Clean Energy Finance Forum – Virtual or Physical, the PPA Is Prime
Many corporate leaders have committed to greening their operations in the past few years, with some promising to go carbon-neutral in the next few decades. The power purchase agreement, or PPA, has emerged as a method for honoring these commitments in all sorts of contexts – including the economic disarray that will follow the Covid-19 tragedy.
A virtual power purchase agreement (VPPA) is a financial contract between a corporate buyer and the developer of a prospective renewable energy project with two aims. The project can both enable corporations to meet their sustainability goals and facilitate decarbonization across the electric grid. Under a VPPA, buyers guarantee a fixed price for each unit of electricity produced by the developer (typically expressed in dollars per megawatt-hour) over a specified period of time in exchange for renewable energy certificates. Companies are not responsible for the generation of renewable energy, nor do they physically receive any electricity from developers. Instead, the developer produces and sells units of electricity at prevailing market prices to local power grids, with corporate buyers continuing to meet their energy demands through their current energy suppliers.