Power purchase agreement (PPA)
A long-term contract under which a consumer buys the output of a named plant, now the standard way data centers secure power and an exposure in its own right.
A power purchase agreement commits a consumer to buy, over ten to twenty years, all or part of the output of a named generating plant at a price fixed in advance. It serves two purposes that discussion often merges: securing a physical volume and locking a price. A given signature may pursue only the second, without a single electron changing path. For data centers it has become the usual way of financing the generation their growth depends on, because public grid connection is saturated in the most attractive regions. In exchange, the buyer takes on new exposures. It carries construction and commissioning delay risk on the plant, volume risk where output is intermittent, and price risk if the market diverges lastingly from the agreed price; that last one is accounted for as a financial instrument. These exposures transfer through separate products: generation shortfall cover for resource risk, construction guarantees for delay. The IT site's property policy carries none of them, and project underwriting must keep the two carefully apart.
Microsoft and Constellation Energy announced in September 2024 a twenty-year power purchase agreement covering the restart of Three Mile Island Unit 1, rated at about 835 megawatts. In March 2024, Amazon had acquired a data center campus supplied directly from the Susquehanna nuclear plant in Pennsylvania.
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