ContractsCounsel Logo

Power Purchase Agreement

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 9,759 reviews
No Upfront Payment Required, Pay Only If You Hire.
Home Types of Contracts Power Purchase Agreement

Jump to Section

What is a Power Purchase Agreement?

A power purchase agreement, sometimes called an electricity power agreement, is a legal contract between a power producer who generates electricity and a customer who uses electricity.

In this arrangement, the power producer installs and owns an energy system on a customer's property. The customer is then able to purchase electricity, usually at a very low price, without any upfront costs. The power producer is able to sell the electricity and take advantage of tax credits.

The power purchase agreement, often abbreviated to PPA, lays out the commercial terms for the sale of electricity between the two signing parties.

Some terms that can be found in a PPA include:

  • When the project will begin
  • Schedule for delivery of electricity
  • Amount of electricity to be supplied
  • Negotiated prices of electricity
  • Accounting
  • Penalties for non-compliance
  • Termination clause

The terms of a PPA usually last between five years and twenty years, and because PPAs take many different forms, they can be negotiated and tailored to suit the needs of the buyer and the seller.

To read more about power purchase agreements, click here.

How Do Power Purchase Agreements Work?

In a power purchase agreement, a customer, also called an offtaker, provides a physical space for an energy producer to install some kind of energy-generating systems like solar panels or wind turbines. The producer owns the equipment for the duration of the PPA and covers all costs of installation. The customer can then purchase the energy at a reduced rate.

There are several steps necessary to execute an effective power purchase agreement.

  • Step 1: A project must be implemented, developed, or refinance. A power purchase agreement is only necessary when a renewable project is ready to be built or refinanced, and it has a connection to the electricity grid.
  • Step 2: Determine the structure of the contract. Power purchase agreements can be either physical or virtual. A physical PPA refers to purchasing energy at the meter point. A customer will receive physical delivery of the energy through the grid. A virtual PPA or a financial PPA allows a company to purchase renewable energy in the form of energy credits virtually.
  • Step 3: Request for proposal or quotation. The energy producer must receive buying offers. This is done through a request for proposal or a request for quotation in which interested buyers make an offer for purchase.
  • Step 4: Compare offers. Once the energy producer has received offers, they must compare the offers. This can be a highly complex process because the proposals do not contain specific details, only a price, tenor, and PPA structure.
  • Step 5: Enter negotiations. Contract negotiations can take between six and twelve months in which sellers and buyers work out the specifics of the power purchase agreement.
  • Step 6: Sign the PPA. After both parties have reached an agreement and all necessary terms have been negotiated, both the buyer and the seller can sign the PPA.
  • Step 7: Management of the PPA. PPA's often have terms of five years or more. Both the buyer and the seller should manage the energy sales and risks throughout the duration of the agreement. This includes being aware of when the contract ends and options to re-negotiate and extend.

Laws relating to PPAs, and third-party energy generation equipment ownership vary by state. If you are unsure about the regulation or limitations on buying and selling power in your state, it is best to consult with an environmental lawyer .

Read this article for more information about power purchase agreements and how they work.

Meet some lawyers on our platform

Benjamin W.

73 projects on CC
View Profile

Sara S.

102 projects on CC
View Profile

Taren C.

2 projects on CC
View Profile

Tabetha H.

29 projects on CC
View Profile

What's Included in a Power Purchase Agreement?

Power purchase agreements are complex legal contracts and must include a variety of different terms agreed upon by the seller and the buyer. PPAs are tailored to fit the specific needs of the two parties involved; however, most effective PPAs will include the following terms:

  1. Length of the Agreement. PPAs are usually five years or more but could be subject to early termination rights.
  2. Price terms will vary greatly depending on the two parties and may include the project's renewable energy credits and carbon credits.
  3. Constraints on the transmission system may curtail the production of energy. The PPA should document who is at risk financially if curtailment rights are exercised.
  4. Development milestones are used to track the progress of the project.
  5. Defaults and Credit. Sellers are usually required to provide credit enhancement in the event that the project doesn't meet milestones or isn't operational on the agreed upon date.
  6. The PPA typically includes a clause about what kind of insurance the seller must maintain.

Types of Power Purchase Agreements

There are several different types of power purchase agreements, like physical PPAs and virtual PPAs, but because there are so many different variations for these agreements, it is difficult to list them all.

The three most common power purchase agreement types include:

  • Physical power purchase agreement
  • Virtual power purchase agreement (also called financial power purchase agreement)
  • Sleeved power purchase agreement

One of the most popular power purchase agreements is PPAs for solar energy. Solar technology is low in cost and risk, so it is one of the least expensive renewable energies available on the market.

