What is the most common type of PPA?

The Most Common Type of PPA: Physical Power Purchase Agreements

When it comes to renewable energy procurement, one model has long taken the lead: the physical power purchase agreement (PPA). This contract, the most common type of PPA, involves a buyer—typically a utility or an energy-savvy corporation—agreeing to purchase electricity directly from a renewable energy generator, such as a wind or solar farm.

In a physical PPA, the buyer doesn’t just pay for clean energy credits—they take on the actual delivery of electricity through the grid. That means the buyer assumes some responsibility for the physical flow and scheduling of power, often working closely with transmission providers. Because of the complexity, this structure has traditionally been favored by large utilities with the infrastructure and expertise to manage it.

However, over the past decade, more experienced corporate buyers have begun entering the space. Tech giants, manufacturers, and other large energy users now sign physical PPAs to lock in long-term energy prices and meet sustainability goals. These agreements not only provide financial stability for renewable project developers but also enable corporations to make tangible claims about their energy use.

While virtual or “sleeved” PPAs are gaining traction—especially in regions with regulatory hurdles—physical PPAs remain the backbone of renewable energy procurement. They offer a direct link between buyer and project, making them a trusted choice for organizations serious about energy ownership and decarbonization.

As markets evolve and grid infrastructure improves, the physical PPA continues to set the standard—proving that when it comes to clean energy deals, substance still matters.