Orissa Feeney | Virtual Power Purchase Agreement Definition
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Virtual Power Purchase Agreement Definition

Virtual Power Purchase Agreement Definition

With more recent guidelines and a strong transition to unlimited management, virtual Power Purchase Agreements (VPPAs) has become the real deal. In addition, virtual power purchase contracts, like conventional PPAs, build credits for renewable energy for businesses. You will receive a Renewable Energy Certificate (REC) from the developer for every megawatt hour of electricity generated. When a company signs a VPPA, it agrees to pay a fixed price for a specified period of time for each electrical unit produced in a wind or solar facility. The developer then sells this electricity on the wholesale market. The point of sale is a pre-selected place from which the public can access electricity generated by renewable energy. The AAE is considered binding at the time of signing, also known as the reference date. Once the project is built, the validity date ensures that the buyer buys the electricity produced and that the supplier does not sell its production to others other than the buyer. [9] This breakdown highlights the essential factors they should keep in mind to manage risks in your Renewable Energy Sales Contract (AAE). In a typical AAE, a supply company would purchase physical energy from the wind or solar facility site and take back the title of electrons and renewable energy credits (REC) provided by the facility. A VPPA is a slight variation of a typical AEA. This is a financial comparison in which a business buyer agrees to pay, for example, a fixed price to the owner of a wind farm for each electrical unit produced by the wind farm, while the park developer takes responsibility for the supply and sale of electricity produced on the commercial market. Therefore, virtual electricity supply contracts are an excellent opportunity to develop clean energy projects in newer markets.

With financial support from large companies, it will be easier to raise funds for solar installations and wind farms, which encourages small developers to operate. The following definitions are understandable and not exhaustive. This won`t make you an expert, but at least if you hear these terms next time in the conversation, you can get along without feeling completely out of the loop. In the case of a virtual AAE, the energy does not physically pass from the project to the buyer.

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