Virtual Power Purchase Agreements (VPPAs): Powering The Energy Transition

Introduction

The Virtual Power Purchase Agreement (VPPA) is a comparatively new but very fast-growing tool in the world energy market. It is basically a financial arrangement, usually being a Contract-for-Difference (CfD), between a renewable power project developer and an institutional or corporate purchaser. As opposed to classical Power Purchase Agreements (PPAs), which are tied to the physical transmission of power from the generator to the buyer over the grid, a VPPA is a financial-only transaction. Under this structure, the renewable developer sells the electricity produced from its facility directly into the wholesale electricity market at the then-current market price. The corporate purchaser, however, simply keeps on buying its electricity as normal from its current utility or nearby supplier.