What is a PPA (Power Purchase Agreement) ?
A Power Purchase Agreement (PPA) often refers to a long-term electricity supply agreement between two parties, usually between a power producer and a customer (an electricity consumer or trader). The PPA defines the conditions of the agreement, such as the amount of electricity to be supplied, negotiated prices, accounting, and penalties for non-compliance. Since it is a bilateral agreement, a PPA can take many forms and is usually tailored to the specific application. Electricity can be supplied physically or on a balancing sheet. PPAs can be used to reduce market price risks, which is why they are frequently implemented by large electricity consumers to help reduce investment costs associated with planning or operating renewable energy plants.
Table of Contents
- Why PPAs?
- How do PPAs and renewable energy financing work together?
- What happens to PPAs after the subsidy period expires?
- Who concludes PPAs?
- What are the different types of Power Purchase Agreements?
- Physical PPAs
- Synthetic PPAs (also: Virtual PPAs)
- What are the Advantages of Power Purchase Agreements?
- What are the Disadvantages of PPAs?
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