The milestones, in order: NTP, M1, M2, M3, PTO, COD
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. The labels vary by financier, but the sequence is consistent.
NTP (notice to proceed) is the formal go-ahead to start construction, granted once permits, financing, and equipment readiness are confirmed. NTP itself usually does not pay; it unlocks the milestone clock.
M1 is the first funding tranche, typically triggered at or near contract execution and project approval. Historically M1 has been a large share of the contract, anywhere from 25 to 70 percent depending on the financier and the installer's standing.
M2 is triggered when installation is complete and the system is inspection-ready. At M2 you are paid the rest of the contract balance minus the final holdback.
M3 is the final tranche, usually around 10 percent, released when the utility grants PTO. Many financiers have shifted full payment later, holding M3 until PTO rather than paying it out at install.
PTO (permission to operate) is the utility's formal approval to connect to the grid and turn the system on. COD (commercial operation date) is the related milestone marking the system as fully operational and placed in service. PTO is the one that gates your final money.
Why the final 10 to 20 percent is held until PTO
The financier holds the last tranche because PTO is the point where the system is actually live, inspected, and producing. Until then, the financier is carrying a system that cannot generate the lease or PPA revenue it underwrote. Holding M3 to PTO protects them if a project stalls.
Most TPO funding contracts also carry a time trigger. The clock typically starts at M1 and runs 90 to 150 days, with roughly 120 days to get the project to PTO. If a job does not reach PTO inside that window, the financier can claw back the money already paid at M1 and M2, which can leave you short on a project you have 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 M3 holdback just delays the last slice of them.
How the timing turns into a 60 to 90 day cash wait
The gap is real and it is mostly outside your control. After your crew finishes the install, PTO commonly takes 2 to 12 weeks, depending on the utility, the jurisdiction, and system complexity. Standard solar-only systems often land at 2 to 4 weeks; battery-paired systems and backlogged utilities routinely run 8 to 12 weeks, and complex cases push past that.
Stack the steps and the wait adds up: inspection, interconnection application, utility review, and finally the meter and PTO. Your labor, equipment, and permit costs went out the door weeks earlier. Many installers end up floating roughly half a project's cost for weeks before any revenue lands, covering two to three months of burn before money comes in consistently.
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 can control the things that cause avoidable PTO delays: clean, PE-stamped plan sets, as-built documentation that matches what was approved, and accurate interconnection applications. Field changes that diverge from the approved plans and error-laden interconnection filings are among the most common reasons projects sit.
What you cannot control is the utility's queue. Inspection backlogs, policy transitions, and interconnection review times are on the utility's clock, not yours. That is exactly why the final tranche, the one tied to PTO, is the least predictable part of your payment timeline, and why so many installers look for a way to stop letting the utility's calendar set their cash flow.