A power purchase agreement (PPA) is a contract between an electricity generator and a purchaser in which the purchaser agrees to buy electricity directly from the generator for a set price over a set period of time.
PPAs can be used for any type of energy supply, but these days are usually contracted for renewable energy. This gives the purchaser access to cheaper, cleaner electricity.
Benefits for the purchaser
- Cleaner electricity - by contracting electricity from a renewable generator, the purchaser can reduce their carbon footprint, meet sustainability goals and satisfy any ESG or CSR obligations they may have.
- Cheaper electricity - usually, the purchaser and generator will negotiate a cheaper electricity price than the purchaser is likely to receive buying electricity from the grid.
- Locked-in cost - by writing PPAs, the purchaser gets a locked-in electricity price and can avoid the price fluctuations seen on the volatile wholesale electricity market. This makes it easier to manage energy costs over the long term.
Benefits for the generator
In turn, the generator locks in long term investment.
Often, especially in the case of new renewable generation, this guarantees the generator the funding they need to actually build the new project.
It’s through PPAs like these that many solar and wind farms, for example, are able to receive the investment needed to get off the ground.
Mojo is using PPAs to become net renewable
At Mojo Power, it’s our mission to facilitate Australia’s transition to renewable energy and we’re working toward being net renewable by 2024 (but are currently on track to reach this goal early - hopefully by the end of this year).
This means we’ll match all of our customers’ electricity usage with renewable energy we purchase directly from solar farms across Australia. We’ll do this via our PPAs.