PPA (Power Purchase Agreement)
A Power Purchase Agreement is a long-term contract between an electricity generator and an offtaker that defines the terms of electricity sales, including pricing, delivery obligations, and risk allocation. PPAs typically span 10-25 years and serve as the primary revenue mechanism for independent power producers and renewable energy developers.
The agreement specifies pricing structures (fixed, escalating, or market-indexed), delivery volumes, performance guarantees, and force majeure provisions. Key terms include the strike price (contract price), degradation adjustments for solar assets, availability guarantees, and curtailment compensation mechanisms.
Corporate PPAs (CPPA) have become increasingly important, with companies seeking to secure renewable energy supply to meet sustainability targets. Virtual PPAs (VPPA) enable financial hedging without physical delivery, providing revenue certainty for developers while allowing offtakers to claim renewable energy attributes.
The PPA market has evolved significantly, with standardized templates emerging and secondary markets developing for PPA portfolio trading.
Technical Details
- •Typical duration: 10-25 years with options for early termination
- •Pricing structures: Fixed, inflation-adjusted, market-indexed, or hybrid approaches
- •Key clauses: Performance guarantees, degradation schedules, curtailment compensation
- •Risk allocation: Force majeure, change-in-law, counterparty credit, and insurance requirements
- •Market evolution: $300B+ in PPA volume globally, with growing secondary market liquidity
Why It Matters
PPAs form the backbone of renewable energy project financing and revenue certainty. In Tera Intelligence Platform's Asset Intelligence module, PPA analysis enables investors to evaluate contract terms, counterparty credit, and revenue stability across portfolios. Developers use PPA data to benchmark pricing and terms during project origination, while corporate energy buyers leverage PPA intelligence to source competitive renewable supply. The platform's comprehensive database of legal and technical documentation, including PPA contracts attached to specific assets, helps stakeholders understand market pricing trends and identify attractive acquisition opportunities in global electricity markets.
Related Features
Exclusive Market News
Newsletter
Get exclusive market intelligence, data-driven insights, and strategic analysis on global electricity markets. Receive updates on emerging trends, regulatory developments, infrastructure projects, and investment opportunities that impact your energy strategy and decision-making.
