Purchasing Power Agreement

Subtype

Definition: Power Purchasing Agreements (PPAs) essentially act as long-term electricity forward contracts, providing a mechanism to hedge against the price volatility inherent to energy markets.

Description

PPAs buyers, often electricity suppliers or large-scale electricity consumers, agree to purchase a specified amount of electricity at a predetermined price, effectively securing a stable and likely competitively priced energy supply. Such agreements enable consumers ranging from large-scale industries to smaller commercial businesses to procure electricity directly from the producer. This ensures energy security and price stability over the term of the contract, which “typically span 8-25 years”.

PPA tokenization has been previously attempted by WePower (2018), which attempted to build a marketplace to buy, sell and trade long-term PPAs.

Example

Helios is a digital platform enabling anyone anywhere to profitably fight climate change by directly funding high-impact solar projects around the world.

In the context of tokenized PPA, digital tokens may represent the financial rights to the revenue generated by PPAs. Helios achieves this by allowing users to invest in solar energy projects through USDC deposits, which are then converted into USD to fund the projects. The revenue generated from selling the produced clean energy under PPAs is returned to users as USDC. This process effectively tokenizes the PPA, linking digital assets directly to the revenue from real-world energy sales.

The Helios SunLite PaperMedium