What do M1, M2, and M3 mean in solar?

They are the staged funding milestones a TPO financier pays an installer, and the labels are in flux. In newer naming schemes, M1 is installation (the bulk of the money, roughly 80 to 90 percent, released after the system is installed and the docs are approved) and M2 is activation (the final 10 to 20 percent, released at the utility's permission to operate, or PTO). Older industry shorthand used three numbers: M1 for contract, M2 for install, and M3 for PTO. Watch the trap, because M1 means contract in the old shorthand but installation in the newer naming. One thing does not vary: contract no longer pays a meaningful amount, so the installer fronts the work, the bulk arrives at install, and a final slice is held to PTO.

Who are the major TPO solar financiers paying installers in 2026?

After a hard shakeout in the post-25D market, the residential TPO financiers still actively originating and paying installers in 2026 include Palmetto LightReach, Sunrun (the largest), GoodLeap, and EnFin (backed by Qcells). Each contracts installers and pays in milestones tied to project events, with its own naming and timing. Several once-prominent names left the market or stopped paying installers in 2025 and 2026, so confirm who your financier is and how their milestone schedule actually works before you front a project.

What is the difference between NTP and PTO?

NTP (notice to proceed) is the financier's formal authorization to start construction, granted once permits, financing, and equipment are in order. PTO (permission to operate) is the utility's formal approval to connect the finished system to the grid and turn it on. NTP starts the project and the milestone clock but pays nothing, so you front the work from there; PTO ends it and releases the final 10 to 20 percent holdback.

Why does the TPO financier hold back the last 10 to 20 percent until PTO?

Because PTO is the point where the system is live, inspected, and able to produce the lease or PPA revenue the financier underwrote. Before PTO, the financier is carrying a system that cannot earn anything yet, so the final tranche protects them if a project stalls or never reaches the grid. Many TPO contracts also run a clawback clock from the install milestone, commonly allowing on the order of 115 to 150 days to reach activation and PTO; miss that window and the financier can reclaim the money already paid at install.

How long does PTO take after install?

It varies by utility and jurisdiction, but PTO commonly takes 2 to 12 weeks after the install is finished. Standard solar-only systems often clear in 2 to 4 weeks, while battery-paired systems and backlogged utilities routinely run 8 to 12 weeks, and complex cases run longer. The steps that fill that window (inspection, interconnection application, utility review, meter swap, and final PTO) are mostly on the utility's clock, not the installer's.

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TPO milestone payments, explained

Written by Ari Arora, Co-Founder & CEO · Last reviewed June 2026

TPO milestone payments are the staged payouts a third-party-owned solar financier sends an installer as a project moves from contract to grid connection, released in steps tied to project events rather than as one lump sum. The key thing to know in 2025 and 2026: contract no longer pays. Notice to proceed (NTP) is an approval gate that releases no money, so you front the work. The bulk, roughly 80 to 90 percent, is released after the system is installed, and the final 10 to 20 percent is held back until the utility grants permission to operate (PTO). Naming is in flux: some financiers now label the funded steps M1 (installation) and M2 (activation), while older industry shorthand used M1 for contract, M2 for install, and M3 for PTO. The financiers running this model in 2025 and 2026 include Palmetto LightReach, Sunrun, GoodLeap, and EnFin, each with its own labels and timing. Either way, you carry the project cost from contract through install, then wait on the funder's review and the utility's PTO for the rest, which stretches the cash wait to 30 to 60 days on many projects.

Contract pays nothing, so you front the work. The bulk releases at install, and the final 10 to 20 percent is held until the utility grants PTO, which is what stretches the wait to 30 to 60 days.

The milestones, in order: NTP (no pay), install (the bulk), activation (the holdback)

Third-party ownership (TPO) means a finance company, not the homeowner, owns the system. The homeowner signs a lease or a power purchase agreement (PPA), and the financier pays you, the installer, directly for each project. That payment arrives in milestones tied to project events.

NTP (notice to proceed) is the formal go-ahead to start construction, granted once permits, financing, and equipment readiness are confirmed. NTP does not pay. It is an approval gate, so you front design, permitting, and the full equipment and labor cost with no funder cash yet. Some financiers label this gate M0.

Installation is the first funding milestone and the big one. Once the system is physically installed and your design and photo documentation is approved, the funder releases the bulk, roughly 80 to 90 percent of the project value. In newer naming schemes this milestone is labeled M1. Note that this is not same-day cash: after you submit the install documents there is a review and approval lag, commonly around one to three weeks, before the money lands.

Activation, at PTO, releases the final 10 to 20 percent. Once the system is live and communicating and the PTO documentation is filed, the funder releases the holdback. In newer naming schemes this milestone is labeled M2. A recent industry trend is funders pushing even more of the payment to this final gate, so at some funders the share held to PTO is larger than 10 to 20 percent.

