Finance
Virtual PPA — the swap that decarbonises without touching the grid
The Virtual PPA (vPPA, financial PPA, bilateral CfD) is a purely financial contract: the company pays a fixed price to the producer and receives the market spot price. No physical delivery, just a swap.
Mechanics in 1 sentence
Net cashflow = (Spot price − Fixed strike) × MWh generated
If spot > strike, the producer pays the difference. If spot < strike, the company pays the delta. Result: smoothed electricity price over 10-15 years + bundled GoOs.
Benefits
- No change to the existing supply contract
- Covers multiple countries and legal entities in a single deal
- Natural hedge against gas / CO2 volatility
- Counts as Scope 2 market-based (RE100, SBTi)
Accounting — beware IFRS 9
A vPPA is a financial derivative: MtM on the balance sheet, volatile P&L. Hedge accounting (IFRS 9) smooths this, but requires rigorous 'own use exemption' or cash flow hedge documentation.
When to prefer a Physical PPA?
Single site, > 20 MW base load, close to a generation asset: Physical Corporate PPA remains simpler. vPPA shines in multi-site, multi-country setups.