The short version
- Capture the full subsidy. The homeowner credit ended after 2025, but eligible company-owned systems can still qualify for commercial credits. Our model routes 100% of that value directly to you.
- Zero hidden fees or debt. You pay a single upfront amount. There are no monthly bills, no UCC-1 property liens, and no surprise escalator clauses.
- A fully funded 25-year partnership. A portion of the federal subsidy is deposited into a dedicated reserve, prepaying us to actively monitor, support, and repair your system for 25 years.
- The freedom to buy out at $0. Because you relieve us of our future salvage liability, the expected net cost to buy out your system and transition to full ownership after Year 5 is $0.
Potrero’s North Star has always been to rapidly expand clean energy adoption across California. We believe the only way to achieve that scale is by obsessively creating undeniable financial value for homeowners. We refused to settle for an industry standard that enriches financiers at your expense. Instead, we have been working hard in the background on a completely new financial architecture that captures the commercial tax credits and delivers 100% of that value directly to the homeowner.
In early 2026, we launched our solution: the Prepaid Energy Service. Here is how it works, the industry flaws it solves, and the exact financial mechanics behind it.
Problem 1: The Subsidy Leak
Until 2025, homeowners could claim a direct 30% tax credit when purchasing a clean energy system. It is no coincidence that the commercial tax credit survived while the homeowner credit was allowed to expire. Lobbyists for Wall Street financiers worked to ensure the commercial credit remained robust, protecting their business models while cutting homeowners out of direct subsidies.
The problem with legacy Third-Party Ownership (TPO) models—like solar leases and Power Purchase Agreements (PPAs)—is that they introduce a third party into the transaction: a Wall Street tax equity investor. These financiers require an 8–10% internal rate of return. When you factor in their target yields, partnership flip structures, and legal fees, financiers capture an outsized share of the federal subsidy, creating a massive distortion in the market. The homeowner is left with a fractured value proposition and a 25-year contract that enriches the bank rather than reducing their energy costs.
As these multi-decade contracts age, they have created a devastating secondary crisis in the real estate market. Publications like Bloomberg, the Wall Street Journal, and Time Magazine have consistently highlighted the key nightmares homeowners face: hidden UCC-1 property liens that derail home sales, buyers refusing to take over draconian 25-year contracts, and homeowners being forced to pay exorbitant $20,000+ buyout fees just to clear their title before moving.
Problem 2: Operational Neglect
Under the traditional three-party model, the third-party owner makes their money upfront. Once your system is energized, their payday is over. Because every future service call eats into their profit margin, their rational economic incentive is to minimize ongoing operation and support costs. Delay tactics and endless hold times are standard industry practice.
In the case of legacy solar-only systems, this misalignment was problematic but manageable. A solar-only system is a "set-and-forget" appliance. To use an anatomical analogy, the solar array is just a peripheral accessory passively returning energy. If the grid went down, the solar shut off.
The addition of a large battery introduces a step-function change in complexity. A modern battery backup system is the beating heart of your home energy. It sits at the center of your electrical infrastructure, intelligently routing power to your home.
With this centrality comes critical added functionality. For example, modern battery setups include a grid isolation switch. When a storm rolls in or the grid fails, this switch physically islands your house from the utility, allowing the battery to safely continue powering your home independently.
The bigger the battery, the more important it is to have intelligent, ongoing operation of that system. This requires a trusted partner to answer behavioral questions ("When should I charge my EV to reduce costs?"), optimize earnings, and handle edge cases. Because things are more complex, you need a partner who is financially incentivized to pick up the phone promptly. When zero dollars are budgeted for care upfront, you are left stranded.
The Solution: The Two-Party Model
We set out to solve both of these problems head-on. By developing the Two-Party Model, we completely removed the Wall Street financiers from the picture.
To solve Problem 1 (The Subsidy Leak), we eliminated the Wall Street bank. This routes 100% of the federal subsidy's value straight through to you. There is no financier taking a massive cut of your tax equity, and we refuse to contribute to the market distortion they created.
To solve Problem 2 (Operational Neglect), we redirect a portion of that captured subsidy into a dedicated operations reserve. This brings long-term support incentives into perfect alignment: we are financially resourced from Day 1 to actively monitor, repair, and optimize your system for 25 years.
If the two-party model is fundamentally better for the homeowner, why isn't it the industry standard? The short answer is that it removes a lucrative tax loophole and adds liability. The two-party approach makes it difficult to monetize the system's depreciation value (MACRSModified Accelerated Cost Recovery System (MACRS). Accelerated year 1 depreciation of the full asset is extremely valuable to Wall Street companies with high earnings to offset.), and it requires the installer to take on 25 years of meaningful operational complexity. Most traditional sales organizations don't want that responsibility. Potrero is different. As an engineering and technology company, we are uniquely structured to manage this long-term liability efficiently, allowing us to reject the Wall Street model and keep the value where it belongs: with the homeowner.
How it works in practice
So how does this structural alignment translate into the actual mechanics of the Prepaid Energy Service? Let's walk through the implementation details, starting with the upfront money.
Step 1: The Upfront Economics
Consider a concrete financial example of a system that would cost $40,000 if purchased directly with cash. Under the Two-Party Model, you pay the full $40,000 upfront as a prepaid service fee.
