PPA

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.

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.

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.

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.