Power Purchase Agreements (PPAs)
What Are PPAs?
A Power Purchase Agreement (PPA) is a contract to buy power from a renewable generator. PPAs are particularly important in the renewable sector and are widespread in energy markets, across all types of technology.
PPAs are a way for corporate buyers to purchase power and renewable certificates directly from an energy generator, rather than the local utility, enhancing their green credentials.
PPAs are a contract in which the buyer commits to buy the output of a renewable power project, often for a fixed price.
Agreements can be designed to be flexible to meet the needs of the energy buyer. For example, a long-term PPA can be drawn-up for 10 to 15 years, but shorter term, or even seasonal deals can be arranged where renewable power supply is matched to changing operational requirements.
Below you will find the basic principles of each type of PPA; although each agreement is a bespoke contract and can be tailored to the company buying the power.
What Are The Benefits Of PPAs?
- Direct contract with renewable power project operators to secure renewable energy
- Flexibility on term and type of agreement; options include seasonal or quarterly contracts through to long-term agreements
- Security of supply and certainty and transparency about the cost of energy
- Contribution to sustainability targets to reduce carbon emissions in a transparent, traceable way
- Demonstration of environmental commitment to customers, investors, employees and other key stakeholders
- PPAs also enable project developers to build additional renewable capacity