Virtual Power Purchase Agreements (VPPAs) Smarter Solar Solutions for UK Businesses
The Evolving UK Energy Market
The UK’s energy system has rapidly shifted in recent years, driven by climate policy, technological advancement, and increasing corporate accountability. Once viewed as expensive and complex, sourcing renewable electricity is now part of the mainstream business toolkit. But with growing scrutiny on greenwashing and a demand for transparency, businesses are now looking beyond basic supplier contracts.
Often, the “green energy” bought by corporations comes from existing, often overseas, renewable sources that are already on the grid — offering limited additional environmental benefit. Meanwhile, on-site solar installations, while attractive for reducing grid charges and lowering costs, aren’t always feasible due to space, planning, or financial constraints.
This is where Virtual Power Purchase Agreements (VPPAs) offer an innovative, impactful solution — one that supports new UK renewable capacity and delivers real carbon reductions.
What are Virtual Power Purchase Agreements ?
Let’s get the virtual PPA explained clearly: a Virtual Power Purchase Agreement is a financial agreement between a corporate buyer and a renewable energy generator. It allows companies to buy electricity at a pre-agreed fixed price, but unlike a physical PPA, the power itself is sold into the national grid — not directly delivered to the buyer.
Instead, the buyer receives the environmental attributes of the power — typically in the form of Renewable Energy Certificates (RECs) or Guarantees of Origin (GoOs) — while benefitting from a hedge against future electricity price volatility.
How a Virtual PPA Works
Fixed Strike Price:
The buyer and the generator agree on a fixed price per MWh of electricity.
Market Settlement:
The generator sells power to the grid at the prevailing market price.
- If the market price is below the strike price, the buyer pays the generator the difference.
- If the market price is above, the generator pays the buyer the surplus.
No Physical Delivery:
The electricity isn’t supplied to the buyer directly — but they retain the environmental benefits.
This model ensures financial predictability, while empowering companies to take an active role in driving new UK renewable energy projects, especially in the solar sector.
Tackling Scope 1, 2, and 3 Emissions with VPPAs
As pressure mounts on businesses to decarbonise, many are aligning their energy strategies with the Greenhouse Gas Protocol’s Scope 1, 2, and 3 emissions framework — a globally recognised standard for carbon reporting.
Scope 1 – Direct Emissions
These are emissions from sources owned or controlled by your organisation — like company vehicles, boilers, or on-site fuel combustion.
➡️ VPPAs don’t typically impact Scope 1 emissions directly, but when paired with electrification strategies (e.g. switching from gas to electric heat pumps), they can indirectly support reductions.
Scope 2 – Indirect Emissions from Purchased Electricity
This includes emissions from the generation of electricity, heat, or steam that your business buys and consumes.
➡️ This is where VPPAs shine. By procuring renewable energy through a virtual power purchase agreement — and receiving matching RECs or GoOs — your business can reduce or even eliminate Scope 2 emissions.
Under the market-based accounting method, organisations can use VPPAs to claim renewable electricity consumption and prove alignment with net-zero goals.
Scope 3 – All Other Indirect Emissions
These encompass emissions from your value chain, including suppliers, employee travel, product use, and waste.
➡️ Although more complex, VPPAs can contribute to Scope 3 strategies too — especially if your suppliers also rely on the grid. Encouraging or helping suppliers to engage in renewable energy procurement through VPPAs enhances the emissions profile of your wider supply chain.
For organisations with science-based targets or aiming for net-zero supply chains, influencing Scope 3 emissions is essential — and VPPAs offer a credible tool for doing just that.
The UK Context: VPPAs & Contracts for Difference (CfDs)
The UK’s Contracts for Difference (CfD) scheme is the government’s flagship tool for growing the renewable energy sector. While CfDs are allocated through auctions to generators, the VPPA model allows corporate buyers to mirror this structure, offering similar price stability while helping fund new solar projects within the UK.
With the Low Carbon Contracts Company (LCCC) managing government CfDs, the credibility of this model is well-established. VPPAs bring that stability and reliability into the commercial sphere, giving businesses access to long-term, low-carbon energy at predictable costs.
