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What Is a PPA? How Power Purchase Agreements Work in Texas

So What Is It?

A Power Purchase Agreement (PPA) is a long-term contract between a power producer and an energy buyer for the purchase of electricity. In simple terms, it’s how organizations buy renewable energy, often solar or wind, without having to build or own the system themselves.

In a PPA, the developer installs, owns, and operates the renewable energy system, while the buyer agrees to purchase the power it produces for a fixed price over time, typically 10 to 20 years. This structure helps lock in predictable energy costs and supports the development of new clean energy projects.

With a deregulated electricity market and robust grid managed by ERCOT, Texas offers unique flexibility for structuring PPAs as the nation’s leader in renewable energy, producing more solar and wind power than any other state.

Businesses within Texas, from data centers in Austin to manufacturing plants in Dallas, are entering solar PPAs to secure stable power pricing, meet sustainability goals, and hedge against volatile utility rates. For developers, PPAs provide the guaranteed revenue needed to finance and build large-scale solar and storage projects.

How a PPA Works

Physical PPA

A physical PPA involves the actual delivery of power from a renewable facility to the buyer through the grid. The buyer receives both the electricity and the renewable energy certificates (RECs), which verify its clean energy use.

Virtual or Financial PPA (VPPA)

A VPPA is a financial contract rather than a physical exchange of electricity. The buyer and seller agree on a fixed price for the power. If the market price drops below that amount, the developer pays the buyer the difference, and vice versa.
This model is especially popular among large companies that want to support renewable projects anywhere in Texas while continuing to buy their day-to-day power from local utilities or retail electric providers.

Benefits of a Texas Solar PPA

PPAs offer several advantages for Texas property owners, businesses, and institutions:

  • No upfront investment – The developer funds, builds, and maintains the system.
  • Fixed energy pricing – Lock in predictable rates and protect against ERCOT price swings.
  • Sustainability and ESG goals – Claim RECs and report lower carbon emissions.
  • Local economic impact – Support Texas-based renewable projects and job creation.
  • Scalability – Add storage or expand your PPA as your energy needs grow.

Because Texas has abundant sunlight, open land, and a competitive energy market, it’s one of the most attractive states in the country for PPA development.

What Businesses Should Know Before Signing a PPA

While PPAs can be a win-win, it’s important to understand the details:

  • Contract term – Most range from 10 to 25 years.
  • Creditworthiness – Lenders and developers prefer buyers with strong financials.
  • Regulatory and interconnection timelines – In Texas, ERCOT and utility approvals can affect project start dates.
  • REC ownership – Confirm that you receive the renewable energy credits if sustainability reporting is a priority.
  • Exit options – Review termination clauses in case your business moves or energy needs change.

Working with an experienced solar developer or third-party energy consultant helps ensure the agreement meets your financial and operational goals.

The Future of PPAs in Texas

As the Texas grid continues to modernize, PPAs are evolving too. Hybrid agreements now bundle solar plus battery storage, enabling buyers to use clean power when ERCOT demand peaks. Corporate and municipal buyers are exploring community-scale PPAs, and Virtual Power Plant (VPP) participation is emerging as another revenue stream for PPA participants.

For companies aiming to stabilize costs and support the state’s energy transition, a well-structured PPA offers both financial and environmental benefits.

Partner With Texas Renewable Experts

At Good Faith Energy, we specialize in helping businesses and property owners navigate the best clean energy solutions, from on-site solar installations to Power Purchase Agreements and battery storage. If your organization is exploring a PPA in Texas, our team can help you understand your options, model your potential savings, and align your energy strategy with future grid opportunities. Start evaluating your clean energy plan with Good Faith Energy today.