A power purchase agreement (PPA) is a contract to buy the electricity generated by a power plant. These agreements are a critical part of planning a successful wind project because they secure a long-term stream of revenue for the project through the sale of the electricity generated by the project. Securing a good PPA is often one of the most challenging elements of wind project development.
PPAs are long-term agreements. The stated term of most PPAs is 20 years, although a term ranging anywhere from 15 to 25 years is not unusual. The PPA is usually legally binding once it has been executed by representatives of both the seller and the purchaser, subject to early termination rights. The end date of the PPA is usually measured in the number of years from the commercial operation date.
A Power Purchase Agreement (“PPA”) is a long-term agreement between the seller of wind energy and the purchaser. Negotiating and signing a PPA is a critical step in the development of any wind energy project because it secures a long-term revenue stream through the sale of energy from the project. Securing a PPA will also be a condition to any equity and debt financing of the project. Power may be sold through a PPA to an investor-owned, municipal, or rural electric cooperative utility in the local market or, in some cases, to more distant utilities or wholesale or retail customers in unregulated markets. The buyers in these situations are called off-takers.