A power purchase agreement (PPA) is a legally binding document that outlines the terms and conditions of a renewable energy project. This agreement sets out the terms between the two parties, the producer and the buyer, for the pricing and delivery of renewable energy.
In the UK, the PPA market is rapidly expanding as more and more companies are looking to reduce their carbon footprint by procuring renewable energy. In this article, we will discuss what a power purchase agreement is and provide a sample of a UK power purchase agreement.
What Is a Power Purchase Agreement?
A power purchase agreement is a long-term contract between a power producer and a buyer to purchase electricity generated from renewable energy. The agreement provides security to the producer by guaranteeing a buyer for their energy and improves the buyer`s environmental sustainability goals by procuring renewable energy. The PPA outlines the delivery of power, pricing structure, payment terms, and other relevant terms and conditions.
PPAs are typically signed for a long duration, usually 10-25 years, providing stability for the producer and the buyer. The pricing structure is determined by a fixed or indexed price for the energy generated. These agreements often include provisions for power curtailment, suspension of payments, and default remedies.
Sample UK Power Purchase Agreement
Below is a sample of a UK power purchase agreement that outlines the terms and conditions of a solar power project.
This Power Purchase Agreement («Agreement») is entered into by and between [Producer Name], a [type of entity] organized under the laws of [State], located at [Producers Address], and [Buyer Name], a [type of entity] organized under the laws of [State], located at [Buyers Address] (collectively, «Parties»).
2. Delivery of Power
The Producer agrees to deliver and the Buyer agrees to purchase the power generated by the Producer`s solar PV system, located at [location], with a total capacity of [total capacity]. The energy will be delivered to the Buyer`s premises through the local distribution network.
3. Pricing and Payment
The price for energy generated by the Producer will be [fixed or indexed] as specified in Attachment A. Payment will be made by the Buyer to the Producer within [specified time period] of the invoice date for energy delivered.
4. Term and Termination
This Agreement will commence on [start date] and continue for a period of [duration]. Either Party may terminate this Agreement if the other Party is in material breach of this Agreement, as specified in Attachment B.
5. Force Majeure
Neither Party will be liable for any failure to perform its obligations under this Agreement if the failure is caused by an event of force majeure as specified in Attachment C.
This Agreement may not be transferred or assigned by either Party, except with the written consent of the other Party.
A power purchase agreement is an essential contract that defines the relationship between a renewable energy producer and a buyer. The agreement provides long-term security for the producer and helps the buyer meet their environmental sustainability goals. The above sample UK power purchase agreement provides an outline of the essential terms and conditions that should be included in a PPA. It is critical to consult with an experienced attorney before entering into a PPA.