Why VPPA Solar is a Game-Changer for UK Businesses
In the drive for corporate decarbonisation, VPPA solar projects offer a highly flexible and impactful solution. Unlike on-site solar — which requires capital expenditure, permits, and physical space — virtual PPAs provide access to solar energy regardless of location, perfect for city offices, leased properties, or large multi-site businesses.
Business Benefits of a Virtual PPA Solar Agreement:
Price Certainty:
Hedge against rising electricity costs and budget with confidence
Sustainability Proof:
Secure GoOs and RECs to substantiate renewable claims
Zero Infrastructure:
No land, panels, or installation required
UK-Based Impact:
Fund new renewable generation right here in the UK
Scope 2 Emissions Reduction:
Directly support your net-zero strategy
FAQs About Virtual Power Purchase Agreements in the UK
As businesses face tighter carbon regulations, increasing energy costs, and greater ESG scrutiny from investors and consumers, finding the right energy procurement strategy is no longer optional — it’s essential.
If you’re serious about achieving net-zero, managing your Scope 2 emissions, and locking in stable, long-term energy pricing, a Virtual Power Purchase Agreement offers a strategic, scalable solution.
Absolutely, here’s some practical, informative, and professionally written content for each FAQ. It’s straight to the point, with enough depth to build trust and educate your audience, particularly those navigating the UK renewable energy landscape. Let’s get into it:
A Power Purchase Agreement (PPA) is a physical deal—you buy electricity directly from a specific renewable energy generator (like a solar or wind farm), and that electricity is delivered to your site through the grid.
A Virtual Power Purchase Agreement (VPPA), on the other hand, is a financial contract rather than a physical energy supply deal. You’re not getting the actual electrons from the generator. Instead, you’re agreeing to buy renewable energy at a fixed price. You continue to purchase your electricity from your regular utility, but the VPPA supports the development of clean energy elsewhere on the grid. You also receive Renewable Energy Certificates (RECs) to offset your carbon footprint.
In most cases, no—VPPAs are tailored for larger corporations with high energy usage and robust sustainability targets. They’re long-term contracts (typically 10–20 years), often involving complex legal, financial, and risk management arrangements. That level of commitment—and capital exposure—doesn’t always make sense for smaller firms.
That said, aggregated VPPAs are emerging, where multiple smaller businesses team up to gain access to the same benefits. It’s still early days in the UK for that model, but it’s worth keeping an eye on.
Yes—and that’s actually one of the key benefits of a VPPA. You can often select the renewable energy project you want to back, whether it’s a large-scale solar park in Cambridgeshire or a wind farm in Scotland. This lets your business align with projects that match your values or geographic footprint, which can be a strong part of your brand’s sustainability story.
However, flexibility depends on the developer and the market. Some deals are take-it-or-leave-it; others are highly customizable.
Yes, you still receive and pay for your electricity from your traditional utility or energy supplier. The VPPA operates alongside your existing electricity arrangement—it’s a financial layer rather than a physical energy supply route.
You pay your utility for the energy you consume, and separately settle the financial transactions under the VPPA based on the contract terms (usually the difference between the fixed VPPA price and market prices). It’s a contract-for-differences model, so you’re essentially hedging against future electricity price volatility while supporting green generation.
Are VPPA solar deals better than installing solar panels?
It depends entirely on your situation. Here’s a practical breakdown:
A VPPA solar deal, by contrast, is better suited to large businesses with multiple sites, high emissions targets, or limited access to on-site solar. You don’t get direct power from the panels, but you do get RECs and a strong sustainability narrative. It’s a strategic play, not a practical energy solution.
Installing solar panels gives you on-site generation, direct energy cost savings, potential tax advantages (like capital allowances), and full control over your asset. It’s ideal if you own your property, have suitable roof or land space, and want tangible energy independence.
In short: solar installations reduce your bills. VPPA deals reduce your emissions profile. Some businesses do both.
Excel Energy: Your VPPA Partner
At Excel Energy, we guide UK businesses through every step of the VPPA journey — from project identification and risk assessment to negotiation and emissions reporting. Our goal? To make clean energy procurement seamless, smart, and financially sustainable.
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