalating payment schedule in writing if it isn't there.
How a 1.99% escalator compounds, and why it's gentler
Every escalator compounds, because each increase is figured on last year's payment. At 1.99%, though, the snowball stays small. The first one is a small annual increase of about $3, and even near the end of the contract each yearly bump is under $5.
| Escalator | Year 1 | Year 5 | Year 10 | Year 15 | Year 20 | Year 25 |
|---|---|---|---|---|---|---|
| 1.99% | $150 | $162 | $179 | $198 | $218 | $241 |
| 0% (flat) | $150 | $150 | $150 | $150 | $150 | $150 |
Monthly payment starting at $150, rounded to the nearest dollar.
Your solar payment at 1.99%, year by year
- Year 10: about $179 a month
- Year 20: about $218 a month
- Year 25: about $241 a month
Unlike 2.9% or 3.5%, a 1.99% escalator never doubles your payment over a 25-year contract. With a PPA, a 20-cent starting price would reach about 32 cents per kilowatt-hour by year 25.
Choosing an escalator rate: 1.99% vs. 2.9%
Say one quote offers $160 a month at 1.99%, and another offers $150 at 2.9%. The 2.9% option looks cheaper on day one. Here's what happens to the total over time:
| Total paid after | $160 at 1.99% | $150 at 2.9% | 1.99% saves you |
|---|---|---|---|
| 5 years | $9,990 | $9,537 | -$452 |
| 10 years | $21,014 | $20,540 | -$474 |
| 15 years | $33,179 | $33,234 | $54 |
| 20 years | $46,605 | $47,878 | $1,273 |
| 25 years | $61,420 | $64,772 | $3,352 |
Example starting payments for illustration. Your quotes will differ, so run your own numbers.
The 2.9% payment passes the 1.99% payment in year 9, and its running total passes in year 15. Stay the full 25 years and the 1.99% deal saves you about $3,352. Move in year 10 or 15 and the two land close, with the 2.9% deal slightly ahead early on. Either way, judge escalator offers by the total payment over 25 years, not the first bill. Here's the full year-by-year math on a 2.9% solar escalator, which is the most common rate along with 2.99%.
At the high end, a 3.5% escalator pushes the same $150 to about $342 by year 25, so 1.99% looks even better by comparison.
Compare 1.99% with your quote
Enter your starting payment and escalator and see every year of your contract side by side.
Run my numbersHow 1.99% holds up against your utility rate
The crossover year is when your rising solar price passes your utility rate. A lower escalator rate pushes that day much further out:
| If utility rates rise | 1.99% escalator | 2.9% escalator |
|---|---|---|
| 0% a year | Year 10 | Year 7 |
| 1% a year | Year 18 | Year 10 |
| 2% a year | Never in 25 years | Year 20 |
| 3% a year | Never in 25 years | Never in 25 years |
Year your solar price per kWh passes your utility rate, assuming it starts 15% below your utility rate. At 4% or more a year, none of these rates ever catch up.
At 1.99%, your solar price stays under the utility rate for the whole contract as long as utility rate increases average 2% a year or more. Massachusetts electricity rates have increased about 70% since 2015, though they don't rise every year, and your utility rate may flatten out for a stretch. Here's how solar lease escalators compare with Massachusetts utility rates over the long run.
Your utility bill won't vanish either way. You'll still pay for grid power at night and on dark winter days, so count that bill when you compare.
When a 1.99% solar lease escalator makes sense for a homeowner
- You plan to stay in the house 15 years or more.
- The starting payment is only a little higher than the 2.9% option.
- You want lower payments now without a steep climb later.
If the 0% option starts close to the 1.99% one, give it a hard look too, since that payment never moves. Here's how to decide whether a solar payment increase is worth it at all, and how to compare two solar quotes with different escalators.
Selling your home with a 1.99% escalator
When you sell, the new homeowner who takes over your solar lease or PPA inherits the escalated payment. At 1.99%, that's about $179 a month in year 10 on a $150 lease, which is easier to hand off than a steeper escalating payment. A gentler escalator can make the transfer smoother when you're selling your home, and it keeps any buyout figure lower too.
Leased solar vs. owning a system outright
Even 1.99% is still an escalation. The only way to have no escalator at all is a 0% option or owning the system with cash or a solar loan, where the loan payment stays fixed. That's the key difference in any solar lease vs. ownership comparison when you're weighing solar financing.
Before you sign, check the solar cancellation window and the rest of the terms. Here's what to look for in a solar contract.
Got a quote with an escalator?
Send it to Mark. He'll review it and find you an option with no escalator.
Mark, review my quoteFAQs About 1.99% Solar Escalators
Is 1.99% a good escalator rate?
It's one of the lower common rates, and it climbs much more slowly than 2.9% or 3.5%. Whether it's good for you depends on how much higher it starts and how long you'll live in the house.
How much does a 1.99% escalator add over 25 years?
On a $150 starting payment, about $12,581 more than a flat $150, or roughly 28% more over the life of the agreement.
Is 1.99% better than a 0% escalator?
Only if it starts meaningfully lower. If the 0% option is just a few dollars more a month, the flat payment usually comes out ahead over a long contract.
About Mark Featherstone
Mark has been in solar for over 12 years, working at some of the biggest solar companies in the country, before co-founding Your World Solutions. His goal is simple: help homeowners get into solar deals that actually work for them, and make sure they understand every part of it before they sign.
This article is for general informational purposes only and isn't financial, legal or tax advice. Numbers and examples are estimates for illustration. Actual payments, savings, utility rates and contract terms vary and aren't guaranteed, and rates and program rules can change over time. Review your own contract and talk with a qualified professional before making a decision.