The Green Blog — What is a PPA and why is it key in today’s energy market?

Power Purchase Agreements (PPAs) ensure the supply of renewable energy in the long term and have become a key tool in today’s energy market. Their value lies in the fact that they allow the price of electricity to be fixed for a prolonged period, providing stability in an environment marked by volatility.

In practical terms, a PPA is an agreement between an energy producer and a consumer that establishes the purchase and sale of electricity at a previously defined price. This type of contract helps companies secure their supply, reduce exposure to price changes, and gain long-term visibility into their energy costs.

How does a PPA work?

A PPA, or Power Purchase Agreement, is a long-term energy supply contract between a generator and a buyer. Its main function is to provide predictability both to the producer, who ensures stable income, and to the consumer, who can access renewable energy with greater economic certainty.

In a context of energy transition, these agreements have gained relevance because they allow new renewable projects to be promoted and, at the same time, respond to the need of companies to have competitive and more stable energy.

Types of PPAs and how they are structured

There are different types of PPAs, from agreements directly linked to generation to more advanced models associated with hybrid projects and storage solutions. This evolution responds to a growing need: to adapt energy not only to how it is produced, but also to how it is consumed.

• PPA onsite. In an onsite PPA, the generation facility is located on or near the customer’s own premises, connecting directly to their grid. This model allows for a more direct supply, with greater control over the use of the energy generated.
• PPA offsite. In offsite PPAs, the generation plant is located in a location other than the consumer and is connected to the electricity grid. Power is supplied through the electrical system, allowing for greater geographical flexibility for both parties.

Depending on the delivery point

Within offsite PPAs, different contractual structures can be found depending on how the delivery of energy is formalised.

• Physical PPA: the energy generated is delivered to the customer through a retailer, which completes the supply if necessary.
• Virtual PPA: the customer agrees on a price with the producer, but maintains its supply contract with its usual marketer.

According to the form of supply

PPAs can also be structured according to how the energy is delivered to the customer, which directly influences the consumption profile and the adaptation of the contract to each need.

• PPA “as generated”: the customer consumes the energy as it is produced in the plant.
• “Baseload” PPA: the generation adapts to offer a more stable and continuous supply, approaching a constant profile.

How are PPAs evolving with storage?

This context explains why PPAs are evolving. Traditionally, these contracts were tied to the production of a renewable asset, which involved intermittent supply. Today, this model is moving towards solutions that guarantee greater availability thanks to battery storage or BESS.

The incorporation of batteries makes it possible to move from contracts based solely on generation to models focused on energy availability. This change gives rise to new structures, such as tolling agreements, which allow storage to be managed in a more flexible way and adapted to the customer’s real demand, providing advanced energy management.

Why are renewable PPAs becoming more and more important?

PPAs offer clear advantages in an increasingly complex energy system. Not only do they allow for long-term pricing, but also access to renewable energy with greater security and planning capacity.

• Long-term price stability, reducing exposure to market volatility.
• Access to renewable energy, including solar generation and storage solutions.
• Greater flexibility, by adapting energy to demand thanks to the use of batteries.

All this makes it possible to secure supply, optimise assets and respond to an increasingly demanding energy system, where flexibility and continuity of service are increasingly relevant factors for consumers and industrialists.

What is a 24/7 PPA? The Grenergy model

Grenergy has been advancing this model for years through different types of agreements and has been a pioneer in the signing of baseload PPAs 24/7. Among them is the agreement with Codelco, the Chilean state-owned company and the world’s largest copper producer, an example of continuous supply applied on a large scale.

It is one of the first large agreements that allows renewable energy to be supplied continuously, overcoming intermittency and moving towards an availability-based model. Thanks to the combination of solar generation and battery storage (BESS), Grenergy is able to store energy when it is produced and supply it later, ensuring a reliable service.

Through GR Power, Grenergy’s energy trading platform, the agreement will allow 0.5 TWh of green energy to be supplied per year for 15 years, starting in 2026. The power will come from Grenergy’s hybrid platform in central Chile, which includes assets such as the Monte Águila plant (340 MW) with an integrated BESS system.

PPAs at Grenergy

This model is complemented by other agreements developed by the company, both in day and night PPAs, such as Ayora in Spain, adapted to different consumption needs. In this way, the company builds an offer based on flexible solutions for different energy profiles.

In addition, this development is already materializing in projects such as Oviedo in Spain, where Grenergy has signed a 10-year tolling agreement with an international utility with an investment grade rating, in one of the first operations of this type in the Spanish market. This reinforces a strategy focused on the available energy and not just the energy generated.