A power purchase agreement (PPA) is a contract between two parties, where one agrees to purchase electricity from the other. Typically, a PPA involves a large energy buyer, such as a corporation or utility company, and a renewable energy developer or generator.
Under a PPA, the renewable energy developer agrees to sell electricity to the buyer at a fixed price over a long-term period, often 10-20 years. This gives the developer certainty over their revenue stream and allows them to secure financing for their renewable energy project.
PPAs are a key tool in the growth of renewable energy, as they provide a reliable source of income for developers and help to increase the market share of renewable energy sources. They also offer benefits for the energy buyer, who can secure a predictable, long-term supply of electricity at a competitive price.
One of the advantages of a PPA is that it can provide cost savings over traditional fossil fuel sources of electricity. Renewable energy sources such as wind and solar have become increasingly competitive with traditional sources, and in some cases, are already cheaper.
PPAs have become particularly popular in recent years as corporations have become more committed to sustainability and reducing their carbon footprint. Many large corporations have committed to sourcing a significant portion of their electricity from renewable sources, and PPAs are a key way to achieve this goal.
In addition to providing a reliable source of income for developers and lower-cost electricity for buyers, PPAs also have positive environmental impacts. By increasing the market share of renewable energy, PPAs help to reduce greenhouse gas emissions and combat climate change.
Overall, a PPA is a valuable tool for both renewable energy developers and large-scale energy buyers. By providing a reliable source of income for developers and lower-cost, long-term electricity for buyers, PPAs can help to accelerate the adoption of renewable energy sources and create a more sustainable future.