If you’re involved in corporate clean energy or sustainability, you’ve likely heard the term virtual power purchase agreement, or vPPA. But what does a vPPA actually involve — and why has it become such a common clean energy strategy for corporations?
A virtual power purchase agreement (vPPA) is a financial contract between a renewable energy generator (the seller) and an organization or corporation (the buyer). The agreement is considered “virtual” because the electricity generated by the renewable project is not physically delivered to the buyer. Instead, the electricity is sold into the local wholesale electricity market, while the buyer and seller settle financially.
Click the image below to watch a short explainer video — or read on for a detailed walkthrough.
In a vPPA, the buyer agrees to financially support a renewable energy project without taking physical delivery of the electricity. This structure allows companies to support new clean energy development, manage long-term energy price risk, and meet sustainability goals — even if the project is located far from their facilities.
Unlike a traditional physical PPA, a vPPA does not require the buyer to operate in the same grid or region as the renewable project. This flexibility has made vPPAs one of the most widely used clean energy procurement mechanisms for large organizations.
At the heart of a vPPA is a financial hedge.
In the contract, the buyer and seller agree on a fixed electricity price, known as the strike price. The buyer agrees to pay the seller this fixed price for each megawatt-hour (MWh) generated by the renewable project.
Meanwhile, the seller sells the electricity into the wholesale market at the prevailing market price, which can vary hourly — or even more frequently.
Because the market price and strike price rarely match exactly, the buyer and seller settle the difference through a monthly settlement payment.
Example:
Buyer pays seller $8/MWh
Conversely:
Seller pays buyer $10/MWh
This structure ensures:
In addition to cash settlements, vPPAs include the transfer of Renewable Energy Certificates (RECs).
Here’s how the REC process works:
Once transferred, the buyer can:
RECs are the mechanism that allows a buyer to claim the environmental attributes of the renewable electricity — even though the physical power was sold into the grid.
Here’s how a virtual power purchase agreement works from start to finish:
Virtual power purchase agreements enable organizations to:
At the same time, renewable developers gain predictable revenue streams that make projects financeable and scalable.
Corporations increasingly rely on vPPAs because they offer a rare combination of environmental impact and financial discipline. Sustainability teams gain credible progress toward clean energy goals, while finance teams gain cost predictability and transparency.
Because vPPAs are financial instruments, they require careful modeling, settlement tracking, and REC management — particularly as portfolios grow across regions and markets.
Verse’s software platform empowers corporate clean energy buyers to plan, evaluate, and manage virtual power purchase agreements with confidence. From forecasting settlement outcomes to validating invoices and tracking RECs, Verse helps make vPPAs faster, easier, and more affordable to manage at scale.
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