What is a PPA?
A PPA Stands for Power Purchase Agreement, which is a contract between a buyer and a seller for the purchase of electricity. Customers purchase electricity from a third party that owns and operates the renewable energy system. The customer pays a fixed rate for each kilowatt of electricity generated, while the third party covers the upfront costs. PPAs provide stable revenue for energy producers and predictable pricing for buyers.
Key features typically include:
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Fixed Pricing: The buyer agrees to purchase electricity at a predetermined price, over the contract term, which provides financial predictability.
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Long-Term Contract: PPAs typically last between 6-25 years, allowing for stable energy supply and predictable long-term pricing.
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Environmental Benefits: Most PPAs focus on renewal energy sources, helping business meet sustainability goals.
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Ownership and Responsibility: The seller owns, operates, and maintains the equipment which is typically located on the buyer's property. The buyer receives the energy and pays for it at a fraction of their normal utility pricing, avoiding the large upfront costs of equipment.