PPA
Acronym for: Power Purchase Agreement
Long-term contract to sell generated electricity at a fixed price; primary financing mechanism for utility solar.
Detailed Explanation
A Power Purchase Agreement (PPA) is a contract where an off-taker (utility, corporate buyer, or government) commits to buy electricity from a solar plant at a fixed price (or inflation-linked) for 10-25 years. PPAs provide the revenue certainty banks need to finance solar projects. Two types: (1) Physical PPA โ actual electrons delivered; (2) Virtual PPA / VPPA โ financial contract settled against spot prices. Corporate PPAs (Google, Amazon, Microsoft buying solar) drove record US/EU deployment 2022-2025.
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Related Terms
Total lifetime cost of building and operating a solar plant divided by total lifetime energy generated.
Utility policy crediting solar owners for excess electricity fed back to the grid at the retail rate.
Time required for a solar system to save enough money to offset its initial cost.