What are PPAs?

PPAs are financial agreements between an energy buyer and a renewable energy project developer. In these contracts, the buyer guarantees the developer a fixed price for energy from a project that hasn’t been built yet, such as a wind farm or a solar array. For this fixed price, the buyer receives renewable energy certificates (RECs) from the project. PPAs are long-term contracts that can last 10 to 15 years. Currently, most contracts span about 10 years. With a virtual power purchase agreement (VPPA), energy does not physically flow from the renewable project to the buyer. Instead, the project sells its energy into the wholesale power grid and the buyer continues to procure power from its utility as usual.