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A corporate power purchase agreement (CPPA) is a long-term contract between a business and an electricity generator. It can arrange for electricity to be supplied, hedge wholesale-price exposure, and transfer renewable energy attributes—but those outcomes depend on the contract’s structure and terms.
The key distinction is whether the PPA is physical or financial. In a financial or virtual PPA, the generator pays the buyer when the agreed market benchmark is above the contract price; the buyer pays the generator when it is below. A virtual PPA does not supply the buyer’s electricity, and its settlement does not automatically fix the buyer’s whole electricity bill.
What a corporate PPA does
A corporate PPA is a commercial agreement between a business and an electricity generator, often for renewable power. Depending on its structure, it can govern electricity delivery or title, provide a financial hedge, support project revenues, and specify who receives associated renewable certificates. These are related but distinct functions: a contract can settle financially without delivering power, and certificate ownership does not follow automatically from the word “renewable.”
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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchThere is no single worldwide PPA template. The market, location, buyer’s supply arrangements, generation profile, and contract wording determine how a particular agreement works.
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Who pays when prices move in a financial PPA?
A financial PPA—also called a virtual or synthetic PPA—settles the difference between an agreed contract price, often called the strike price, and a specified wholesale-market price. In the US Environmental Protection Agency’s explanation, the party that pays depends on which price is higher. The settlement applies to the volume and interval defined in the agreement, not necessarily to all of the buyer’s electricity use.
| Market benchmark compared with strike price | Settlement direction | What it means for the buyer |
|---|---|---|
| Benchmark is above the strike price | Generator pays buyer the difference for the relevant settled volume. | The payment is intended to offset higher market costs. |
| Benchmark is below the strike price | Buyer pays generator the difference for the relevant settled volume. | The buyer gives up some benefit of lower wholesale prices. |
For illustration only, the EPA uses a hypothetical strike price of 10 cents per kilowatt-hour: above that market price, the generator pays the buyer; below it, the buyer pays the generator. This is an example, not a current market price or a recommended contract price. EPA: Financial PPAs
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Why the settlement may not match the electricity bill
A virtual PPA is a financial arrangement, not a retail electricity supply contract. The generator sells its power into the grid, while the corporate buyer obtains electricity separately. The hedge can offset the buyer’s costs only to the extent that the PPA’s settlement benchmark moves in line with the price the buyer actually pays. If the indices, locations, or time intervals differ, the financial settlement and the buyer’s bill can move differently; the size and direction of any remaining exposure depend on the contract and market.
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| Structure | What happens to electricity | What the buyer should check |
|---|---|---|
| Physical PPA | The agreement provides for delivery or transfer of title to electricity under its terms. | Delivery schedule, supplier arrangements, payment terms, under-delivery remedies, and termination provisions. |
| Sleeved grid PPA in Great Britain | A licensed supplier manages grid access and associated charges for the arrangement. | Supplier fees, responsibilities shared among the buyer, generator, and supplier, and other network or policy costs. |
| Unsleeved grid PPA in Great Britain | The buyer and generator retain responsibility for grid-access arrangements rather than relying on a supplier to manage them. | Who handles grid access, balancing, and related obligations. |
| Onsite or private-wire PPA | Power is supplied from a project located at or connected privately to the buyer’s site. | Site, connection, land, planning, and tenancy constraints, as well as what happens to any unmet demand. |
| Financial or virtual PPA | No electricity is delivered to the buyer under the financial settlement; the buyer purchases power separately. | Settlement benchmark, strike price, settled volume, and whether renewable certificates are transferred. |
The US EPA describes physical PPAs as long-term agreements for renewable electricity, including onsite and offsite arrangements. Its guidance says such agreements are usually 10 to 20 years; that is a description of US green-power practice, not a universal rule. EPA: Physical PPAs
Great Britain’s 2026 government publication distinguishes sleeved and unsleeved grid arrangements, onsite or private-wire deals, and virtual arrangements. It reports that consultation respondents regarded sleeved CPPAs as the dominant and more accessible GB structure, while also raising potential hidden costs and complexity among three parties. Those are views reported through a government consultation, not a guarantee about every contract. Northern Ireland is in a separate electricity market, so the Great Britain account should not be assumed to describe it. UK government: CPPA call-for-evidence response
How output and volume terms allocate risk
Pay-as-produced
Under a pay-as-produced arrangement, the buyer takes all or a defined share of the project’s actual output. Generation varies, so it may not match the buyer’s consumption at each time. In the Great Britain context, government guidance describes the buyer as bearing production and profile exposure under this model. If the contracted output covers only part of demand, the buyer needs a separate supply arrangement for the rest.
