Power Purchase Agreements

Power purchase agreements (PPAs) are typically long-term contracts between a power generator and a power offtaker. Power offtakers can include utilities, power marketers, commercial entities and residential consumers. PPAs can be for 100% of the output from a generator or a portion of the output. The per-kilo-watt hour price can be steady or include an escalator. In monopoly markets where state-owned utilities are the single buyers, policymakers may want to consider opportunities for allowing direct purchases of power via bilateral agreements between generators and corporate offtakers. PPAs can take multiple forms, including direct PPAs, virtual PPAs that are more of a financial agreement and aggregated PPAs that bring in multiple offtakers into a shared agreement.