Power purchase agreements have utility but are not risk-free

Power purchase agreements (PPAs) are often a preferred method for data center operators to procure renewable electricity, but their fixed purchase price and duration (eight to 20 years) can pose significant financial and power management risks.

Data center owners and managers globally are committing to increase the percentage of renewable electricity that powers their data centers or to match 100% of their electricity consumption with renewable energy certificates (RECs) — or both. PPAs offer a compelling vehicle to procure renewable electricity and their associated RECs and potentially stabilize or reduce long-term energy costs. They also enable data center operators to claim some responsibility for the investment in/construction of renewable generation capacity.