Power Purchase Agreements allow buying renewable energy at a fixed price directly from the producer.
A PPA (Power Purchase Agreement) is a long-term contract between a renewable energy producer and a consumer (or aggregator), establishing price, quantity, and supply duration. It typically has a duration of 7-15 years.
Key PPA numbers
PPA types compared
| Feature | Physical PPA On-site | Physical PPA Off-site | Virtual PPA (VPPA) |
|---|---|---|---|
| Energy delivery | Direct to consumer | Via electricity grid | No physical delivery |
| Plant location | At consumer premises | Remote site | Anywhere |
| Price mechanism | Fixed price €/kWh | Fixed price + transport | Contract for difference (CfD) |
| Complexity | Low | Medium | High |
| Counterparty risk | Low | Medium | High |
| GO included | Yes | Yes | Yes |
| Best for | SMEs with available space | Large consumers | Corporate / multinationals |
How a PPA works
Benefits for businesses
PPAs offer long-term energy cost stability, protecting against market volatility. They guarantee supply from certified renewable sources, contributing to ESG and decarbonization goals. Additionally, they allow locking in a competitive price without directly investing in plant construction.
Considerations
PPAs require careful evaluation of: counterparty risk, production vs consumption profile, price adjustment clauses, bank guarantees, and contractual flexibility. It is advisable to rely on specialized consultants for contract structuring.
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