Read This Before Entering Into A Power Purchase Agreement

A power purchase agreement is a particular type of purchase agreement focused on the purchasing of power from a power production source by another party. The party which provides the power bought within a power purchase agreement is known as the provider and the purchaser of the power under the power purchase agreement is known as the host.

A power purchase agreement thus might allow a specific organization or body to purchase power directly from a given source for the sake of ensuring the constant production of power, as well as potentially allowing the purchaser to choose to obtain power from particular sources with which they are most interested.

For example, a power purchase agreement would allow a host to purchase power from a more green energy source, such as solar power plants, instead of purchasing from a coal power plant or any other form of power plant.

A power purchase agreement will most often establish a relationship concerning the buying and selling of power for a duration of between 5 and 25 years and the exact terms of the power purchase agreement will likely vary from situation to situation. For example, in some situations the power purchase agreement might include a clause providing for immediate renewal of the power purchase agreement, or the power purchase agreement might include a clause which would allow the host to purchase the equipment used by the provider in the power purchase agreement.

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