Virtual PPAs: turbocharging business Net Zero targets

A Virtual PPA is a flexible, customizable, multi-year bilateral renewable energy contract, powered by renewable energy produced by Enel Green Power, that does not involve the physical delivery of energy from the vendor to the customer, who thus does not need to change supplier.

It is essentially a financial transaction, which is why this type of agreement is often referred to as a "financial PPA". Virtual PPAs work under the guise of contracts for difference (CFD), under which the energy supplier and the client agree a price for the electricity to be supplied (the "strike price"). If this price is lower than the one determined by the wholesale electricity market, the customer receives from the supplier a rebate equal to the difference between the strike price and the wholesale market price. Conversely, if the agreed "strike price" is superior to the wholesale market price, the client pays the difference to the supplier. Being long-term, these agreements protect businesses from volatility in energy markets while facilitating access to renewable energy supplies. Furthermore, they are ideal for customers who need to power several, distinct locations, as no specific supply points are involved.

Because our power stations are not directly connected to the customer’s power supplier, these contracts do not include any dispatch costs. Businesses who sign up to VPPAs also receive Energy Attribute Certificates (EACs), which certify that the power they have purchased is supplied from renewable sources. The flexibility of VPPAs make them the preferred choice for large companies, while at the same time strengthening the role they play in the energy transition. They are an also effective instrument in the fight against Scope 2 emissions, and so are important in efforts to promote decarbonization.