In a solar power purchase agreement, the developer funds the installation of a solar energy system on the customer's property at little to no cost to the customer. The customer benefits from purchasing the power at a fixed rate less than the utility's rate, and the developer can sell the electricity and also benefit from tax benefits.

Solar PPAs terms are usually between ten and twenty-five years. During this period, the developer is responsible for the operation and the maintenance of the solar energy system. At the end of the agreement, the customer usually has the option to either end the contract, extend the contract, or purchase the energy system.

Benefits of a solar PPA include:

  • Little to no upfront costs
  • Reduced energy bill
  • Very little risk
  • Tax credits
  • Potential increase in property value

ContractsCounsel Power Purchase Agreement Image

Image via Pexels by Pok Rie

Who Signs a Power Purchase Agreement?

The two parties who sign the power purchase agreement are the seller and the buyer.

The seller is the producer of energy who owns the project. Sellers can include:

  • Investment companies
  • Independent producers of electricity
  • Renewable energy asset managers
  • Utilities and energy companies building their own renewables assets
  • Infrastructure funds investing in renewables

The buyer is the entity purchasing the electricity produced by the seller. Buyers can include:

  • The occupant of the building, like a homeowner
  • Utility companies who need additional power to supply their customers
  • Large corporations with large energy consumption need like Google or Amazon
  • Companies looking to reduce their carbon footprint
  • Industrial companies who require a large amount of energy for manufacturing

A PPA is an excellent way for buyers to reduce their energy costs, protect themselves against price increases, and take advantage of tax incentives.

Get Help with a Power Purchase Agreement

Do you have questions about power purchase agreements and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from environmental lawyers who specialize in power purchase agreements.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Power Purchase Agreement Lawyers

Daniel R. on ContractsCounsel
View Daniel
5.0 (51)
Member Since:
January 2, 2023

Daniel R.

Business and Real Estate Atttorney
Free Consultation
New York
28 Yrs Experience
Licensed in NY
New York Law School

NY Admitted Lawyer 20+ years of experience. Focused on Startups , Entrepreneurs, Entertainers, Producers, Athletes and SMB Companies. I have been a part of numerous startups as Founder, CEO, General Counsel and Deal Executive. I have been through the full life cycle from boot strap to seed investors to large funds-public companies to successful exit. Let me use my experiences help you as you grow your business through these various stages. We saw a market for an on-line platform dedicated to Virtual General Counsel Services to Start Ups and Private Companies.

Jane C. on ContractsCounsel
View Jane
4.9 (81)
Member Since:
October 9, 2020

Jane C.

Attorney
Free Consultation
New York
19 Yrs Experience
Licensed in CT, DC, NY
Pace University School of Law

Skilled in the details of complex corporate transactions, I have 15 years experience working with entrepreneurs and businesses to plan and grow for the future. Clients trust me because of the practical guided advice I provide. No deal is too small or complex for me to handle.

Jeremiah C. on ContractsCounsel
View Jeremiah
4.9 (36)
Member Since:
March 5, 2021

Jeremiah C.

Partner/Attorney at Law
Free Consultation
Houston
16 Yrs Experience
Licensed in NV, TX
Thomas Jefferson

Creative, results driven business & technology executive with 24 years of experience (15+ as a business/corporate lawyer). A problem solver with a passion for business, technology, and law. I bring a thorough understanding of the intersection of the law and business needs to any endeavor, having founded multiple startups myself with successful exits. I provide professional business and legal consulting. Throughout my career I've represented a number large corporations (including some of the top Fortune 500 companies) but the vast majority of my clients these days are startups and small businesses. Having represented hundreds of successful crowdfunded startups, I'm one of the most well known attorneys for startups seeking CF funds. I hold a Juris Doctor degree with a focus on Business/Corporate Law, a Master of Business Administration degree in Entrepreneurship, A Master of Education degree and dual Bachelor of Science degrees. I look forward to working with any parties that have a need for my skill sets.

Taren C. on ContractsCounsel
View Taren
5.0 (2)
Member Since:
December 4, 2023

Taren C.

Attorney
Free Consultation
Royal Palm Beach, Florida
4 Yrs Experience
Licensed in FL
Nova Southeastern University

The Castro Law Firm, located in Royal Palm Beach, Florida, provides a range of legal services to clients that focus on probate, estate plannnig and business matters. Our staff is fluent in Spanish. We offer free consultations and virtual appointments.

Artem (Art) V. on ContractsCounsel
View Artem (Art)
Member Since:
December 4, 2023

Artem (Art) V.

