New Energy World™
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Jean-Pascal Boutin, Energy Partner at international law firm Watson Farley & Williams, explains the wide-ranging differences between power purchase agreement (PPA) structures across the globe.
What is a power purchase agreement (PPA)? In its simplest form, a PPA is an agreement whereby a generator sells the electricity it generates to an offtaker (a customer). The offtaker may be a private independent or state-owned utility or corporate customer.
A PPA may take many different forms, including virtual PPAs – where the generator enters a hedge/contract for difference (CfD) with an offtaker – or equipment leases of the generating facility, in which the generator receives a fixed rental income.
When the generating facility is a renewable energy facility, the PPA will commonly also deal with the associated renewable energy credits/carbon credits, which can also be sold separately. A generator won’t necessarily have just one PPA; multiple PPAs can cover different slices of an output.