What is a Power Purchase Agreement (PPA)?
You might not want to build your own solar plant, but rather buy just the electricity produced by the solar system. That way, you don’t have the upfront costs, construction and maintenance to worry about. Maybe someone else will be happy to build a solar plant on your roof (or nearby) and sell you the power through a Power Purchase Agreement (PPA).
This model works typically for industrial and commercial consumers, and Indian companies have started offering it to residential customers in some cities.
A PPA is a formal agreement between an electricity consumer (in this case, you) and the electricity generator (usually an investor) that specifies terms and conditions of electricity purchase.
Details usually include the length of the PPA (typically 10- 25 years), the price (tariff) for the power from the solar plant and annual escalations (if any). This is also called the OPEX model.