Unlike corporate PPAs (power purchase agreements) or fixed-price renewable energy certificates (RECs) that allow utilities to invest in renewable assets with a guaranteed return through a long-term purchase agreement with a corporate buyer, virtual PPAs (VPPAs) expose the utility and the corporate buyer to the risk of fluctuations in spot prices from participating in different markets. VPPAs are nevertheless gaining some traction as corporations and utilities are pressed to achieve their renewable energy goals by their boards, regulators, and customers. Ironically, the VPPA does not guarantee that corporations will be consuming renewable energy. The VPPA includes a purchase agreement to acquire renewable energy from the utility. But the utility delivers the energy into its local grid. The corporation then continues to acquire its energy from its own local utility, which could be generating it using nonrenewable resources. Spot-price fluctuations and sourcing conflicts aside, VPPAs do enable utilities to work with corporate buyers in any geography to create asset investments. They also enable corporations to claim they are making progress on renewable energy consumption goals.
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