Full Title: Power Purchase Agreements
Author(s): Better Buildings
Publisher(s): Better Buildings
Publication Date: May 23, 2024
Full Text: Download Resource
Description (excerpt):
A power purchase agreement (PPA) is a contract between a renewable energy developer and an electricity consumer, often called an “offtaker.” The offtaker purchases renewable energy and renewable energy certificates (RECs) from a specific power generation asset at a set price ($/MWh) that is usually lower than their utility’s retail price. Unlike the fluctuating cost of fossil fuels or the market rate for electricity, the fixed energy price of a PPA can help insulate organizations from increasing utility costs.
Responsibility for installing, maintaining, and operating equipment usually falls on the developer, reducing liability for the offtaker. Organizations with limited space can use PPAs for renewable energy procurement as the development and their facilities do not need to be in the same location.
PPAs promote clean energy on the grid and generate RECs for offtakers to purchase. Organizations can compare renewable energy developers and projects to find the ones that best align with their sustainability goals. The two most common types of PPAs are Physical and Virtual PPAs and their structure dictates how energy is delivered to a facility and its cost. This overview provides information on how the most common types of PPAs operate.