A Virtual Power Purchase Agreement (VPPA) is a financial contract between a business and a renewable energy generator, without any physical delivery of electricity.
Instead of electricity, the buyer receives renewable energy certificates (RECs or GoOs), while the generator sells the actual electricity into the wholesale market. The agreement includes a fixed price for energy; if the market price exceeds this, the generator pays the business the difference—and vice versa.
This arrangement functions like a financial hedge. Businesses gain exposure to renewable energy benefits without needing to alter their existing electricity supply contracts.
They receive credible environmental attributes to support carbon reporting and ESG goals, while the generator gains revenue certainty, enabling project financing.
VPPAs are particularly useful for multinational corporations with dispersed energy use or those that can't physically connect to a specific renewable source.
They're best suited for firms with advanced energy procurement strategies, like tech companies, banks, large retailers, or corporates aiming for 100% renewable targets across regions.
Since VPPAs are typically “contract for differences” agreements, they require financial and legal sophistication to manage risk and accounting implications. However, they also offer the opportunity to support new renewable capacity and demonstrate climate leadership on a global scale.
By separating the physical and financial aspects of energy procurement, VPPAs unlock access to green energy for a wide variety of businesses, regardless of their location or local grid limitations.