Power purchase agreement

How it is used

Almost always shortened to PPA. Corporate PPAs let companies buy renewable power directly; they can be physical or virtual (financial). PPAs are negotiated, signed and priced per MWh, usually for 10 to 20 years, and they help projects get bank financing.

Example sentences

1. The car maker signed a ten-year power purchase agreement with a local wind farm.

2. Without a power purchase agreement, the bank would not finance the solar project.

Common collocations

• sign a PPA
• corporate PPA
• virtual PPA
• PPA price
• long-term PPA

Related terms

• wholesale marketThe market where electricity is traded in large volumes between generators, suppliers, traders and large consumers before it reaches end customers.
• guarantee of originAn electronic certificate proving that one MWh of electricity was produced from a specific, usually renewable, source. Companies use them to back up claims of using green power.
• LCOEShort for levelized cost of electricity: the average cost of producing one MWh over a plant's whole life, including building, financing, fuel and maintenance costs.
• utilityA company that supplies electricity, gas or water to the public and often owns or runs the network that delivers it. In energy texts it usually means a power company.
• feed-in tariffA support scheme that guarantees renewable energy producers a fixed price for each kWh they feed into the grid, usually for 10 to 20 years.

More terms: Energy Markets and Tariffs

• tariff
• smart meter
• day-ahead market
• net metering
• demand response