What is a power purchase agreement (PPA)?
A power purchase agreement (PPA) is a long-term contract to buy electricity from a specific power plant or supplier on agreed terms. The buyer often commits for 10 to 20 years. Technology companies use PPAs to secure power for data centers.
Also known as: PPA, Corporate PPA
Researched and fact-checked by AI, with no human review. 6 sources listed below. How we verify
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How it works
A PPA sets the terms on which a power producer sells electricity to a buyer, often called the offtaker. Where a private producer sells to a public utility, the World Bank describes the PPA as usually the project's main source of revenue. That, it says, makes its terms central to whether the producer can raise financing. Pricing typically combines a capacity charge for keeping the plant available with a charge for electricity delivered.
The U.S. Environmental Protection Agency (EPA) describes two forms used to buy renewable electricity. A physical PPA usually runs 10 to 20 years. The buyer purchases power from a specific generator and receives it through the grid. In a financial PPA, also called a virtual PPA, no electricity passes between the parties. They agree on a strike price and settle the difference between it and the wholesale market price.
A December 2025 Congressional Research Service (CRS) report lists three main ways data centers obtain electricity: PPAs, grid power and on-site self-supply.
Why it matters
EPA says a financial PPA gives the buyer predictable costs and the project developer a long-term contract with predictable revenue. CRS notes that PPAs let data center operators tie their supply to specific energy sources. EPA cautions that a buyer can claim to use green power only if it owns the project's renewable energy certificates or has them retired on its behalf.
A PPA is a contract, not a dedicated power line. Announcing a nuclear agreement with Amazon in September 2026, Constellation said all the plant's electricity would keep flowing to the regional grid.
Where things stand in 2026
CRS lists a September 2024 PPA between Microsoft and Constellation tied to restarting an 800-megawatt nuclear unit at Three Mile Island. It also lists an October 2025 PPA between Google and NextEra Energy tied to restarting the 616-megawatt Duane Arnold nuclear plant in Iowa.
On September 30, 2026, Constellation and Amazon announced a 20-year agreement that includes 690 megawatts of power. Of that, about 190 megawatts is new capacity at the Calvert Cliffs plant in Maryland, planned for 2030 to 2032.
On October 6, 2026, Google and Constellation announced a 20-year PPA intended to fund upgrades adding 890 megawatts at 11 nuclear units in Illinois, Pennsylvania and New Jersey. The first is expected by 2028. They also announced a 15-year supply agreement for a further 2,700 megawatts.
Sources
- Power Purchase Agreements (PPAs) and Energy Purchase Agreements (EPAs), World Bank (Public-Private Partnership Resource Center)
- Physical PPA | US EPA, U.S. Environmental Protection Agency (EPA)
- Financial PPA | US EPA, U.S. Environmental Protection Agency (EPA)
- Data Center Energy Infrastructure: Federal Permit Requirements, Congressional Research Service (Congress.gov)
- Constellation and Amazon Announce 20-Year Power Purchase Agreement Adding 190 Megawatts of Nuclear Capacity at Calvert Cliffs, Constellation Energy
- Google and Constellation Announce Landmark Agreement to Bring 890 MW of New Nuclear Capacity to PJM Grid as Part of Long-Term Power Deal, Constellation Energy
