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Off-Site Physical PPA

Off-Site Physical PPA

A power purchase agreement (PPA), is a contract in which a customer agrees to purchase the energy produced by a generator over a period of time for a predetermined price per unit of energy, such as a megawatt-hour (MWh). Cities looking to match their energy use with renewable energy may consider a PPA (often called a direct or physical PPA). In a PPA, the seller typically delivers electricity to a “delivery point” that is near the buyers’ location, and the customer takes legal title to the energy. The buyer typically also takes ownership of the renewable energy certificates (RECs) associated with the generated electricity. Physical PPAs are most common in states that have created electric retail choice markets (or partial retail choice markets, as in California). They can, however, also be executed by municipal utilities and some community choice aggregators in non-retail choice markets. To find out which type of market your city belongs to, visit the State Resources page.

Virtual PPAs

A virtual PPA (VPPA), as opposed to a physical PPA, is an agreement under which the buyer never takes ownership of the energy but instead simply receives the revenues generated by selling the electricity into a wholesale market. Click here to learn more about VPPAs.