Virtual PPA

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Sustainability - renewables - electricity - power purchase agreements - contract for differences.

Abbreviation for Virtual Power Purchase Agreement.

A virtual PPA is a contract between a green electricity generator and a buyer. However, no renewable power is physically delivered.

Instead, the generator sells their renewable power directly to the grid and receives the open market price.

The project developer pays the difference to the buyer when the agreed-upon PPA price (or strike price) is below the market price, and vice versa.

This type of contract is sometimes known as a financial PPA, and is distinguished from a Direct PPA (under which power is physically delivered to the buyer).

The virtual PPA can also be viewed as a fixed-for-floating swap, the flows being swapped between the parties being a fixed power price, and the floating market price.

See also

External link

Introduction to Power Purchase Agreements - UK Crown Commercial Service