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.
Informational content by IPGS Energy. Information is reviewed as of the stated update date and does not replace a contractual, tax or regulatory assessment specific to an individual business.