Onsite energy agreements are long-term contracts. They are usually well drafted, but the vocabulary can be opaque to anyone who does not negotiate them regularly. This glossary covers the terms that matter most, grouped by what they control.
The agreement itself
Power purchase agreement (PPA). A contract to buy electricity from a specific generator at an agreed price for an agreed term. An onsite or behind-the-meter PPA covers a plant located at the buyer's site.
Energy supply agreement / Energy-as-a-Service. A broader contract covering electricity and often heat, steam or gas, where the supplier finances, builds, owns and operates the plant. See Energy-as-a-Service vs owning the plant.
Term. The length of the agreement, typically long enough for the supplier to finance the plant over its useful life.
Commercial operation date (COD). The date the plant is formally accepted as operational and billing begins.
Price
Tariff / energy price. The price per unit of energy delivered — per kWh of electricity, or per unit of heat or gas.
Escalation. How the price changes over time. It might be fixed, indexed to inflation, indexed to the grid tariff, or a combination.
Discount to grid. A price set as a percentage below the buyer's equivalent grid tariff, so savings are maintained as the grid tariff moves.
Capacity charge. A fixed charge for making capacity available, sometimes combined with a lower energy charge. Common where the buyer wants guaranteed capacity, such as data centres.
Volume and performance
Take-or-pay. An obligation to pay for a minimum quantity of energy whether or not it is used. Protects the supplier's financing; buyers should make sure the minimum reflects realistic consumption.
Availability. The share of time the plant is able to deliver its contracted output. Usually measured monthly or annually.
Availability commitment / guarantee. A contractual minimum availability, with liquidated damages or price reductions if it is not met.
Liquidated damages (LDs). Pre-agreed compensation for a specific failure — late commissioning or availability shortfall, for example.
Force majeure. Events outside either party's control that suspend obligations. Buyers should check how long force majeure can last before they can terminate.
Fuel, heat and carbon (biomass projects)
Fuel supply obligation. Who provides the fuel, in what quantity and to what specification. Where the buyer supplies its own residue, this is a key obligation.
Fuel specification. Limits on moisture, size, ash and contamination, and how compliance is tested.
Heat offtake. Terms for recovered heat or steam — metering, price and minimum quantities.
Carbon rights / environmental attributes. Who owns renewable energy certificates, carbon removal credits and other environmental attributes. See carbon removal economics.
Site and operations
Site lease / licence. The right for the supplier to build and operate on the buyer's land for the term.
Interconnection. How the plant connects to the buyer's electrical system and, where relevant, the grid.
Operations and maintenance (O&M). Who runs and maintains the plant, and to what standards.
Step-in rights. Rights for lenders or the buyer to take over operation if the supplier fails to perform.
End of term
Extension option. The right to extend the agreement on agreed terms.
Purchase option / transfer. The right for the buyer to acquire the plant at the end of the term, sometimes at a pre-agreed price.
Decommissioning. Obligations to remove the plant and restore the site if the agreement is not extended or the plant transferred.
Next step
Assess your site and we will walk you through how these terms would work for your project.
