An electricity purchase contract (AAE) or an electricity contract is a contract between two parties, one that produces electricity (the seller) and the other that wants to buy electricity (the buyer). The PPP sets out all the terms and conditions for the sale of electricity between the two parties, including when the project will begin operating commercially, electricity delivery schedule, delivery penalties, payment terms and termination. An AEA is the main agreement that defines the revenue and credit quality of a production project and is therefore a key instrument of project financing. There are many forms of PPA in Use Today and they vary according to the needs of the buyer, seller, and financing against the parties. [1] [2] A new form of PPP has recently been proposed to commercialize electric vehicle charging stations through a bilateral form of power purchase contract. AAEs are often seen as a central document in the development of independent power generation units (power plants). Because it defines the revenue conditions for the project and the quality of the credit, it is essential for obtaining project financing without recourse. Synthetic AAEs decouple the physical flow of electricity from the financial flow. This will further increase the flexibility of contractual agreements. With respect to synthetic chaining contracts (also known as sPPAs), producers and consumers agree on a price per kilowatt-hour of electricity, as does a physical AAE. However, electricity is not delivered directly to the consumer from the power generation facility.

Instead, the producer`s energy service provider (for example. B an electricity distributor) takes the electricity generated in its clearing group and acts (in the short-term electricity markets, to cite an example). The consumer`s energy supplier (for example. B, a municipal plant) obtains exactly the power profile that the manufacturer makes available to its energy service provider on behalf of the PPA consumer partner, the purchase being made on a platform such as the spot market. In the synthetic AAE, this flow of electricity is now supplemented by what is called a differential contract. In this contract, the AAEs parties aim to compensate for the difference between the agreed price of AAEs and the actual spot market price. This means that each counterparty in the AEA has two cash flows: one with the energy service provider concerned and the other with the AAE contractor. In any event, the payments add up to the price of the AAEs set at the beginning and offer both parties the desired price guarantee. Without direct physical delivery between the contracting parties (such as an AAE on site) and without a direct link between them (such as an off-site AAE), this is a simple and administratively economical AAE.

It is well suited to cases where a producer does not create or does not wish to create its own balance sheet group, to cite an example. Electricity producers enter into AAEs either bilaterally with a consumer company ("Corporate PPA") or with an electricity distributor who purchases the electricity generated ("Merchant PPA"). The electricity distributor can continue to supply electricity to an electricity consumer (transform it again into a "corporate PPA") or to negotiate electricity on an electricity exchange. Many international groups are already buying shares in their electricity consumption via AAAs or have announced their intention to do so more frequently (see there100.org/re100). They use AAEs to obtain stable and predictable electricity prices. AAEs are an effective way to reduce the risk of electricity prices, particularly for operators of high-investment and low-cost facilities (such as photovoltaic and wind power plants).