Accessing the Benefits of Virtual Power Purchase Agreements (VPPAs)

30 Apr 2020 | Event, Insights

Watch the Webinar on VPPAs
Recorded on Thursday, April 30th
🡢Watch it here



Most US companies seek to reduce carbon emissions from electricity use through energy efficiency programs and the purchase of RECs (renewable energy credits).  Energy efficiency efforts, such as lighting retrofits and behavior change, are often the low hanging fruit, with a good ROI. Unbundled RECs are easy to purchase and a valid way to meet reduction targets, per the GHG Protocol.

Renewable Energy Credits vs. Virtual Power Purchase Agreements

However, while RECs accurately allocate credit for renewable generation to purchasers, and the market for RECs supports renewable energy generally, REC buyers typically cannot claim credit for bringing new renewable generation onto the grid.  In addition, RECs are a pure operating expense requiring significant cash outlays each year.  As a result, many companies ask: how can we do more to actively drive the transition to low carbon energy?

Virtual power purchase agreements (VPPAs) are one answer to this question.  When a company signs a VPPA, it essentially uses its resources and sophistication to play a direct and substantive role in bringing a new renewable energy project onto the electrical grid.  VPPAs do not use company capital and, depending on market conditions and the terms of the deal, can make the company money.

Until recently, VPPAs have mostly been reserved for very large companies, like Google, Apple, and Walmart, that have the scale to procure 100 megawatts or more in a single contract and have the sophistication and resources to navigate the financial, legal, and energy-market risks inherent in these transactions.  But this is  changing.  The market is becoming more standardized, transaction costs are coming down, and new options are emerging that are opening up these opportunities to a broader set of companies,including The LevelTen Marketplace and Sustainability Roundtable’s Renewable Energy Procurement Services (SR Inc REPS).

 

The LevelTen Marketplace and SR Inc REPS

The LevelTen Marketplace is a “dynamic two-sided market [that] aggregates both PPA buyers and sellers, allowing the parties to connect and transact in a vastly efficient manner.”  LevelTen can not only help a corporate buyer gain visibility into the projects available in the market, it can also run an iterative RFP.  In addition, it provides an impressive array of embedded analytical tools to help assess one deal against another and conduct scenario analysis.

SR Inc REPS, in contrast, offers a service that brings 10 or so buyers together and, working on the group’s behalf, identifies and negotiates an “Aggregated VPPA.” As with LevelTen, they provide market intelligence, run an iterative RFP, and do careful scenario analysis – yet they provide all these services through an expert team with extensive experience in renewable energy markets and procurement, and the legal and financial complexities of VPPAs.  SR Inc REPS offers companies looking for a smaller deal size all the advantages that scale players enjoy in the VPPA market.

Both companies work on a success fee basis, meaning that there is no upfront fee and if a satisfactory deal does not come together, there is no cost.  Instead, they earn a per megawatt hour fee over the life of the contract.  LevelTen requires more scale (in terms of megawatts) to be able to transact on their platform, while SR Inc REPS’ standard deal is a 10MW individual procurement (100MW for a ten-company group).

Watch the Webinar

Hosted by Anthesis, Sustainability Roundtable Inc. REPS​, and Intuit’s Global Sustainability Leader, Sean Kinghorn.

Participants will learn:

  • The basic structure of VPPAs
  • The role and value of VPPAs in a carbon reduction strategy
  • How more companies are accessing VPPAs with strongly positive projected financial returns
  • How buyer organized aggregations reduce VPPA risks and procurement complexity

George Favaloro
Executive Director, North America
George is an Executive Director with Anthesis and leads the North America Energy and Renewables practice. He works with CSOs to develop and manage effective sustainability programs, and his clients include leaders in manufacturing, retail and consumer, industrial products, and technology industries. He will be the host of the webinar.

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