Solar PPA rates: price structures and the power purchase agreement

A PPA (Power Purchase Agreement) is a long-term electricity purchase contract. For a solar project, it replaces or complements a regulated tariff and secures revenue — which changes everything for bankability.

1. The main types of PPA

• Corporate PPA (offtaker = a company) vs utility PPA (offtaker = a supplier/aggregator).
• Physical (actual delivery of electricity) vs financial / virtual (contract for difference on the market price).
• Pay-as-produced (the offtaker takes generation as it comes) vs baseload (guaranteed profile, riskier for the producer).

2. PPA rates: structures, level, and what the bank keeps

« What is the rate of a PPA? » has no single answer, because a PPA is not a price: it is a price structure. Two contracts showing the same €/MWh figure can produce radically different business plans — and radically different debt amounts.

The four structures you meet

That last point matters most and is rarely spelt out: a lender does not size on the expected price, it sizes on the guaranteed one. On a collar PPA, debt is computed at the floor, never at the central price — everything above accrues to the shareholder but finances nothing. A purely floating PPA, despite being a contract, therefore adds almost no debt capacity.

What sets the level of the price

• Term: the longer the contract, the deeper the discount the offtaker demands for carrying the risk.
• Offtaker credit quality: a rated buyer pays less than a fragile one, whose default risk must be priced — and who, above all, shrinks the debt a bank will accept.
• Profile risk: a solar plant generates in daylight, not when the buyer consumes. The further the delivery shape sits from the natural generation profile (baseload rather than pay-as-produced), the more balancing risk the producer carries — and prices in.
• Covered share: hedging 100% of output costs more in discount than hedging 70% and leaving the rest merchant.
• Zone and vintage: PPA prices track forward power prices, which move fast.

The orders of magnitude, and what they are worth

A PPA price is not public data: every contract is bilateral and confidential. But refusing to give any order of magnitude helps nobody build a business plan. So here are the ranges we use ourselves as modelling benchmarks — with their vintage, because a price without a date means nothing.

Vintage: Q3 2026. These are modelling benchmarks meant to sanity-check a business plan, not guaranteed market values and not an offer. They match our benchmark figures, and for any real decision they must be checked against the public PPA price indices — LevelTen Energy and Pexapark publish averages by technology and country on a quarterly basis. A 10 €/MWh gap on a 15-year contract shows up immediately in the IRR and the DSCR: test it rather than estimate it.

Corporate PPA vs utility PPA, and what changes at utility scale

A corporate PPA is signed with a company that consumes the power — a data centre, an industrial group, a retailer — usually to cover a decarbonisation commitment. A utility PPA is signed with a supplier or an aggregator that resells it. The difference is not cosmetic: it changes who carries the balancing risk, how long the counterparty is willing to commit, and above all what the bank thinks of the credit. A rated utility supports a longer, cheaper debt than a mid-cap corporate, even when the headline €/MWh is identical.

At utility scale — say beyond 50 MWp — three things shift. Few single offtakers can absorb the whole output, so the volume is often split across several contracts with different tenors and structures, which the model must handle line by line rather than as one blended price. The share left merchant grows, so the debt sizing leans more on the floor than on the central case. And the grid connection becomes a project of its own, with its own schedule and its own CAPEX — which is why a large project is rarely a small one multiplied.

Contract term and debt tenor

The term determines the share of the business plan covered by the contract, the rest being valued at market (merchant). Implicit rule among lenders: debt maturity stays short of the end of the PPA, plus a safety margin — the tail. Debt running into the merchant-only period would expose the bank to price risk, which it refuses or prices dearly. Extending a PPA from 10 to 15 years therefore often does more for financeable debt than gaining a few euros per MWh.

3. Why a PPA strengthens financing

Contracted, predictable revenue lets the bank size debt with a better DSCR and higher gearing. The credit quality of the offtaker is decisive: it is what "carries" the security of the revenue.

4. The risks to model

• Offtaker credit: default or renegotiation.
• Volume / profile: gap between (intermittent) solar generation and the contracted profile.
• Residual price: the uncovered share and the post-PPA period, exposed to the market.

5. Impact on the business plan

In the model, the PPA translates into a contractual price curve over its term, then a merchant switch. Testing several post-PPA price scenarios is essential to measure the robustness of returns.

6. The clauses that matter for bankability

Beyond price, a few clauses decide whether a PPA is "bankable":

7. PPA or regulated tariff?

A regulated tariff (feed-in premium awarded through a tender) offers great visibility but little flexibility and conditioned access. A PPA brings flexibility (term, price, counterparty) and an ESG narrative for the offtaker, at the cost of a credit risk to bear. Many projects combine both over time, or a PPA on part of the volume and merchant on the rest — which the financial business plan must be able to model layer by layer.

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