Power Purchase Agreement

Definition

A Power Purchase Agreement (PPA) is a type of contract that allows an Energy Consumer, typically large industrial or commercial entities, to form an agreement with a specific energy generating unit.

A Power Purchase Agreement is a contract between a purchaser and supplier of electricity. The PPA contract itself specifies the commercial terms including: delivery, price, payment, etc. The contract specifies details such as the volume of electricity to be placed on the grid and how much the consumer will take off.

PPAs generally guarantee a price for the electricity during the specified time period. In many markets, these contracts secure a long-term stream of revenue for an energy project (See Project Finance). In order for the consumer to say they are buying the electricity of the specific generator, attributes shall be contractually transferred to the consumer with the electricity.

PPAs cannot deliver electricity attributes that are different from the Grid average. The end user can acquire a Energy Attribute Certificate like a Guarantee of Origin in combination with the electricity contract.

References

• GHG Protocol Scope 2 Guidance (2015)