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Definition

Virtual renewable electricity PPA (VPPA)

A virtual renewable electricity PPA is a financial contract that exchanges the difference between a fixed strike price and a generator's wholesale price without supplying your sites; project attributes transfer only if the contract says so.

What is a virtual renewable electricity PPA?

A virtual power purchase agreement (VPPA), also called a financial PPA or contract for differences, is an arrangement with a renewable generator. The generator sells into its wholesale market while you buy electricity from your usual suppliers. The VPPA delivers no electricity to your sites.

Why does a virtual renewable electricity PPA matter to you?

A VPPA review needs two evidence trails: strike price, reference price, settlement volume and payment for finance; generated MWh, transferred and cancelled attributes, market, and period for the renewable-electricity claim.

How does a virtual renewable electricity PPA work?

The parties set a strike price per MWh. You pay when the wholesale reference price is lower; the generator pays when it is higher. Keep your electricity bills separate. For Scope 2, match your transferred and cancelled attributes to same-period use, then test the Scope 2 quality criteria.

What mistakes should you avoid?

  • Calling the VPPA a physical supply contract.
  • Assuming its financial settlement proves a renewable-electricity claim.
  • Claiming more MWh than transferred and retired attributes cover.
  • Treating the VPPA as a perfect hedge when the project's reference price moves differently from the electricity price your sites pay.

Is a VPPA the same as a physical PPA?

No. A physical PPA supplies electricity to you; a VPPA keeps your usual supply and settles only the wholesale-price difference.

Does a VPPA automatically reduce your market-based Scope 2 emissions?

No. A cash settlement is not attribute evidence. Use transferred and cancelled attributes only for the MWh they cover. For the rest, use the residual mix, the factor for unclaimed electricity, or another allowed fallback.

What should you send when a customer asks about your VPPA?

Send the settlement calculation and payment record, plus cancelled-certificate evidence reconciled to same-period electricity use.

Example

Hypothetical Swedish agricultural cooperative example: Suppose a cooperative uses 8,000 MWh at its Swedish sites during one settlement period, and its VPPA settles 7,200 MWh of wind generation for the same period. The strike price is SEK 550/MWh and the contract's wholesale reference price is SEK 430/MWh.

The cooperative pays the generator (SEK 550 - SEK 430) x 7,200 MWh = SEK 864,000 for that period. Project records show 7,200 MWh generated, but only 6,900 Guarantees of Origin were transferred and cancelled for the cooperative. The Swedish Energy Agency confirms that one GO represents one produced MWh, so the records cover 6,900 MWh from the same period. Attribute coverage is 6,900 / 8,000 = 86.25%, leaving 1,100 MWh needing the applicable residual-mix or allowed fallback factor. The SEK 864,000 settlement does not increase the covered MWh.

Where it comes up

CDP 2026 Question 7.30.15 electricity purchases accounted for at a zero or near-zero emission factorCDP Technical Note: Accounting of Scope 2 Emissions, version 12.0, sections 4.2.1 and 5.1, and Question 7.30.15 (checked 2026-08-20)AASB S2 information about contractual instruments relevant to Scope 2 emissionsAASB S2 paragraph 29(a)(v) and paragraphs B30-B31 (checked 2026-08-20)

Related terms

Renewable electricity power purchase agreement (PPA)

A renewable electricity power purchase agreement is a long-term contract with a specific generator, but it supports market-based Scope 2 reporting only when the agreement transfers the relevant energy attributes to your company.

Energy attribute certificate (EAC)

An energy attribute certificate carries the generation attributes of a defined quantity of electricity and can support a market-based Scope 2 claim when it covers the right period and market and is retired or cancelled for one claimant.

Scope 2 quality criteria

A market-based Scope 2 total reflects your electricity contracts, certificates, and supplier choices rather than only the local grid average; the Scope 2 quality criteria are eight GHG Protocol checks for that evidence.

Scope 2 Emissions

Scope 2 emissions are the indirect greenhouse gas emissions from generating the electricity, steam, heat, and cooling your company buys and uses.

Null power (Scope 2)

Null power is electricity left without its renewable source and emissions attributes after the related certificates or other contractual instruments have been sold or transferred to another claimant.

Sources

  • U.S. Environmental Protection Agency

    Financial PPA definition, strike-price settlement, lack of physical delivery, REC ownership, and physical-PPA comparison

    2026-08-20

  • CDP

    Question 7.30.15, PPA treatment, contractual-instrument reporting, and Scope 2 quality criteria

    2026-08-20

  • Australian Accounting Standards Board

    Paragraph 29(a)(v) and B30-B31 disclosures about contractual instruments relevant to Scope 2 emissions

    2026-08-20

Last verified 2026-08-20

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Virtual renewable electricity PPA (VPPA) Definition | Keslio