PPAs (Power Purchase Agreement) are one of the worldwide energy trends.

Their purpose is securing a long-term supply of cheap energy, regardless of price increases.


Benefits of PPA agreements

When it comes to the RES market, the PPA is signed between the electricity producer and the consumer, i.e. the buyer. This form of contract gives an opportunity to come up with a more mutually beneficial arrangement than a standard auction system. It means stable energy costs and reliable product sales for many years.

PPAs specify the amount of energy supplied, prices for transactions, settlement methods, consequences of failure to comply with the agreement and the duration of cooperation.

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Types of PPAs

The flexibility to prepare provisions that are tailored to the needs of both parties and the lack of standardisation means that PPAs can vary widely.

There are several basic types, divided by the location where the energy is generated and the number of parties signing the contract.

Number of parties signing the contract:

  • Multi-buyer – one producer sells energy to several buyers under the same contract.
  • Multi-seller – one buyer obtains energy from several producers under the same contract.

Energy generation site:

  • On-site – signed when the buyer gets electricity directly from the producer, without intermediaries. This is only possible if the photovoltaic system is located in the immediate vicinity of the building, e.g. on the roof.
  • Off-site – the producer uses an intermediary to deliver energy to the consumer. Typically, these are power plants that use public grids for this purpose.
  • Near site direct wire – the PV system is not located in the immediate vicinity of the customer, but the distance is short. This gives an opportunity to create a dedicated transmission line so that there is no need to involve intermediaries in the process.