A power purchase agreement, or PPA, is a long-term contract to buy electricity at an agreed price from a specific project, often a solar or wind farm. Large energy users sign them to lock in cost and support new clean power.
How a PPA works
A developer builds a project and sells the output to a buyer for a set number of years. In a physical PPA, the power is delivered directly. In a virtual PPA, the buyer settles the price difference and receives the renewable energy certificates, while the power itself flows into the grid.
Why businesses sign them
PPAs can stabilize energy costs and help a company meet clean energy goals. Data center operators and manufacturers are among the biggest buyers because their power needs are large and steady.
What to check
Contract length, price structure, where the project is located and how the certificates are handled all matter. The EPA Green Power Partnership offers background on buying renewable power, and the U.S. Department of Energy publishes guidance for large buyers.
The takeaway
A PPA is a financial and energy contract at the same time. Read the terms closely, and look for clear reporting on what the purchase actually delivers.
Related reading
Keep going with more explainers in Eco Explained, or see the latest in News.
