As businesses worldwide push for lower carbon emissions and a transition to renewable energy, Virtual Power Purchase Agreements (VPPAs) or Financial Power Purchase Agreements (FPPAs) have become vital instruments for companies seeking to meet sustainability targets and manage energy price volatility.
Map FinTech, which supports companies with regulatory reporting, recently delved into VPPAs.
A VPPA is a long-term financial contract between a corporate buyer and an energy producer, allowing the buyer to purchase electricity at a fixed price. Unlike physical power purchase agreements, there is no direct delivery of electricity. Instead, the energy producer supplies power to the grid, while the corporate buyer procures electricity separately. The financial settlement occurs based on market fluctuations—if the market price is lower than the fixed contract price, the energy producer compensates the buyer for the difference. Conversely, if the market price is higher, the buyer pays the energy producer the difference.
In many cases, energy producers provide buyers with Energy Attribute Certificates (EACs), proving that the electricity purchased originates from renewable sources. These certificates, which vary by region—such as the EU’s Guarantee of Origin (GoOs), the US’s Renewable Energy Certificates (RECs), and the UK’s Renewable Obligation Certificates (ROCs)—are often tradeable, adding further financial benefits to buyers.
Given that VPPAs are complex financial contracts with settlement structures akin to derivatives, they fall under the European Market Infrastructure Regulation (EMIR) in the EU and UK.
Complying with EMIR can be challenging, particularly for companies that lack the necessary internal infrastructure for regulatory reporting. MAP FinTech provides a suite of services to support companies involved in VPPAs. These services include analysing contracts—whether bespoke or standardised agreements such as ISDA or EFET—mapping contract details to EMIR reporting requirements, enriching reports with necessary data points like delivery zones and load types, and submitting reports on behalf of clients to EU or UK trade repositories. Additionally, MAP FinTech ensures that clients receive all relevant documentation for their records, making compliance a seamless process.
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