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Power Purchase Agreements

Power Purchase Agreements (PPAs) Explained

As large corporates commit to net-zero targets, Power Purchase Agreements (PPAs) have emerged as a strategic route to sourcing renewable energy directly from generators. But not all PPAs are the same — and understanding the options is key to making the right commercial decision.

Types of PPAs_On-Site PPAs

1. On-Site PPAs

With on-site PPAs, renewable energy (typically solar or wind) is generated directly at your premises — on your roof or adjacent land.
Best for: Businesses with high energy use and physical space.
Advantages:
  • Avoids grid transmission costs
  • Direct, reliable supply
  • Minimal capital investment — often fully funded by developers
Considerations:
  • Space limitations
  • Developer typically retains asset ownership and maintenance responsibility

2. Off-Site Sleeved PPAs

In this structure, the energy is generated remotely, then “sleeved” through a licensed utility and delivered to your sites via the grid. You enter a long-term PPA with the generator, and your supplier manages the physical flow.
Best for: Multi-site or urban-based businesses.
Advantages:
  • Flexibility to source from the best projects, regardless of location
  • Enables procurement of utility-scale renewables
  • Certificates (e.g., REGO) match usage for credible ESG claims
Considerations:
  • More complex commercial and legal structure
  • Requires coordination with suppliers and legal teams
Types of PPAs_2. Off-Site Sleeved PPAs
Types of PPAs_Virtual PPAs (vPPAs)

3. Virtual PPAs (vPPAs)

Virtual or synthetic PPAs are financial contracts — not physical energy deliveries. You agree to pay the generator a fixed price for power; in return, you receive market-based payments (or pay the difference) depending on actual prices. You also receive associated green certificates.
Best for: Corporates with sites across multiple regions or countries.
Advantages:
  • Not tied to energy supply locations
  • Facilitates global sustainability goals
  • Flexibility and scalability
Considerations:
  • Exposure to market pricing volatility
  • Treasury and finance involvement required

PPA Pricing Structures

When entering a PPA, your business will agree to a pricing model that fits your risk profile and sustainability objectives:

Fixed Price

A locked-in price per MWh over the term (e.g., 10–15 years). Provides long-term cost predictability and budgeting certainty.

Low risk, stable pricing

No upside from falling markets, but protected from spikes

Market-Linked / Market-Following

Prices fluctuate in line with wholesale power markets — offering exposure to real-time pricing dynamics.

Can capture savings in low-price markets 

Exposes buyer to price volatility

Day-Ahead Index + Premium 

You pay a day-ahead market rate (e.g., N2EX) plus or minus a negotiated premium/discount. 

Market reflective, with some flexibility 

Requires active risk management or supplier hedging 

Types of PPAs_Market-Linked

Why It Matters​

Choosing the right PPA structure is about more than compliance — it’s about cost stability, reputation, and strategic resilience. At Export Energy, we help you assess your options, structure your agreement, and align your energy strategy with your ESG commitments.

 

Physical PPA 

Virtual PPA (vPPA) 

Energy Delivery 

Yes – electricity delivered to your meters 

 

No – financial settlement only 

Price Model 

Fixed or index-linked 

Contract-for-difference vs market 

Green Certificates 

Yes (e.g., REGOs in UK, GOs in EU) 

Yes – with full traceability 

Best For 

UK/EU-based energy consumers 

Global/multi-region firms or complex supply chains