Finance
A Power Purchase Agreement (PPA) is a long-term contract between an electricity generator and a buyer (off-taker) to purchase energy at a predetermined price per unit, for a fixed duration. In solar and wind projects, PPAs often span 10-25 years, providing the project with a stable revenue stream and the buyer (utility or corporate) with a reliable source of renewable energy at agreed prices. The PPA outlines terms like payment rate (which can be fixed or escalating), delivery schedule, and responsibilities for both parties. PPAs are crucial in project financing because they reduce market price risk, making it easier for developers to secure loans and investment. Variations include on-site PPAs (solar on a business’s roof selling power to that business) and virtual PPAs (financial contracts for renewable attributes without physical power delivery to the buyer).