Understanding Power Purchase Agreements
A power purchase agreement (PPA) is a contractual agreement between two parties, the seller who generates electricity and the buyer who agrees to purchase the electricity. The seller is usually referred to as the “Developer”, “Asset owner” or “Generator”, and the buyer is referred to as the “Offtaker”.
The buyer agrees to purchase renewable energy from a specific asset, within the boundaries of a pre-established pricing framework from the seller. This can be a fixed or flexible pricing structure. Power Purchase Agreements are particularly useful for companies requiring large volumes of electricity and supplier who are looking to buy energy, to then resell onto the retail marketplace.