Fixed baseload or predetermined profile
A baseload arrangement specifies a predetermined delivery volume or profile. The UK government says the generator bears the volume risk in this model, which can increase the price because the generator takes on more risk and operational complexity. Public information on how GB contracts allocate volume is limited, so neither model should be treated as universal. UK government: Corporate power purchase agreements
Terms that determine the economic result
The headline price alone is not enough to compare offers. The executed agreement and the buyer’s separate supply arrangements determine the actual allocation of costs and risk.
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- Delivery and responsibilities: Identify whether the deal is physical, sleeved, unsleeved, onsite/private wire, or financial. For physical supply, check operation date, delivery schedules, under-delivery remedies, payment, termination, and credit support.
- Settlement price and strike: For a financial PPA, establish the market index, location, time interval, calculation method, and volume used for settlement. The benchmark needs to be compared with the buyer’s actual electricity-price exposure.
- Volume and shape: Determine whether the buyer takes actual output or a fixed profile, and what happens when generation differs from demand.
- Price changes over time: Check whether the price is fixed, indexed to inflation, or subject to an escalator. The UK government describes 10 to 15 years as typical for GB CPPAs, with some agreements longer; that duration is specific to its GB guidance and is not a global standard.
- Residual costs: Review network charges, balancing, policy levies, supplier or sleeving fees, and credit or collateral requirements. These can affect the total economics even when the contract’s energy price appears clear.
- Renewable attributes: State whether certificates or guarantees are transferred, retained, or handled another way. The EPA notes that certificate ownership is contract-specific; UK guidance discusses Renewable Energy Guarantees of Origin (REGOs) and their separate trading.
In its 2026 response, the UK government summarized consultation respondents’ view that long-term price certainty can help hedge wholesale volatility. Respondents also identified credit and collateral requirements, bespoke negotiation, specialist advisers, non-commodity charges, and complex sleeving as access barriers. The same response says onsite or private-wire projects may avoid some network charges, but can be difficult to scale because of location, land, planning, or tenancy constraints. These are consultation findings, not measured outcomes that apply to every buyer. The response records 125 submissions and says the department believes CPPAs account for 2.5% to 5% of Great Britain’s power-trading market; it explicitly notes that formal statistics are limited, so the market-share range is an estimate, not a definitive count. UK government: CPPA call-for-evidence response
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- Identify the structure. Confirm whether the agreement delivers electricity or title, arranges supply through a sleeving supplier, or settles financially while the buyer purchases electricity separately.
- Trace the money flows. Write down the contract price, settlement index, location, interval, settled volume, and which party pays in both above-strike and below-strike cases.
- Compare the hedge with the buyer’s actual exposure. Check how the settlement benchmark relates to the electricity price under the buyer’s supply arrangement and identify any differences in location or timing.
- Test output against consumption. Establish whether volume is pay-as-produced or a defined profile, how shortfalls or excess output are handled, and what other supply arrangement covers unmet demand.
- Review all-in costs and attributes. Include network, balancing, policy, supplier, and financing-related obligations, then verify how renewable certificates are treated.
- Read the protections and governing terms. Check delivery milestones, remedies, payment, credit support, default, and termination provisions under the signed contract and applicable local rules.
US EPA material explains general PPA mechanics in the context of US green-power markets; the UK government’s 2026 publications address Great Britain specifically. Neither establishes a universal settlement index or a guaranteed bill outcome, so local market rules and the signed agreement control.
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