# PPA Source: https://ordergroup.co/glossary/ppa/ Last updated: 2026-10-10 > PPA (power purchase agreement) for energy software buyers: physical and virtual PPAs, volume structures, EU rules and what the system must model. [Energy](https://ordergroup.co/glossary/energy/) 3 min read # PPA Power purchase agreement Also known as: power purchase agreement, corporate PPA Definition A PPA (power purchase agreement) is a contract under which a buyer agrees to purchase electricity directly from a producer on market terms, usually for several years and often from a named wind or solar plant. Cite this entry Text "PPA". Order Group, Software glossary, 10 October 2026. https://ordergroup.co/glossary/ppa/ HTML `PPA - Order Group` Reviewed by [Paweł Zieliński](https://ordergroup.co/authors/pawel-zielinski/), Co-founder & Business Owner Last reviewed 10 October 2026 ## How a PPA works EU law defines a power purchase agreement in Regulation 2019/943 (Article 2, point 77, added by Regulation 2024/1747) as a contract under which a natural or legal person agrees to purchase electricity from a producer on market terms. In practice a PPA is a multi-year contract between an electricity buyer and the owner of a specific plant, usually wind or solar. A corporate PPA is one where the buyer is an end user, such as a factory or a data center operator, rather than a utility. PPAs differ in delivery, volume and price. In a physical PPA the electricity is delivered to the buyer's balancing portfolio, often through a supplier who "sleeves" it. In a virtual (financial) PPA the producer sells on the spot market and the parties settle the difference between the agreed price and the market price. On volume, the buyer can take whatever the plant produces, a flat baseload band, or a shape matched to its own demand. The price can be fixed, indexed, or fixed with a floor and cap. Guarantees of origin often pass to the buyer together with the electricity. Common PPA volume structures StructureWhat the buyer receivesWho carries the shape riskWhat the system must model Pay-as-producedActual output of the plant, period by periodBuyerMetered production per settlement periodBaseloadFlat MW band in every periodProducerGap between production and the bandShapedAgreed profile, e.g. monthly or peak/off-peakShared, per contractProfile table and deviationsShare of demandPercentage of the buyer's consumptionSharedConsumption forecast and actuals ## EU rules for PPAs The 2024 reform of the EU electricity market design added Article 19a on PPAs to Regulation 2019/943. Member States must make instruments such as guarantee schemes at market prices available, so that buyers who face entry barriers can still sign PPAs. Where a state backs such a scheme, it must include provisions that avoid lowering liquidity in electricity markets, and it cannot support purchases from fossil fuel generation. Two requirements land directly in the contract and therefore in the data model. A PPA must specify the bidding zone of delivery and who is responsible for securing cross-zonal transmission rights if the bidding zone changes, for example after a bidding zone review. It must also specify the terms under which either party may exit, including exit fees and notice periods. The same regulation defines a two-way contract for difference separately: a contract between a generator and a counterparty, typically a public body, that sets both a floor and a cap on the generator's remuneration. It is a public support scheme. ## What a PPA means for your software A PPA adds a long contract with its own volume logic to the standard products a buyer already purchases. The system that manages it, whether a procurement platform or a full ETRM, needs: - A contract model that covers the real terms: tenor, start and end date, bidding zone, volume structure, price formula per month or year, indexation, floor and cap, currency, guarantees of origin and exit clauses. Contracts get amended, so keep versions. - Volumes come as MW, MWh or a percentage of demand. Pick one internal unit, convert explicitly and show the user what was entered. - A pay-as-produced PPA cannot be settled without metered plant output at 15-minute resolution, and a share-of-demand PPA needs the buyer's own meter data. - A PPA rarely covers all demand. The system must compute, per period, demand minus PPA volume minus other hedges, and price the rest against forwards and the day-ahead market. - Settlement of a virtual PPA is (agreed price minus market price) times volume, per period, with an audit trail the counterparty can check. - Reports cover the hedge ratio, effective cost per MWh and guarantees of origin for emissions reporting. Writing the specification? Add PPA to your requirements checklist Collect the terms your project touches and get their system requirements in one e-mail, ready for an RFP. PPA data and where it usually comes from DataTypical sourceResolution Contract terms and price formulaSigned contract, entered by the userPer month or yearPlant productionProducer, metering operator or SCADA export15 minutesBuyer consumptionDistribution system operator meter data15 minutes or hourlyMarket prices for residual volumeExchange or ENTSO-E15 minutes (day-ahead)Guarantees of originRegistry statementPer month ## From our projects For Enerace, an energy procurement advisory, PPAs have been part of the platform's contract module since 2021, when PPA was added as a commodity. In 2022 and 2023 we built a PPA section in client contracts: the user enters the monthly volume as MW, MWh or a percentage, which the system always converts to a percentage, along with a monthly price. From that, the platform generates the matching purchase tranche under the same rules the platform uses to buy tranches automatically, buys the spot product selected in the contract, and only then tops up the rest of the position. In 2026 we added recording of PPA purchases within contracts. From our projects [Enerace - Custom-Made SaaS Web Application for Energy Procurement Advisory How the custom SaaS web application Order Group built for Enerace automates energy procurement advisory and supports buying decisions across Europe.](https://ordergroup.co/case-studies/enerace-energy-trading-software/) Where to get it - [Enerace](https://enerace.eu/offer/power-purchase-agreements) Enerace advises large energy buyers on power purchase agreements. We build and maintain its Enerace.Online platform. ## Related terms - [Day-ahead market](https://ordergroup.co/glossary/day-ahead-market/) The day-ahead market is a daily auction in which electricity for each 15-minute period of the next day is bought and sold. In Europe orders close at 12:00 CET and one algorithm sets prices for all coupled bidding zones. - [ETRM](https://ordergroup.co/glossary/etrm/) Energy trading and risk management Energy trading and risk management (ETRM) is the category of software that records energy trades and manages the resulting positions, risk, profit and loss and settlement for companies that buy and sell power, gas or other energy commodities. ## Sources 1. [Regulation (EU) 2024/1747 amending Regulation (EU) 2019/943 (electricity market design), Articles 2 and 19a](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32024R1747) - EUR-Lex Paweł Zieliński reviewed this entry. Ask how it applies to your project. [Ask an engineer](https://ordergroup.co/contact-us/) ## FAQ ![Paweł Zieliński](https://ordergroup.co/media/images/Pawel_p3bY6z4.format-webp.webp) Paweł Zieliński Co-founder & Business Owner [Talk to an engineer](https://ordergroup.co/contact-us/) ### What is the difference between a physical and a virtual PPA? In a physical PPA the electricity is delivered into the buyer's portfolio, usually through a supplier. In a virtual PPA the producer sells on the market and the two parties settle the difference between the agreed price and the market price. ### Does a PPA replace buying electricity on the market? Rarely. Production profiles seldom match demand, so the buyer still covers the residual volume with forwards and spot purchases, and the system has to track that residual per period. ### What data does a PPA platform need from the producer? Metered production per settlement period, planned and unplanned outages that affect volume, and guarantees of origin. Without production data a pay-as-produced PPA cannot be settled. ### Is a PPA the same as a contract for difference? No. In EU law a two-way contract for difference is a support scheme between a generator and a counterparty, typically a public body. A PPA is a commercial contract between a buyer and a producer. Building a system that depends on PPA? See how we build software for this domain, with case studies and the stack we use. [See Energy Hub](https://ordergroup.co/energy-hub/) Requirements checklist For each term we send the definition and what it requires from your software. Free, no sales call needed. Your checklist is empty. Use the plus next to a term to add it.