Definition
A long-term contract between an electricity generator (such as a renewable energy provider) and a buyer (often a company or utility), in which the buyer agrees to purchase electricity at a predetermined price. PPAs help companies secure clean energy and reduce carbon emissions while ensuring financial stability for renewable energy projects.
Why It Matters
- Accelerates Corporate Decarbonization: Companies use PPAs to procure renewable energy, lower carbon footprints, and meet Net Zero targets.
- Provides Price Stability: Long-term contracts protect businesses from energy price volatility while supporting clean energy investments.
- Supports Renewable Energy Development: PPAs provide financial certainty for solar, wind, and other renewable projects, enabling faster expansion.
Types of PPAs
- Physical PPA: The buyer receives renewable electricity from the generator, typically within the same power grid.
- Virtual (or Financial) PPA: A financial contract where the buyer does not physically receive electricity but pays a fixed price for renewable energy credits (RECs) linked to a project.
- Sleeved PPA: An intermediary (such as an energy retailer) manages the transaction between the buyer and generator, simplifying energy procurement.
- On-Site PPA: A renewable energy system (such as solar panels) is installed directly on the buyer’s premises, and the generated electricity is consumed on-site.
- Off-Site PPA: The renewable energy project is located elsewhere, and the buyer receives credits or offsets corresponding to their share of the energy produced.
Example: Microsoft's Solar PPA in Singapore
In 2018, Microsoft entered into a long-term PPA with Sunseap Group to purchase 100% of the renewable energy generated from a 60 MWp solar project in Singapore. This initiative:
- Powers Microsoft's data centers with renewable energy, reducing Scope 2 emissions.
- Supports Singapore's renewable energy objectives by enhancing solar adoption.
- Provides price stability for Microsoft while enabling Sunseap to expand its solar capacity.
Read More: Microsoft and Sunseap sign agreement on largest-ever solar project in Singapore
Further Reading
