Power Purchase Agreement Template and How to Draft One (2026)

What is a power purchase agreement, and when do you need one? A power purchase agreement (PPA) is a long-term contract under which a power producer agrees to sell electricity, and a buyer agrees to buy it, at an agreed price for an agreed term. It is the backbone of independent power and renewable energy projects. The PPA fixes how much power is bought, at what tariff, who bears what risk, and what happens if either side fails to deliver or pay. You need a PPA whenever electricity is sold other than at the wholesale spot market: a solar or wind developer selling to a distribution company (discom) or to an intermediary like SECI, a captive or group-captive plant selling to its own users, or a company buying power directly from a generator (an open-access or corporate PPA). The term is usually long, often 20 to 25 years for renewables, because the plant's economics depend on steady offtake. In India, PPAs sit inside the regulatory framework of the Electricity Act, 2003. Tariffs are either determined by the regulator (Section 62) or adopted after competitive bidding (Section 63), and the Central or State Electricity Regulatory Commission has jurisdiction depending on whether the sale crosses state lines. <!-- [VERIFY: current CERC/SERC tariff regulations year] --> Renewable generation is generally given must-run or priority-dispatch treatment, subject to grid-security exceptions. <!-- [VERIFY: current must-run wording in Grid Code / CERC regulations] --> This article is general guidance, not legal advice. The law here varies by jurisdiction and changes over time, so have a qualified lawyer review any agreement before you rely on it. ## Power purchase agreement template Copy the block below and fill the bracketed fields. This is a simplified starting point; a bankable PPA for a real project is far longer and project-specific. ```

POWER PURCHASE AGREEMENT This Power Purchase Agreement ("Agreement") is made on [DATE] BETWEEN: [GENERATOR / SELLER NAME], [address] ("Seller") AND [BUYER / PROCURER NAME], [address] ("Buyer") 1. DEFINITIONS Terms are defined by reference to the Electricity Act 2003, the applicable CERC/SERC tariff regulations, and the Grid Code, in that order. [Define Commercial Operation Date, Contract Year, Tariff, etc.] 2. SALE AND PURCHASE The Seller will sell and the Buyer will buy [all / up to [N] MW of] the electricity generated by the [solar / wind / thermal] project at [location] (the "Project"). 3. TERM This Agreement runs for [25] years from the Commercial Operation Date (COD), unless ended earlier under this Agreement. 4. CONDITIONS PRECEDENT Each party's obligations start once the conditions in Schedule 1 are met (for example financial closure, approvals, connectivity). 5. CONSTRUCTION AND COMMISSIONING The Seller will build and commission the Project and achieve COD by [Scheduled COD]. Delay damages apply as per clause 12. 6. TARIFF The Buyer will pay [CURRENCY/AMOUNT] per kWh (unit), [fixed for the term / escalating at [X]% per year as per Schedule 2]. The tariff is [determined under Section 62 / adopted under Section 63 of the Electricity Act, 2003]. 7. METERING AND BILLING Energy is metered as per the Grid Code and [CEA metering regulations]. The Seller invoices [monthly]; the Buyer pays within [N] days. 8. PAYMENT SECURITY The Buyer provides [a letter of credit / payment security mechanism] of [N] months' average billing. Late payment carries a surcharge as per the applicable late payment surcharge rules. 9. DISPATCH AND MUST-RUN [For renewables] The Project has must-run status; the Buyer will schedule and offtake all available energy, subject to grid-security instructions of the load despatch centre. 10. OFFTAKE OBLIGATION The Buyer will offtake the contracted energy. If the Buyer fails to offtake available energy for reasons not allowed under this Agreement, it pays [deemed generation / compensation] as per Schedule 3. 11. GENERATION SHORTFALL If the Seller delivers less than [the guaranteed CUF / contracted quantity], it compensates the Buyer as per Schedule 3. 12. DELAY IN COMMISSIONING If the Seller misses the Scheduled COD, it pays liquidated damages of [amount] per [day] of delay, capped at [N]%, and the Buyer may encash the performance security after [N] days. 13. CHANGE IN LAW If a change in law changes a party's costs or revenue, the parties restore the affected party to the same economic position, on the terms in clause 13. 14. FORCE MAJEURE Neither party is liable for failure caused by events beyond its reasonable control, on the terms in clause 14. 15. DEFAULT AND TERMINATION Either party may terminate for the other's event of default after notice and cure, on the terms here, with the termination payments in Schedule 4. 16. INSURANCE The Seller will maintain the insurances in Schedule 5. 17. DISPUTE RESOLUTION AND GOVERNING LAW This Agreement is governed by the laws of India. Disputes are referred to [the appropriate Electricity Regulatory Commission / arbitration], in line with the Electricity Act, 2003. Signed for the Seller: __________ Signed for the Buyer: __________ Name / title / date Name / title / date

