Common
Power purchase agreement
Contract between two parties for the sale of electricity
Power purchase agreement
A power purchase agreement (PPA), or electricity power agreement, is a long-term contract between an electricity generator and a customer, usually a utility, government or company. PPAs may last anywhere between 5 and 20 years, during which time the power purchaser buys energy at a pre-negotiated price. Such agreements play a key role in the financing of independently owned (i.e. not owned by a utility) electricity generators, especially producers of renewable energy like solar farms or wind farms. PPA contracts can either be for a pre-defined amount of electricity or for a pre-defined portion of whatever quantity of electricity the seller generates. In either case, the price can be a fixed amount per kilowatt-hour or fluctuate with market rates, depending on the specific terms of the contract. In the case of distributed generation (where the generator is located on a building site and energy is sold to the building occupant), commercial PPAs have evolved as a variant that enables businesses...
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