A note on labels, because they are genuinely confusing. Newer schemes number the funded steps M1 (installation) and M2 (activation), with NTP and a final title step as non-paying gates around them. Palmetto LightReach, for example, documents exactly this for its certified installers: M0 is NTP, M1 is installation, and M2 is activation. Older industry shorthand numbered things differently: M1 was contract, M2 was install, M3 was PTO. So M1 can mean either contract or install depending on whose convention you are reading. What does not vary is the order of the money: nothing at contract, the bulk at install, the slice held to PTO.

Why the final 10 to 20 percent is held until PTO

The financier holds the last tranche because PTO is when the system goes live, inspected and producing. Until then, the system cannot generate the lease or PPA revenue the financier underwrote, so holding the final slice protects them if a project stalls.

Most TPO contracts also run a clawback clock. It typically starts at the install milestone and allows on the order of 115 to 150 days to reach activation and PTO. Miss that window and the financier can claw back the money already paid at install, leaving you short on a project you already built.

Separately, many financiers take a dealer fee, an upfront cut per deal that is netted out of what you receive rather than paid to you. It is worth distinguishing from the milestone holdback: the dealer fee reduces your total proceeds, while the holdback just delays the last slice of them.

How the timing turns into a 30 to 60 day cash wait

The gap is real and mostly outside your control. After your crew finishes, PTO commonly takes 2 to 12 weeks. Standard solar-only systems often land at 2 to 4 weeks; battery-paired systems and backlogged utilities run 8 to 12, and complex cases longer.

The steps stack up: inspection, interconnection application, utility review, then the meter and PTO. Your labor, equipment, and permit costs all went out before a dollar of funder cash arrived. Until the install payment lands you float the whole project, and then the final 10 to 20 percent for weeks more.

For an installer doing dozens of concurrent projects, those overlapping holdbacks stack into hundreds of thousands of dollars floating at any one time. That is the structural reason a healthy, growing solar business can still feel cash-starved: the money is earned, it is just parked behind PTO.

What you can and cannot control

You control what causes avoidable PTO delays: clean PE-stamped plan sets, as-built docs that match what was approved, and accurate interconnection applications. Field changes that diverge from the approved plans and error-laden filings are the most common reasons projects sit.

You cannot control the utility's queue. Inspection backlogs, policy transitions, and review times run on the utility's clock, not yours. That is why the PTO tranche is the least predictable part of your timeline, and why so many installers look for a way to stop letting the utility's calendar set their cash flow.

Questions, answered

What do M1, M2, and M3 mean in solar?: They are the staged funding milestones a TPO financier pays an installer, and the labels are in flux. In newer naming schemes, M1 is installation (the bulk of the money, roughly 80 to 90 percent, released after the system is installed and the docs are approved) and M2 is activation (the final 10 to 20 percent, released at the utility's permission to operate, or PTO). Older industry shorthand used three numbers: M1 for contract, M2 for install, and M3 for PTO. Watch the trap, because M1 means contract in the old shorthand but installation in the newer naming. One thing does not vary: contract no longer pays a meaningful amount, so the installer fronts the work, the bulk arrives at install, and a final slice is held to PTO.
Who are the major TPO solar financiers paying installers in 2026?: After a hard shakeout in the post-25D market, the residential TPO financiers still actively originating and paying installers in 2026 include Palmetto LightReach, Sunrun (the largest), GoodLeap, and EnFin (backed by Qcells). Each contracts installers and pays in milestones tied to project events, with its own naming and timing. Several once-prominent names left the market or stopped paying installers in 2025 and 2026, so confirm who your financier is and how their milestone schedule actually works before you front a project.
What is the difference between NTP and PTO?: NTP (notice to proceed) is the financier's formal authorization to start construction, granted once permits, financing, and equipment are in order. PTO (permission to operate) is the utility's formal approval to connect the finished system to the grid and turn it on. NTP starts the project and the milestone clock but pays nothing, so you front the work from there; PTO ends it and releases the final 10 to 20 percent holdback.
Why does the TPO financier hold back the last 10 to 20 percent until PTO?: Because PTO is the point where the system is live, inspected, and able to produce the lease or PPA revenue the financier underwrote. Before PTO, the financier is carrying a system that cannot earn anything yet, so the final tranche protects them if a project stalls or never reaches the grid. Many TPO contracts also run a clawback clock from the install milestone, commonly allowing on the order of 115 to 150 days to reach activation and PTO; miss that window and the financier can reclaim the money already paid at install.
How long does PTO take after install?: It varies by utility and jurisdiction, but PTO commonly takes 2 to 12 weeks after the install is finished. Standard solar-only systems often clear in 2 to 4 weeks, while battery-paired systems and backlogged utilities routinely run 8 to 12 weeks, and complex cases run longer. The steps that fill that window (inspection, interconnection application, utility review, meter swap, and final PTO) are mostly on the utility's clock, not the installer's.

How R11 records each funding milestone, on the day the financier reports it

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