Attorney
Free Consultation
New York
2 Yrs Experience
Licensed in NY
Fordham University School of Law

Art is a New York admitted attorney. With a focus on business and corporate law, Art excels in advising clients across diverse areas such as corporate governance, corporate and finance transactions, contractual matters and non-disclosure agreements, intellectual property, and privacy issues. His professional background extends to counseling institutional lenders in the commercial real estate sector, specializing in financing, restructuring, and workout projects. Art is passionate about offering tailored support to start-ups, small, and mid-size corporations, addressing a spectrum of legal concerns related to corporate matters, contracts, and general business affairs.

Tayane O. on ContractsCounsel
View Tayane
Member Since:
December 4, 2023

Tayane O.

Attorney
Free Consultation
Boca Raton, Florida
7 Yrs Experience
Licensed in FL
Nova Southeastern University, Shepard Broad College of Law

Tayane M. Oliveira is a founding partner at Vannucci Oliveira. With a concentration in family law, Tayane is renowned for her commitment to providing compassionate yet powerful representation to her clients. Her experience as an associate attorney at Brodzki Jacobs & Brook, coupled with her unwavering dedication to her clients' welfare, prepared her for her current role at Vannucci Oliveira. Tayane's academic achievements are a testament to her rigorous intellectual curiosity and dedication to her profession. She graduated with a Bachelor of Arts degree in Criminal Justice, supplemented by a minor in Psychology, from Florida Atlantic University in 2013. The culmination of her academic pursuit came in 2017, when she earned her Juris Doctor degree, cum laude, from the esteemed Nova Southeastern University's Shepard Broad College of Law. Before co-founding Vannucci Oliveira, Tayane honed her skills in the heat of the courtroom, representing clients in an array of general civil litigation matters. This diversified exposure instilled in her an ability to tackle complex legal challenges, a skill she employs to benefit her clients in family law. Originally from Brazil, Tayane brings an international perspective to her practice. When not delving into legal briefs or advocating for her clients, she indulges in travelling, reading, spoiling her puppies, and exercising, activities that not only rejuvenate her but also provide her with a broader perspective on the world and her practice. *Supreme Court Certified Portuguese Speaking Mediator

McCoy S. on ContractsCounsel
View McCoy
Member Since:
December 4, 2023

McCoy S.

Founding Attorney
Free Consultation
Portland, Oregon
33 Yrs Experience
Licensed in CA, NY, OR, WA
University of Virginia

P. McCoy Smith is the Founding Attorney at Lex Pan Law LLC, a full-service technology and intellectual property law firm based in Portland, Oregon, U.S.A and Opsequio LLC, an open source compliance consultancy. Prior to his current position, he spent 20 years in the legal department of a Fortune 50 multinational technology company as a business unit intellectual property specialist; among his duties was setting up the free & open source legal function and policies for that company. He preceded his in-house experience with 8 years in private practice in a large New York City-based boutique intellectual property law firm, working simultaneously as a U.S. patent litigator and U.S. patent prosecutor. He was also a patent examiner at the U.S. Patent & Trademark Office prior to attending law school. He is licensed to practice law in Oregon, California & New York and to prosecute patent applications in the U.S. Patent & Trademark Office; he is also a registered Trademark and Patent Agent with the Canadian Intellectual Property Office. He has degrees from Colorado State University (Bachelor of Science, Mechanical Engineering, with honors), Johns Hopkins University (Masters of Liberal Arts) and the University of Virginia (Juris Doctor). While in private practice, and continuing into his in-house career, he taught portions of the U.S. patent bar exam for a long-standing and well-known patent bar exam preparation course, and from 2014-2020 was on the editorial board of the Journal of Open Law, Technology & Society (JOLTS), and starting in 2023 will be on the editorial board of the American Intellectual Property Law Quarterly Journal (AIPLAQJ). He is the author or co-author of chapters on open source and copyright and patents in “Open Source Law, Policy & Practice” (2022, Oxford University Press). He lectures frequently around the world on free and open source issues as well as other intellectual property topics.

Find the best lawyer for your project

Browse Lawyers Now

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Business lawyers by top cities
See All Business Lawyers
Power Purchase Agreement lawyers by city
See All Power Purchase Agreement Lawyers

ContractsCounsel User

Recent Project:
Power Purchase Agreement
Location: New Jersey
Turnaround: Over a week
Service: Drafting
Doc Type: Power Purchase Agreement
Number of Bids: 2
Bid Range: $500 - $2,000

ContractsCounsel User

Recent Project:
SOlar PPA Agreement and negotiation
Location: California
Turnaround: A week
Service: Contract Review
Doc Type: Power Purchase Agreement
Page Count: 15
Number of Bids: 5
Bid Range: $700 - $1,550
related contracts
See More Contracts
other helpful articles

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city