Power purchase agreements are long-term and large-scale contracts to buy renewable energy. To understand how they work, let’s look at an example.

Microsoft recently announced that it will buy 315 megawatts of solar power in Virginia from project developer sPower. Microsoft struck this deal to power all the data centers in Virginia and it happens to be the largest corporate purchase of solar power in the US.

Because Microsoft owns the power generation, it locks in the rate at which it will pay for electricity throughout the life of the contract.

But PPAs do not necessarily mean that every light turned on by a company is fueled by clean energy. PPAs allow companies to pay for the production of clean energy that will be used by someone on the grid.

A Google report states: “From a physical perspective, this is just as good as consuming the renewable energy directly. That’s because electricity on a grid is fungible; electrons generated in one spot can’t be directed to any specific user on the grid, any more than a cup of water poured into a river could be directed to a particular stream. So it doesn’t make much of a difference where the renewable energy that we buy is located, as long as it’s on the same grid as our data center.”

Who knows, maybe your computer right now runs on electricity made possible by a corporate PPA. Check out all the PPA locations that Google has around the world: