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Power Efficiency

Power Purchase Agreement

PPA

A long-term contract between a power generator and a buyer that fixes the price and volume of electricity, typically used to secure renewable energy supply.

Unit: £/MWh or $/MWh

Full Definition

<p>A Power Purchase Agreement (PPA) is a commercial contract in which an electricity generator agrees to sell a specified volume of power to a buyer at an agreed price over a fixed term — commonly 10–25 years. Data centre operators use PPAs to hedge against energy price volatility and to claim additionality for their renewable energy commitments.</p><p>PPAs come in two main forms: physical PPAs, where power is delivered directly via the grid or a private wire; and virtual (financial) PPAs, where the generator and buyer settle the difference between the contracted price and the spot price, with the buyer claiming RECs or Guarantees of Origin. Hyperscalers have used large-scale PPAs to credibly claim 100% renewable operations.</p>

Also Known As

energy offtake agreementvirtual PPAVPPA

Source Reference

RE100 Initiative; IEA Renewables guidance

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