Virtual Power Purchase Agreement (Vppa)

Step 3: After the construction period, the developer begins to sell the energy produced in the electricity market. Now, remember, the buyer of the company has agreed to pay a fixed price for renewable energy; The developer (including the seller) is subject to variable market prices. LevelTen Energy has developed its dynamic matching engine to solve this problem. The engine analyzes all data from the LevelTen Marketplace – a vast database of more than 1,600 renewable energy projects across North America – to identify the best projects (or portfolios) based on the needs of each buyer. Thanks to the power of data science, LevelTen Energy can discover a project that meets a company`s needs in terms of size, price, risk, timing, location and other factors, whether they work alone or with other buyers. It is important to note here that VPPa need market liquidity – where the project is allowed to sell its energy directly on the grid at the prevailing wholesale price. This is generally only possible in organised markets such as a regional transport organisation (RTO) or an independent network manager (ISO) acting as third-party operators independent of the transport network. Since the VPPA economy is based on the difference between the fluctuating market price and the VPPA price, it is important to have the transparency of an RTO/ISO market. VPAPs are flexible and can help companies aggregate their load into a single renewable energy project under a single AAE, regardless of where their individual facilities are located.

The VPPA is a separate financial contract that does not directly affect an organization`s traditional electricity supply. The organization continues to purchase electricity from the distribution company, in addition to the VPPA for renewable energy. Virtual Power Purchase Agreements (VPPAs) is becoming increasingly popular with companies to achieve their renewable energy goals. Here is the 101 on VPPAs for anyone exploring this option for the first time on behalf of their company. As we always claim with PowerHub, the benefits of virtual walking are and must be harnessed by all. The sustainability of our planet and our energy sources has accelerated through the use of virtual electricity supply contracts. 2018 was a record year in the United States for renewable energy contracts. 4.81 GW of virtual agreements were signed in the first 10 months. To obtain financing for a project, developers must first find a buyer for the majority of the energy that the project will produce. Historically, developers would find a supplier or a large company to buy most of the energy, and then, if the energy remained low, they would sign an AAE with a small company. This has made it extremely difficult for a small business to find a developer willing to sell them exactly the right amount of energy. This is why the initiative for virtual contracts to purchase electricity comes mainly from companies that may not have extensive experience in the renewable energy trade.

Electricity purchase contracts are contracts between energy buyers and developers. They give the developer the guarantee that the buyer buys electricity generated from renewable energy sources. A virtual energy sales contract is a long-term contract between a company and a developer. As the name suggests, there is no physical exchange of energy in a virtual energy sales contract. In the case of a virtual AAE, the energy does not physically pass from the project to the buyer. It is simply a financial contract, which is why it is often referred to as a financial PPPA. In a VPPA, energy is sold on the wholesale electricity market in a defined billing location (nodes, trading platforms or charging area). The buyer continues to receive his electricity from his utility at his supply rate.

For more information on the differences between a physical PPA and a virtual PPP, see „4 questions to ask before choosing a physical or virtual energy purchase contract

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