A power purchase agreement (PPA) is a simple and affordable way to transition your business to green energy. Learn about the two types of PPA and how you can accelerate your net-zero journey.
Across Central and Eastern Europe, a growing number of businesses are embracing renewable energy to reduce costs and carbon emissions. However, purchasing, installing, and maintaining a clean energy asset, such as a solar PV system or wind turbine, is beyond the scope of many companies.
One solution gaining popularity is a green PPA. It is a long-term financial agreement (typically 10 to 20 years) between a business and a renewable energy producer, such as Enery. A green PPA supplies a defined volume of clean electricity at a fixed price, typically below market rates. For companies struggling with rising energy costs, a PPA offers protection against price volatility and future increases.
Environmentally, a PPA directly reduces your carbon footprint and can help you meet ESG and net-zero commitments. Purchasing renewable energy also enhances your corporate image and aligns your business with today’s climate-minded consumers.
What are the two types of PPA?
The two common types of PPA are “physical” and “virtual.” When you form an industry partnership with a supplier like Enery, we recommend a PPA model that meets your financial and sustainability goals.
When designing a PPA, there are various factors we consider, including:
- Your business’s load profile and energy demands
- The number of locations covered by the PPA
- The availability of renewable energy plants in your region
- The desired length of your agreement (e.g., 12 years, 20 years)
A PPA does not change the way your business receives or uses electricity. Additionally, there are no up-front costs or maintenance requirements, providing simple, capital-free access to clean energy.
The environmental benefits are also the same regardless of whether your PPA is physical or virtual. Both options add more renewable electricity to the power grid and support Europe’s clean energy transition.
A physical PPA: direct clean energy
As its name suggests, a physical PPA supplies clean energy directly to your business. The electricity is generally delivered via the power grid but may come from an on-site system with a private connection. Depending on your agreement, you may purchase all the electricity a renewable energy plant produces or only a specific percentage.
What are the benefits of a physical PPA?
A physical PPA supplies clean energy directly, making it practical for companies with one location or multiple facilities sharing the same power grid. The agreement provides clear visibility of all electricity generated and purchased, ensuring transparent financial and environmental savings.
Additionally, the structure of a physical PPA is relatively simple due to its direct generation and supply. Enery’s physical PPAs include guarantees of origin for every megawatt-hour of clean energy supplied, if available in your respective market.
A virtual PPA: aggregated clean energy
A virtual PPA, also called a financial PPA, provides the same economic benefits as a physical PPA but does not supply electricity directly. In fact, your business and the renewable energy plant do not need to share the same power grid. For example, Enery recently signed a virtual PPA with Asahi Europe & International’s breweries in Romania. The PPA will reduce the company’s operating costs and help it become carbon-neutral across its European breweries by 2030.
In a virtual PPA, the renewable energy producer sells its power into the local electricity market. The supply and purchase of electricity are based on market spot prices and reconciled by the PPA provider. This financial model eliminates any cost variations, guaranteeing a fixed energy price for the duration of your agreement.
What are the benefits of a virtual PPA?
A virtual PPA does not physically supply your business with electricity, making it a more flexible and customizable solution. They are beneficial for companies spread across different regions, such as those with multiple offices, factories, or distribution centers.
A virtual PPA can also combine renewable energy sources – such as solar PV, wind, and batteries – to meet your company’s power demands more accurately. This structure can deliver greater financial savings and make it easier to meet your corporate decarbonization or net-zero targets. Like our physical PPAs, our virtual PPAs include guarantees of origin for all energy supplied, where available.
Physical or virtual: which PPA is best?
Even though physical and virtual PPAs have differences, it is not a case of one being better than the other. For companies with a single location or multiple facilities connected to the same power grid, a virtual PPA can be a highly effective solution. On the other hand, larger companies with higher power demands, locations in multiple regions, or more complex requirements may find a virtual PPA offers the best results.
Ultimately, it’s a matter of identifying the right PPA model for your business and tailoring it to your specific financial and sustainability goals.
Start your net-zero journey with a green PPA
If you’d like to discover more about the benefits of a power purchase agreement, the team at Enery is here to help. As one of Central and Eastern Europe’s leading PPA providers, we can help you reduce your long-term costs and carbon emissions while supporting the clean energy transition.
To find out more, contact a member of our PPA team to schedule a free consultation.