Because Potrero commercially owns the equipment during the service term, the project qualifies for a 30% federal commercial clean energy tax credit—roughly $12,000. Combined with your $40,000 prepayment, this creates a total capital inflow of $52,000.
We allocate every dollar of these funds with complete transparency:
- $8,000 refunded directly to you: Two-thirds of the federal subsidy is refunded directly to you the following June after tax season, bringing your net out-of-pocket cost down to $32,000 (a clean 20% discount).
- $6,000 dedicated to the O&M reserve: The remaining $4,000 of the subsidy is paired with a $2,000 contribution from Potrero (half that of the subsidy). This establishes a fully funded $6,000 reserve strictly dedicated to maintaining, monitoring, and servicing your system over its 25-year lifespan.
- Hardware and Installation: The remaining $38,000 covers system design, permitting, materials, labor, logistics, commissioning, interconnection, and overhead.
Capital Flow for a $40,000 Home Energy System
Co-funding this dedicated reserve serves two critical purposes: it ensures strict tax law compliance (the ongoing financial burden of operating the equipment must legally remain on a commercial entity), and it brings long-term incentives into clear alignment. Potrero has real capital committed from Day 1 to ensure your system performs over its entire lifespan.
Step 2: Fully Funded Operations
Once your installation is complete, Potrero effectively becomes the long-term asset manager for your home energy system. By utilizing the co-funded operations reserve, this ongoing service is meaningfully pre-funded from day one.
These dedicated funds are used for the tangible realities of keeping a modern solar and battery system running over a 25-year lifespan, including:
- Hardware & Labor: Covering the cost of necessary truck rolls and replacing expensive physical components, like inverters, as they age.
- Always-On Connectivity: Paying the ongoing cellular subscription fees for your system. This ensures you can control your home's power even if your Wi-Fi drops, and guarantees we always have telemetry to proactively monitor your system's health.
- Proactive Tech Support: Actually picking up the phone when you call. Because we installed the electrical heartbeat of your home, future electrification projects—like adding an EV charger or heat pump—often require our guidance to ensure the new work integrates seamlessly.
- Software Management: Handling backend firmware updates and optimizing your battery's behavior as utility rate plans change.
If the reserve falls short of actual maintenance costs over the 25-year period, Potrero covers the difference. If there are funds remaining in your specific service reserve at the end of the contract, you receive a cash true-up check for the balance.
Step 3: Eventual Buyout Options
While our Prepaid Energy Service is a 25-year agreement, you are never locked in. You have the absolute right to purchase the system and terminate the service agreement at any time.
However, we expect the majority of our customers to keep the system enrolled in the Prepaid Energy Service for its full 25-year duration. The service is fundamentally designed to protect you: Potrero holds the liability for the health, maintenance, and eventual decommissioning of your system, while you simply enjoy the clean power it provides. Purchasing the system means exchanging that long-term support for direct ownership, forcing you to assume 100% of the operational risk yourself.
For those who do eventually choose to buy out the system, it usually happens in one of two scenarios. The most common is selling your home: while a new buyer can easily assume the remaining years of your prepaid service at no cost, you always have the option to buy out the system and roll its value into the sale price of the home if the buyer prefers a clean slate. The second scenario is simply a preference for total autonomy; some homeowners just prefer to own their infrastructure outright once the initial five-year tax compliance period has passed.
How the Buyout Economics Work
If you choose to buy out the system after the initial five-year tax compliance period, your expected out-of-pocket payment is $0. Before Year 5, the net buyout price remains above zero solely due to strict IRS rules regarding the recapture of tax credits, which establishes a statutory floor that decreases annually.
Net Buyout Economics Example
Below is a mathematical model for a standard Prepaid Energy Service, anchored by a $40,000 gross hardware value.
To comply strictly with IRS regulations, an eventual buyout is achieved through two independent transactions that occur concurrently at closing:
- 1The Appraisal: Federal tax law prohibits us from agreeing to a fixed buyout price on Day 1. Instead, the purchase is based on a genuine appraisal at the time of buyout. Because your purchase relieves Potrero of the substantial financial liability of decommissioning the hardware at the end of its life, the Fair Market Value is inherently lowered—calculated net of these avoided salvage costs.
- 2The Refund: Simultaneously, because your purchase terminates the service contract early, you are contractually entitled to a refund for the unused years of service. After Year 5, this unused fee refund is expected to equal or exceed the depreciated Fair Market Value of the equipment.
- 3The Net Result: The concurrent appraisal and refund effectively cancel each other out, resulting in an expected $0 net transaction. If a market anomaly temporarily spikes the Fair Market Value, you are under no obligation to purchase—you can simply decline the buyout, stay in the program, and wait for the market to normalize. Conversely, if your unused refund exceeds the Fair Market Value, the excess automatically converts into an Extended Service Credit for your newly owned system.
Summary
The Prepaid Energy Service is a fundamentally different approach to home energy. You capture 100% of the federal subsidy value, gain a dedicated operations partner for 25 years, and retain the freedom to transition to ownership at any time.
Developed by Potrero and introduced in early 2026, this model is already powering homes across the region. Our focus is creating clear, lasting value for homeowners to help accelerate clean energy adoption across California. We are proud to offer a financial structure that aligns our incentives with yours, and we will continue to refine our services to support our customers over the long term.