A power purchase agreement (PPA) is a long-term contract between a renewable electricity generator and a buyer, covering the sale of electricity and, in many cases, the associated EACs. PPAs are one of the primary mechanisms through which corporate buyers source renewable energy and the certificates that back their renewable claims.
A PPA typically covers volume (in MWh), price (fixed, indexed, or hybrid), delivery point, contract duration (often 10-20+ years), and the treatment of the associated EACs. PPAs can be physical (with actual electricity flowing to the buyer's site or grid) or virtual (with no physical delivery, only financial settlement against a reference price).
A physical PPA involves actual electricity delivery from the generator to the buyer or to a grid connection serving the buyer. A virtual PPA (VPPA) involves no physical delivery as the buyer pays the generator a fixed price for the electricity output, the generator sells the electricity at market price, and the difference is settled financially. In both cases, the buyer typically receives the EACs to substantiate their renewable claim.
A PPA is the contract; the EACs are the certificates that flow under it. Most PPAs explicitly transfer the associated EACs to the buyer, allowing them to make a renewable energy claim. Without the EAC transfer, the buyer is paying for renewable electricity but not receiving the verifiable proof, which means they cannot claim it as renewable for Scope 2 reporting purposes.
PPAs are primarily used by corporate buyers (Google, Microsoft, and Amazon are major examples), large industrial consumers, utilities, and energy users seeking long-term price certainty and renewable sourcing. They are increasingly used by smaller commercial buyers through aggregation, where multiple buyers share a single PPA.
Explore other terms like
Power purchase agreement
