What is Power Purchase Agreement (PPA)?

Why in News? India made changes to its rules about exporting electricity to other countries, in August 2024. These changes were made to protect Indian companies from political risk in countries like Bangladesh.

What is the Godda Project?

• Adani Power runs a very large power plant in Godda, Jharkhand, that can produce 1,496 megawatts (MW) of electricity. This entire amount of electricity is sent to Bangladesh.
• The project began in 2017 when Adani Power signed a 25-year agreement with the Bangladesh Power Development Board (BPDB).
• This agreement, called a Power Purchase Agreement (PPA), marked India’s first project that sends electricity across borders to another country.

  What is Power Purchase Agreement (PPA)?

• A Power Purchase Agreement (PPA) is a long-term contract between a power producer and a customer that defines the conditions for the purchase of electricity.
• PPAs can be used in a variety of situations, such as when a customer wants to secure a supply of power, or when a renewable energy project might not be viable without a guarantee of price and quantity.
• PPAs can also help to reduce market price risks, finance the construction and operation of renewable energy plants, and ensure follow-up financing for existing power plants..