A power purchase agreement (PPA) is a contract between an electricity generator and a buyer for the sale of power over a long period, usually many years, at a price or pricing formula agreed in advance. When the buyer is a company buying for its own use rather than an energy supplier, it is called a corporate PPA.
Main types
| Type | How it works |
|---|---|
| Sleeved PPA | Power travels over the public grid. A licensed supplier handles grid access, network charges, levies and balancing for a fee, and often supplies top-up power. |
| Private wire or onsite PPA | The generator is on or near the buyer’s site and connected directly by a private cable, avoiding most network and policy charges. |
| Virtual (financial) PPA | No power is delivered. The two sides settle the difference between the agreed price and the market price, as a hedge. |
Sleeved PPAs are the most common structure in Great Britain. Private wire deals are often the cheapest but are limited to sites near a suitable generator.
How it relates to other schemes
A PPA often comes with the generator’s Renewable Energy Guarantees of Origin (REGOs), which lets the buyer show the electricity it pays for is renewable. Respondents to a 2026 government call for evidence said Contracts for Difference, the government scheme, are the main route to market for large UK renewable projects, so how the two fit together is a key question for buyers.
Why it matters
For the buyer, a PPA brings price certainty over many years and a direct link to a named low-carbon project, which many businesses see as more credible for climate reporting than buying certificates alone. For developers, a long-term buyer makes it easier to raise finance.
The government ran a call for evidence on corporate PPAs from January to March 2026 and published its response in July 2026. Respondents said barriers such as credit requirements, collateral and complex negotiation keep PPAs mostly within reach of large, creditworthy companies. The response did not commit to new PPA-specific measures. This is general information, not financial advice.
Read more: Green energy investment explained: where the money goes and the risks.