Power Purchase Agreements

What is a PPA, and what are the main benefits?

Business Energy transition

A PPA (Power Purchase Agreement) is a long-term agreement between a renewable developer and a consumer for the purchase of energy. The Iberdrola group has extensive experience in this sector and has entered into contracts of this type in countries including the United States, United Kingdom, Spain, Mexico and Australia, and it now has agreements with companies such as Amazon, Apple, Facebook and Nike, among others.

What is a PPA?

A PPA is a long-term agreement to purchase clean energy from a specific asset at a predetermined price between a renewable developer and a consumer — generally a company requiring large amounts of electricity — or between a developer and a supplier who then resells the energy. The signing of a PPA can be understood as the sale of a project and its environmental attributes (Guarantees of Origin): it is a commitment that allows a renewable developer to make an investment decision using the criteria of profitability versus risk and/or achieve the funding necessary to execute the project.

According to BloombergNEF's latest Corporate Energy Market Outlook report, in 2023, private companies and public institutions signed contracts to secure a record 36.7 gigawatts (GW) of renewable energy to power their operations in 2022 – 18% more than in 2021. In total, since 2008, companies have signed PPAs for 148 GW of clean energy – more than France's total power generation capacity.

Taking these figures into account, it is worth noting that contracts signed increased by 18% in the Americas to a record 24.1 GW, with a significant uptick in both the US and Latin America. Asia-Pacific saw corporate PPA activity more than double to 4.6 GW, led by India and Australia. While in the Europe, Middle East and Africa (EMEA) region, activity fell 7% to 8.1 GW in 2022, mainly due to the region's energy crisis. 

Global volumes of corporate PPAs (BloombergNEF, 2022).
Global volumes of corporate PPAs (BloombergNEF, 2022).

Iberdrola, spearheading PPA 

Iberdrola has a wealth of experience in the PPA area; we started our journey in this sector more than a decade ago in the United States, where we have already signed agreements with large companies such as Apple, Amazon, Nike and Facebook, for which we produce green energy at facilities such as Montague Wind and Gala Solar, both in Oregon.

In the European market, we are the market leader with more than 900 MW signed by 2023. We have signed partnerships with companies such as Vodafone, TMD and Salzgitter. We have also achieved the gold medal as the company that signed the most PPAs in 2023, with a total of nine agreements for a total of 908 MW, according to the European PPA Market Outlook 2024 – the fourth edition of a series of annual reports by the consultancy firm Pexapark. 

Furthermore, we made the most of our offshore wind generation with six contracts in Germany, where we have the 350 MW Wikinger wind farm already in operation: the 476 MW Baltic Eagle, which is under construction; and the 300 MW Windanker, which is in progress. We have also signed two agreements to provide photovoltaic energy in Spain and another for onshore wind energy. 

In 2023, we signed a PPA withTMD Friction Services, the world's largest manufacturer of brake materials; with Vodafone; with the steelmaker Stahl Holding Saar (SHS); and with the Salzgitter Group, also focused on the steel industry. Not to mention alliances through PPAs with Amazon, Telefónica, Mercadona, Holcim, Heineken, ABInBev, Apple, De Acero, VW-SEAT, Mercedes Benz and Renault, among other companies. In fact, at the end of September 2023, we sold around 90% of the energy we planned to generate between 2023 and 2025, mainly through long-term contracts and PPAs. 

We also manage these types of agreements in markets such as the UK, Mexico, Brazil and Australia from onshore wind and photovoltaic projects.

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Types of PPA 

There are several types of PPA depending on where the energy is generated:

  • An On-site PPA is a contract for the supply of electricity from an ad hoc photovoltaic plant located on the customer's property and connected to its internal network. The renewable developer makes the investment and designs, installs, operates and maintains the plant. The energy generated by the solar panels is energy that the customer is no longer demanding from the grid, so the developer offers the customer this energy at a more competitive price. 

  • An Off-site PPA is a contract associated with a utility-scale wind farm or photovoltaic plant connected to the transmission or distribution network of the country's electricity system to take energy from its point of origin to the consumption point.

Main types of PPA

Power Purchase Agreement (PPA) not noly provides long-term supply of renewable energy to costumers ar a fixed and competitive price. It also offers a project and its environmental attributes.


Renewable energy produced ar an optimal location and connected to the grid.

PPA price

Renewable asset Customer

Renewable energy


Renewable energy produced near on-site of the customers facilities.


Off-site PPAs on the point of delivery of the energy

Physical PPA

Physical PPA

The developer sells the renewable energy to an end customer through an energy retailer, which supplies the energy from the renewable asset. Any shortfall is supplied from the retailer's generation portfolio. At the end of the month, the customer receives a single bill for all of its consumption, whether from the renewable installation under the PPA or at the spot price.

Virtual PPA

Virtual PPA

The customer deals directly with a renewable developer to agree the price of the energy (PPA price). In addition, it buys electricity from its preferred energy retailer. At the end of the month, the energy retailer sends the customer the bill for its physical consumption of energy. It also receives an itemised breakdown from the developer showing the result of the adjustment for the difference between the spot price and the agreed PPA price. Additionally, the developer will transfer the guarantees of origin generated by the installation to the end customer.

Sleeved PPA

Sleeved PPA

In markets where the renewable developer does not have a retailing licence and the customer wants a physical PPA, an agreement with a local retailer can be reached to transfer the conditions of the PPA signed between the client and the renewable developer to the customer.

Off-site PPAs on how the energy is delivered

As-generated PPA

As-generated PPA

The customer consumes the gross generation from the plant. This is the most competitive product when it comes to price; however, it is also the riskiest product for the customer as generation from renewable sources is not predictable. It is only recommended for the most sophisticated customers.

Baseload PPA

Baseload PPA

The renewable developer converts the gross generation from the plant into a baseload. This is the most common product among customers, as there is an interesting balance between cost and risk. However, not all developers are able to offer this type of PPA.

As-consumed PPA

As-consumed PPA

The renewable developer converts the gross generation into a curve which faithfully mirrors the customer consumption curve. This is the most common product among non-expert customers as this is the product in which the developer gives most added value to the customer. Only companies with a large generation portfolio can compete in this type of PPA.

Main benefits of PPA

The biggest benefits for the consumer are:

  • A clean supply of energy which can be traced from a specific asset.
  • They generate additionality: Signing a PPA makes it feasible to invest in renewable assets, thereby reducing the amount of power generated from polluting sources.
  • Possibility of branding the renewable asset.
  • Competitively priced energy (significant discounts on current and future energy prices).
  • Electricity at a stable and predictable price.
  • Each product is adapted to the client's needs.

As for the benefits of PPAs for developers, we can mention:

  • They allow them to invest in new assets because of the long-term revenue certainty they provide.
  • They allow investment decisions to be made based on the criteria of profitability versus risk.
  • They make the project bankable.
  • They establish long-term relationships with end clients.
  • They are an alternative means of investment in renewable assets, in addition to participate in auctions or to invest merchant.