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All industries › Glossary › Power purchase agreement

Glossary

Power purchase agreement

Also: PPA, offtake agreement

The long-term contract to buy a project's power, which a developer usually needs before it can finance and build.

A power purchase agreement fixes who buys a project's output, for how long and at what price: a utility, a large company buying clean power, or a hyperscaler powering its data centers. Lenders want a buyer before they lend, so a signed PPA usually comes before financing and construction.

Utilities' PPAs often need a utility commission's approval, which puts them on a public docket; corporate PPAs are announced when the buyer chooses to.

Related terms

DeveloperThe company that finds the site, wins the permits, the grid connection and the financing, and hires the builder.Interconnection agreementThe contract that settles how and when a project connects to the grid, and who pays for the upgrades; the strongest queue signal that a site will be built.Siting approvalThe state or local permission to build a power plant at a site; in many states, the step that decides whether a project goes ahead.
Every term Utility solar projects Data center projects

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