PPA (Power Purchase Agreement)

A PPA (power purchase agreement) is a long-term contract under which a buyer commits to purchase electricity from a specific generation project. The electricity is bought at agreed prices, and such contracts typically run 10-20 years. Data center operators are among the world's largest corporate PPA buyers, using them to lock in power costs and claim renewable energy for sustainability targets: Amazon, Microsoft, Meta, and Google have each contracted many gigawatts of wind, solar, and increasingly nuclear capacity. Physical PPAs deliver actual power; virtual PPAs (VPPAs) are financial contracts settling against market prices while the buyer receives renewable energy certificates. PPAs also help new generation get financed, since long-term offtake de-risks construction. In the AI era, PPAs extend to firm 24/7 sources — nuclear restarts and geothermal — because data centers need constant, not intermittent, power.