Power Purchase Agreements explained

A PPA is an agreement where a buyer and a seller agree to pay a certain price for the electricity generated by a specific asset.


PPAs are contracts between an electricity generator and a purchaser. The generator agrees to sell their electricity to the purchaser at a fixed price for an agreed period of time. PPAs are used to purchase electricity from both renewable and traditional power generation. 

The length of a PPA can vary, but they often last between 5-20 years. 

The fixed price in the PPA allows the purchaser to predict and budget for their energy costs. It also provides the generator with a guaranteed source of revenue for the life of the agreement. This predictable revenue stream is why PPAs are used to finance new renewable energy projects.

For example, an energy utility may choose to buy all of the power generated by a wind farm for a 10 year period. This provides revenue certainty for the wind farm owner so they are confident investing in the project, whilst the utility is able to manage their energy price risk via an agreed contract.


Curios about the Montel Groups PPA service, Qwatt? Read more about the service here.