- **Tariff (clause 6).** This is the heart of the PPA. State the per-unit price, whether it is flat or escalating, and whether it was determined by the regulator (Section 62) or adopted after competitive bidding (Section 63). The route affects which regulator has jurisdiction and how the tariff can change.
- **Payment security (clause 8).** Payment risk from discoms is the single biggest concern for developers. A letter of credit, a payment security mechanism and a defined late-payment surcharge are standard protections.
- **Dispatch and must-run (clause 9).** For renewables, must-run status and the obligation to offtake available energy protect the developer, subject to grid-security instructions of the load despatch centre.
- **Offtake and shortfall (clauses 10 and 11).** Both sides carry a quantity risk: the buyer compensates for failing to offtake (deemed generation), the seller compensates for generating less than the guaranteed capacity utilisation factor.
- **Commissioning delay (clause 12).** Tie liquidated damages and performance-security encashment to a Scheduled COD.
- **Change in law (clause 13).** Long PPAs span many regulatory changes. A change-in-law clause that restores the affected party to the same economic position is essential and heavily litigated. ## Common mistakes to avoid - Not matching the tariff route (Section 62 vs Section 63) to the right regulator's jurisdiction, which can make the tariff unenforceable before the wrong forum.
- Weak or missing payment security against discom payment delays.
- No or vague change-in-law clause over a 25-year term.
- Must-run and offtake obligations that are not backed by a deemed-generation remedy.
- No clear generation guarantee (capacity utilisation factor) or shortfall remedy.
- Conditions precedent that are open-ended, leaving financial closure uncertain. ## A note on jurisdiction This template is India-focused. In India the PPA lives inside the Electricity Act, 2003: Section 62 (regulator-determined tariff), Section 63 (adopted competitively bid tariff), Section 79 (CERC jurisdiction for inter-state sales) and Section 86 (SERC functions, including renewable purchase obligations). Which commission has jurisdiction depends on whether the sale crosses state lines. Outside India, PPAs follow the same commercial logic but a very different regulatory frame: the UK, Ireland, Singapore, Australia and the US each have their own electricity market rules, grid codes and offtake structures, and "corporate PPAs" (a company buying renewable power directly) have their own national variations. Treat the regulatory clauses as India-specific and confirm the framework locally for any other market. ## Where a contract workspace helps A template gets you a workable PPA structure. The ongoing work starts after signing: keeping terms consistent across many versions and counterparties, checking each draft for weak or missing terms before you sign, remembering key dates and obligations, and keeping versions straight as the deal changes. Drafting, reviewing, tracking and governing a PPA can live in one AI workspace tuned to how your company contracts, so per-clause risk on tariff, change in law and payment security is shown, terms can be edited in plain language, and the commercial operation date, term and offtake obligations stay in view over a long contract. [Adira](https://adiralaw.com) is one tool built on that single workspace. This template alone is enough to put a fair PPA in place; a workspace just makes drafting, review and tracking one connected job.