power purchase agreement

Syllable breakdown

Dictionary meaning

a long-term contract between a renewable energy generator and a buyer — typically a corporation, utility, or government — in which the buyer agrees to purchase electricity at a fixed or indexed price over a period typically ranging from ten to twenty-five years; power purchase agreements (PPAs) provide revenue certainty that enables project developers to secure financing for new wind, solar, and other renewable generation assets; corporate PPAs have been a major driver of renewable energy investment, with large technology companies, manufacturers, and retailers signing agreements to match their electricity consumption with new renewable capacity; PPAs can be physical, involving direct delivery of electricity, or virtual (VPPAs), in which the financial settlement is based on price differences without physical delivery