A financial agreement in which a customer agrees to pay a project owner a predetermined price per unit of energy and the associated Renewable Energy Certificates (RECs) from a renewable energy project. Instead of the customer receiving the electricity physically, the project owner sells the energy into the local organized wholesale market; for each MWh, the buyer then pays or receives the difference between the wholesale market revenue and the predetermined PPA price.
Contract for Differences, Synthetic PPA, Financial PPA
A virtual power purchase agreement (vPPA) is a way for cities to support renewable energy projects, and in some cases new project development, without physically taking ownership of the electricity. In a vPPA, a customer agrees to pay a specified price for the output of the renewable energy facility for a specified number of years, although the amount the customer pays is determined by market prices -- the buyer pays or receives the difference between the wholesale market revenue and the predetermined price. The buyer must specify in its contract that it receives the renewable energy certificates (RECs), which represent the environmental attributes of the renewable energy. Since this type of transaction relies on selling the generated power into an active market, vPPAs can only be signed with projects located within or close to an active wholesale electricity market. It’s important to note that a city does not necessarily also have to be in a wholesale market; any city in the U.S. could potentially enter into a vPPA. The data below only represents whether a vPPA is possible for a project within your state.
- Is my state in a wholesale market?
- Which market(s)?
SharedRenewablesScorecard.org; SharedRenewables.org; DSIREusa.org; NREL.gov