Physical and financial structures differ
A physical PPA purchases energy under delivery arrangements that must fit the relevant market and retail service framework. A financial PPA commonly settles a contract price against an agreed market reference while the business continues buying electricity separately. Specific terms control. Neither should be casually described as a fixed total utility bill. The project’s settlement point, the business’s retail load location, and the timing of output can differ, creating risks that a simple average-price comparison misses.
Output and market value are uncertain
Wind and solar generation vary by conditions and can be affected by curtailment, outages, or delayed operation. A business may have volume, shape, basis, negative-price, or settlement exposure depending on the contract. Ask how underperformance, force majeure, delivery failure, and project milestones are handled. Model more than expected annual production. A low strike price does not prove a positive cash outcome in every period, and the project’s output may not align with the company’s consumption.
Attributes and financial obligations need specialist review
Confirm certificate ownership, delivery, retirement, replacement, and reporting rights. Review term, escalation, credit support, assignment, termination, remedies, tax assumptions, and accounting treatment. Changes in facilities or corporate structure can matter during a long commitment. Qualified legal, treasury, accounting, tax, and technical analysis may be necessary. A supplier presentation should not substitute for that review. Verify current incentive assumptions independently and avoid broad claims about emissions or additionality that the agreement alone cannot establish.
Hypothetical financial settlement
Under a highly simplified illustrative contract, 1,000 MWh settles against a $50/MWh strike. At a $40/MWh reference, the buyer would pay a $10,000 difference under that assumed direction; at $60/MWh it would receive $10,000. The actual contract may differ and includes other considerations. The buyer’s separate retail bill does not disappear. This is a teaching example, not a proposed transaction, investment recommendation, or prediction of market settlement values.
Practical review checklist
- Identify physical versus financial structure, delivery or settlement point, term, and retail arrangements.
- Model output, basis, shape, curtailment, negative prices, delays, and credit or cash stress.
- Confirm certificate rights and reporting evidence separately from energy or financial settlement.
- Obtain qualified legal, accounting, tax, treasury, and technical review before a material commitment.
Questions & answers
Is a virtual PPA the same as buying all my retail power at a fixed rate?
No. It can create a separate financial settlement while ordinary retail supply and delivery charges continue.
Does a PPA automatically transfer renewable attributes?
Only the agreement establishes the included rights. Confirm certificate ownership, delivery, and retirement rather than assume them.
Sources & scope
Primary references reviewed October 15, 2026. These sources support the stated concepts; actual tariffs, program rules and signed agreements govern the account. Decision examples and operational worksheets are original educational analysis.
- EPA: Green power supply options
Renewable procurement structures and REC ownership. - EPA: Renewable energy certificates
Renewable attributes, MWh certificates, retirement, and claims. - FTC: Green Guides
Qualification and substantiation of environmental marketing claims. - FERC: Wholesale electricity markets overview
Wholesale energy, capacity, and ancillary-service functions.