A Physical Power Purchase Agreement (PPA) is a direct contract between a renewable energy generator and a buyer—usually a business—that involves the physical delivery of electricity.
In this setup, the generator delivers power directly to the business’s premises or to the local grid via a specific connection. The buyer receives both the electricity and the associated renewable energy certificates (RECs) or Guarantees of Origin (GoOs), which help prove the use of green energy.
Physical PPAs offer long-term price certainty, protecting businesses from market volatility. These agreements typically range from 10 to 20 years and allow organisations to meet decarbonisation goals by reducing reliance on fossil fuels and securing traceable, renewable energy.
This type of PPA is best suited for large energy consumers with predictable and continuous electricity needs, such as manufacturing plants, data centres, or large office campuses. These organisations usually have access to the wholesale electricity market or use an energy supplier capable of handling complex contractual arrangements.
Physical PPAs work particularly well for companies with operations near renewable energy assets (e.g., wind farms or solar parks), ensuring minimal transmission losses and efficient energy delivery.
The tangible nature of the electricity delivery and its traceability make this an attractive solution for firms with strong ESG commitments and robust sustainability reporting needs.
By physically tying the business to renewable generation, these PPAs offer credibility, long-term savings, and resilience against future carbon taxes or regulatory shifts toward net zero.