What is a power purchase Agreement?

A power purchase agreement (PPA) is a Contract between an electricity generator (generator) and the party who is purchasing the power (offtaker) which incorporates the commercial Terms for the sale and purchase of electricity for a generation project. For details of our full suite of resources and precedents on power purchase, see: Power purchase agreements and routes to market—overview.

The PPA provides a route to market for the electricity generated by the generator and, in the case of renewable energy generating stations, any green benefits that the generator receives for generating electricity from renewable sources and that may be sold to electricity suppliers. The PPA is the contract pursuant to which a large proportion (if not all) of a project's revenues are earned and consequently the PPA underpins the economics of most power projects.

The majority of PPAs will contain provisions dealing with the following issues:

1. •

   commencement and term

2. •

   sale of power

3. •

   sale and transfer of any green benefits (for projects generating electricity from renewable sources)