This is why the initiative for virtual contracts to purchase electricity comes mainly from companies that may not have extensive experience in the renewable energy trade. Aggregation is the basis of such an approach. It allows small buyers to partner with huge groups, obtain a purchasing power agreement and thus give life to a renewable energy project. Instead of investing your own capital and resources in installing renewable technologies, you can purchase electricity from an AAE from a company that supports all aspects of project collection, including financing. In an AAE, the “seller” builds or installs the technology (z.B. a solar installation or wind farm) and the buyer buys the electricity per kWh. Unlike a physical power purchase contract, a virtual AAE is a simple monetary contract. This is why it is also known as the Financial Power Purchase Agreement. When a company signs a VPPA, it agrees to pay a fixed price for a specified period of time for each electrical unit produced in a wind or solar facility. The developer then sells this electricity on the wholesale market. The point of sale is a pre-selected place from which the public can access electricity generated by renewable energy. When a company decides to follow an AAE, the two most common options are a physical or virtual AAE. With a physical AAE – as the name suggests – the company or a designated third party takes possession of the physical energy at a specific delivery point of the electrical grid.
The physical energy can then be transferred from that indicated delivery point to the company`s energy account or meter. Therefore, a virtual agreement not only opens doors to more opportunities, but also facilitates asset and contract management. In addition, buyers do not have to worry about market volatility with respect to the fixed price component. This is what allows VPPa companies to do this. Step 3: After the construction period, the developer begins to sell the energy produced in the electricity market. Now, remember, the buyer of the company has agreed to pay a fixed price for renewable energy; The developer (including the seller) is subject to variable market prices. Therefore, virtual electricity supply contracts are an excellent opportunity to develop clean energy projects in newer markets. With financial support from large companies, it will be easier to raise funds for solar installations and wind farms, which encourages small developers to operate.