PPA (Power Purchase Agreement)
A power purchase agreement is the long-term contract under which a consumer buys electricity from a generator — fixing rate, escalation, term, delivery/settlement mechanics and remedies — the document that turns solar economics into enforceable cash flows.
Why it matters on an MEPF project
In OPEX rooftop and open-access supply, the PPA is the product: the plant is merely how the contract gets performed. The rate draws attention; the risk lives in everything around it — escalation formulas, minimum-offtake obligations, deemed-generation clauses when your shutdowns idle the plant, change-in-law pass-throughs when charges shift, termination and buyout schedules, and roof/land licence terms.
Diligence is bidirectional: developers underwrite your credit and consumption; you underwrite their build quality, O&M commitments and generation guarantees. Every clause allocating a risk should name a number — a PPA that is vague where money moves is a dispute on a timer.
How it's specified in practice
| Parameter | Typical / working position | Governing reference |
|---|---|---|
| Tariff & escalation | Base ₹/unit + formulaic escalation | contract |
| Offtake & deemed generation | Minimum purchase; treatment of consumer-caused idling | contract |
| Change in law | Who absorbs charge/duty shifts | contract |
| Exit | Term, termination events, buyout schedule | contract |
Common mistakes
- Negotiating the rate, signing the boilerplate.
- Ignoring deemed generation until the first maintenance shutdown.
- No modelled buyout column beside the PPA column.
- Roof licence terms conflicting with your own expansion plans.
Related on this site
One of 68 working definitions in the MEPF & solar engineering glossary. The buying side of the same decisions is in the buyer's guides; the numbers are in the calculators.
Frequently asked
What is a typical solar PPA term?
Long — commonly in the 10–25 year band depending on structure. Longer terms lower the rate and raise the exit-clause stakes; model both.
What is deemed generation?
Compensation to the developer for energy the plant would have produced but could not because of consumer-side causes (your shutdown, your grid outage as defined). The definition's edges are exactly where disputes grow — read them.
Standards referenced: contract law; regulatory overlays per structure