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AI supply chain term

PPA (Power Purchase Agreement)

A PPA is a long-term contract in which a data center or its operator agrees to buy electricity from a specific generator at a set price and volume for years at a time.

What it means

A Power Purchase Agreement (PPA) is a multi-year contract that locks in the price and quantity of electricity a buyer will take from a particular generator, such as a nuclear plant, wind or solar farm, or gas producer. For AI operators, the PPA is how a data center secures firm, long-dated power and hedges against volatile spot electricity prices. It sits at the boundary between the power market and the compute stack: the contracted cost per kilowatt-hour propagates directly up into cost per token and, ultimately, application margins. PPAs have also become a way for hyperscalers to underwrite new generation, including nuclear restarts and small reactors, by guaranteeing demand. That makes the PPA both a financing tool and a lever over who captures the economics of scarce, reliable power.

Why it matters to investors

PPAs decide who captures the value of scarce firm power. Generators that can sign large, long-dated contracts with AI buyers gain visible, contracted revenue, while operators lock in an energy cost that flows straight into cost per token and margins.

See PPA in the AI value chainIts live model score, why it matters, and every company exposed to it.

Companies on this part of the chain

Talen Energy CorporationTLNVistra CorpVSTNRG Energy, Inc.NRGOklo Inc.OKLO

Named to show where the term sits in the AI supply chain — research, not advice, and never a recommendation to buy or sell.

Related terms

Data-center powerPower Usage Effectiveness — total facility power divided by IT power; lower is more efficient.Cost per tokenThe all-in price to generate model output — the convergence point of the whole stack.SMR (Small Modular Reactor)An SMR is a compact nuclear reactor built from factory-made modules, designed to deliver firm, carbon-free power at a smaller scale than a conventional plant.Interconnection queueThe interconnection queue is the waiting line of projects seeking approval and physical connection to the power grid before they can draw or deliver electricity.

See PPA in the live AI chain.

THE ENTITY maps every constraint onto one live model — which part is tight now, who owns it, and who gets squeezed when it moves. Plain-English reads you can check.

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THE ENTITY is an educational read on the AI supply chain — research, not investment advice. It explains how the chain works and who sits where, never price targets or buy/sell calls.