INTRODUCTION TO THE VIRTUAL POWER PURCHASE AGREEMENT

The document defines the virtual power purchase agreement (VPPA) as a purely financial transaction where a corporate buyer guarantees a fixed price for renewable energy generation in exchange for renewable energy certificates (RECs) and a floating market price. Unlike physical PPAs, VPPAs do not involve the buyer taking ownership of physical electrons, allowing companies with distributed loads or those in regulated markets to meet sustainability goals without changing their retail utility relationship. The guide highlights that VPPAs are the fastest-growing transaction structure in the US corporate renewable energy market because they are scalable and accessible to buyers without energy trading expertise.

• Virtual PPAs differ from physical PPAs in that the buyer does not own the electricity produced; instead, the VPPA is a financial swap of a fixed-price cash flow for a variable-priced cash flow and renewable energy certificates (RECs).
• VPPAs have become the fastest-growing transaction structure for corporate renewable energy in the US, enabling smaller companies and those lacking energy trading expertise to achieve sustainability goals efficiently.
• A VPPA functions as a 'contract for differences' where the buyer pays a fixed price to the developer and receives the floating market price from the sale of the electricity into a deregulated wholesale market, along with the associated RECs.
• The financial risk for the buyer in a VPPA is influenced by where the contract is 'settled'—either at a 'node' (a specific pricing point on the grid) or a 'hub' (a virtual aggregation of nodes), which affects the volatility of the market price.

APA

KANSAL, R. (2018). INTRODUCTION TO THE VIRTUAL POWER PURCHASE AGREEMENT. RMI. https://rmi.org/app/uploads/2018/12/rmi-brc-intro-vppa.pdf

Chicago

KANSAL, RACHIT. INTRODUCTION TO THE VIRTUAL POWER PURCHASE AGREEMENT. RMI, 2018. https://rmi.org/app/uploads/2018/12/rmi-brc-intro-vppa.pdf.

Wikipedia

{{cite report |last1=KANSAL |first1=RACHIT |title=INTRODUCTION TO THE VIRTUAL POWER PURCHASE AGREEMENT |publisher=RMI |date=November 2018 |url=https://rmi.org/app/uploads/2018/12/rmi-brc-intro-vppa.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kansal2018introduction, author = {KANSAL, RACHIT}, title = {{INTRODUCTION TO THE VIRTUAL POWER PURCHASE AGREEMENT}}, institution = {RMI}, year = {2018}, month = nov, url = {https://rmi.org/app/uploads/2018/12/rmi-brc-intro-vppa.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }