Introduction

A Power Purchase Agreement (PPA) is a long-term legal contract between an electricity provider and power purchaser. During the contractual period, which typically lasts 20–25 years, the purchaser agrees to buy electrical energy from the electricity provider. Under such a contract agreement the electrical energy supplier is considered to be an independent power provider (IPP). Energy sales under PPA type contracts are regulated by state or local governments. Under a PPA contract agreement, the electrical energy provider is most often the developer and owner of solar power or sustainable energy production technology. However, the seller in some instances could be an entity that buys the energy from several sources and resells it to various purchasers.

In the United States Power Purchase Agreement contracts are regulated by the Federal Energy Regulatory Commission. Under the Energy Policy Act of 2005, solar or sustainable PPA providers are considered exempt from wholesale energy producer regulations. Most prevalent PPA contracts fall into two categories, namely, solar (SPPA) or wind (WPPA).