Adding Battery Storage to a Solar Lease: What You Need to Know

Many homeowners considering solar also want to know if their project is suitable for battery storage. After all, batteries are the Swiss Army Knife of home energy, providing savings benefits, backup power, and more.

But now that only solar leases and Power Purchase Agreements (PPAs) qualify for a federal tax credit, can you still add a battery to your home solar project?

Can I Add Battery Storage to a Solar Lease or PPA?

Solar leases and PPAs both fall under the umbrella of Third-Party Owned (TPO) solar, in which a business owns the system on your roof, collects the tax credit, and offers you a low, predictable rate for the electricity it produces. Every third-party owner of residential solar projects allows batteries. However, they don’t always allow them on all projects.

The underlying question they’re going to ask is this: Can adding a battery create sufficient value to offset the cost to install and maintain it? And the answer largely depends on how the battery will be used.

Battery storage primarily for cost savings

In locations like California, which has Time of Use rates and net metering that doesn’t allow solar to achieve “full” value when it’s sent back to the grid, adding a battery can more than pay for itself by capturing solar production and deploying it when it provides the home the greatest value. Think of the battery as only cashing out a stock position when the stock is at its peak for the day.

In many locations, utilities are subsidizing battery installations because they provide valuable grid services in the form of Virtual Power Plants” (VPPs). If your project qualifies for one of these subsidies, then you can likely include a battery in your project at a very attractive cost. It’s important to read the details of these programs, however, as they generally allow the utility some control of your battery’s operation.

Battery storage primarily for backup power

If you’re in a location like the Gulf Coast, you might want a battery purely for resiliency purposes. While this is of great value to you, it’s hard for the third-party owner to quantify that value. And, if the cost to install and maintain your solar and battery project doesn’t allow them to provide you with electricity at or lower than your utility, then the system doesn’t pencil and the third-party owner may disallow the battery as part of the project.

Do battery projects qualify for a federal tax credit?

The One Big Beautiful Bill introduced a host of new rules and regulations surrounding what projects are eligible for the tax credit and which aren’t. One of the largest changes is the introduction of “FEOC” rules, which disallow projects that utilize more than a set threshold of components from Chinese companies from receiving the benefit of the tax credit.

Given China’s strong ambitions in the energy space, they’ve invested heavily in solar and battery equipment manufacturing—and a lot of that Chinese capacity has ended up in residential solar batteries. While we’ll likely see supply chains evolve over time, manufacturing a battery is a complex and setting up a factory is capital-intensive. Therefore, new factories with FEOC-compliant products can’t be turned on overnight.

This means the pool of available battery suppliers will likely dramatically shrink in 2026 relative to 2025, and homeowners will have limited selection on which batteries they can add to a third-party-owned solar project.

Can I add a purchased battery to a leased solar system?

So what’s a homeowner to do if they want a solar battery but it can’t be rolled into a lease? It is possible to own the battery separately from the solar array, although there needs to be a clear line of what equipment is yours versus what equipment is owned by a third-party (your lease or PPA provider).

Before adding battery storage, it’s often required to get permission from the third-party solar owner and have the original solar installer perform the battery installation.

Are there still tax credits for residential battery storage?

Under the One Big Beautiful Bill, which created the premature ending of the solar tax credits, battery systems actually phase out on a different timeline and extend well beyond the expiration of the solar tax credits. However, this is only for the Section 48E Clean Electricity Investment Credit claimed by lease and PPA providers—not the 30% federal tax credit for individual homeowners who purchase and own their battery storage equipment.