In recent years, PPAs have emerged as a key tool for businesses willing to achieve sustainability objectives as soon as guaranteeing reliable access to energy. That said, businesses can be presented with a dilemma as to whether to enter into a virtual PPAs or physical PPAs for especially tracking RE via Energy Attribute Certificates (EACs). Both the methods aim at fulfilling the same objectives but with difference in the green effect, realizing energy budget, and emissions reporting.
What Are Energy Attribute Certificates (EACs)?
It is crucial to preview what Energy Attribute Certificates (EACs) mean before considering virtual and physical PPAs’ comparison. These certificates prove the source of the renewable energy used by a firm. When a business buys renewable power through a PPA, it also purchases EACs that guarantee that the energy is from clean sources like solar or wind energy or hydro.
EACs act as a sign that the energy you are purchasing is not just green-tinted washed but generated by renewable generators. It is important for meeting sustainability initiatives plans such as RE100, CDP, or other standards or local environmental policies. Therefore, no matter the form, whether a virtual or physical PPA, EACs remain the instruments that help make you credibly report on your renewable energy consumption.
The Role of EACs in Physical PPAs
A physical PPA is one where the renewable energy you purchase is actually transported to your facilities using the electricity grid. You are actually using the energy and with that there comes the corresponding embodied assessment credits. These certificates are commonly traded along with the energy supply; this gives supply chain transparency and you can be able to hold an evidence that you have used renewable electricity to conform to the required reports.
The important factor here is that physical PPA enables business entities to synchronize their energy utilization with the requirements of sustainable development. This is where EACs linked to renewable energy procurement are handy: if you’re directly consuming wind energy from a specific wind farm or solar electricity from a specific solar installation, the certificate is your guarantee of sustainability. This it assists in achieve corporate objectives such as carbon neutrality or renewable energy usage.
The Role of EACs in Virtual PPAs
On the other hand, virtual PPAs (vPPAs) do not involve the physical delivery of electricity to your premises. Instead, these are financial agreements between a buyer and a renewable energy generator. In a vPPA, you essentially buy renewable energy certificates—like RECs or Guarantees of Origin (GOs)—without the need for the energy to actually flow to your facility.
The contract in a vPPA operates like a contract-for-difference (CfD). The buyer and seller agree on a fixed price for the energy, but the buyer settles the difference between the agreed price and the market price, depending on energy market fluctuations. Through this structure, the buyer still claims the environmental attributes of the energy (i.e., the EACs) despite not physically consuming the energy. This makes virtual PPAs a popular option for companies seeking flexibility in energy sourcing and a simpler method for meeting sustainability goals.
Virtual vs Physical PPA: How EACs Impact Your Reporting
When it comes to reporting sustainability through frameworks like RE100, the difference between virtual and physical PPAs is crucial. Physical PPAs allow for direct energy consumption tracking, making it easier to match energy usage to the generation source. The EACs you acquire in a physical PPA are directly tied to your company’s energy footprint.
In a virtual PPA, however, the EACs give you a different kind of visibility. Even though you’re not directly consuming the energy, you can still claim it in your sustainability reports. But this opens up new complexities in terms of portfolio management and tracking. With virtual PPAs, companies must ensure that they are receiving the correct EACs for the energy credits they have purchased and ensure that these align with their Scope 2 emissions and carbon reporting.
Making the Choice: Virtual vs Physical PPAs
Deciding whether a virtual PPA vs physical PPA is best for your business depends on various factors, including geographical flexibility, financial goals, and sustainability commitments. If you want to directly consume renewable energy, a physical PPA might be your best option. However, if flexibility, cross-border agreements, or minimizing risk is important, a virtual PPA allows you to meet your renewable energy targets without the complications of managing energy flow.
Conclusion: The Importance of EACs in Both Models
At the heart of both virtual and physical PPAs is the ability to track and verify renewable energy consumption through Energy Attribute Certificates. These certificates not only allow companies to prove their commitment to renewable energy but also provide the necessary data for accurate environmental reporting. Whether you choose a physical or virtual PPA, EACs are indispensable in ensuring transparency, compliance, and effective management of your energy usage.
Understanding how these two types of PPAs work in tandem with EACs gives businesses the confidence to meet their sustainability goals while making informed decisions about their energy procurement strategies.
