What is Power Purchase Agreement?

A long-term contract between an electricity generator and a buyer (typically a utility or corporate offtaker) that establishes the price, volume, and terms for the sale of power over a defined period, providing revenue certainty for project financing.

What category does Power Purchase Agreement belong to?

Power Purchase Agreement is a economics concept in nuclear energy and SMR technology.

Power Purchase Agreement — Nuclear & SMR Glossary

A Power Purchase Agreement (PPA) is a legally binding contract between a power plant owner/operator and an electricity buyer that specifies the price, volume, delivery terms, and duration for the sale of electrical output. For capital-intensive nuclear projects with long construction timelines, PPAs are the financial foundation that enables project financing by providing bankable revenue certainty to lenders and investors. Nuclear PPAs typically span 15-25 years or longer, reflecting the extended operating life of nuclear plants and the long-term price stability that both generators and offtakers seek. The PPA price, expressed in $/MWh, must cover the project's levelized cost of energy including capital recovery, fuel costs, operations and maintenance, and an adequate return on investment.

The SMR industry has been transformed by a wave of unprecedented corporate PPAs from technology companies seeking carbon-free, 24/7 power for data center operations. The landmark deal was Microsoft's 20-year PPA with Constellation Energy for the entire 835 MW output of the restarted Three Mile Island Unit 1, valued at approximately $16 billion. Google signed the first U.S. corporate SMR fleet PPA with Kairos Power for 500 MW of KP-FHR capacity, with the first reactor targeted for 2030. Amazon partnered with X-energy and Energy Northwest for up to 12 Xe-100 modules (first phase: 320 MW) at the Cascade Advanced Energy Facility near Richland, Washington. Meta announced agreements in January 2026 with TerraPower (up to 8 Natrium plants, 2.8 GW baseload plus 1.2 GW storage), Oklo (1.2 GW Aurora campus in Pike County, Ohio), and existing nuclear fleet operators Vistra and Constellation.

These corporate PPAs represent a structural shift in nuclear project economics. Unlike utility-scale nuclear projects that depend on regulated rate recovery or merchant market revenues, corporate PPAs from creditworthy counterparties like Google, Amazon, Microsoft, and Meta provide the long-term revenue certainty that project finance lenders require. Meta's prepayment mechanism for the Oklo project demonstrates an even more aggressive commitment, providing upfront capital that reduces financing risk. The aggregated data center nuclear demand exceeding 10 GW has created a market pull that complements the technology push from DOE programs like the ARDP. For SMR developers, securing a PPA from a major corporate offtaker has become as important as achieving regulatory milestones, as it validates both the commercial viability of the technology and the developer's ability to deliver contracted power on schedule.