1. What are megawatts (MW), gigawatts (GW), and terawatts (TW)?A megawatt is a unit of power which is equal to one million watts:
1 megawatt = 1 million watts
1 gigawatt = 1 billion watts or 1000 megawatts
1 terawatt = 1 trillion watts or 1000 gigawatts
2. What is a megawatt hour (MWh)?A MWh is the amount of electricity generated by one megawatt in one hour.
3. What do these other acronyms and terms mean?ESG: environmental, social and governance
GHG: greenhouse gas
CPPA: corporate power purchase agreement
PPA: power purchase agreement
VPPA: virtual power purchase agreement
GoO/GO: guarantee of origin
RE: renewable energy
REC: renewable energy certificate
REGO: renewable energy guarantee of origin
4. What’s the difference between a physical PPA and a virtual PPA?
Both physical and virtual PPAs are attractive green power procurement options.
A PPA is a contract for the purchase of power and associated certificates from a named renewable asset. PPAs allow both the energy generator and the customer to hedge against price volatility in the electricity market. It offers the customer a predictable cost for their electricity use and therefore budget certainty. At the same time, it offers project developers such as Ørsted a predictable revenue, which is key to the continuous build-out of renewable energy assets such as wind or solar farms. Such agreements promote growth in the renewable energy sector.
With a physical PPA, the energy generator, Ørsted, and the buyer must be located in the same power market, or in two markets with connected grids, to allow for physical delivery of the electricity. The buyer will also receive a certificate for every MWh purchased. The certificates prove that the energy purchased comes from a specific renewable asset and can be used to support their scope 2 GHG reporting.
With a virtual PPA, there’s no physical delivery of electricity; the buyer never takes legal title to the electricity. It’s a financial contract that provides a fixed price hedge. However, the buyer still receives certificates for every MWh purchased. The certificates prove that the energy purchased comes from a specific renewable asset and can be used to support their scope 2 GHG reporting.
The net result of a virtual PPA is a less volatile cost of electricity for the customer and therefore budget certainty.
5. What are the advantages of a PPA vs certificates?
Each MWh of green electricity produced is worth one green certificate. Certificates are used for tracking the specific location where the renewable energy is produced and by which technology (e.g. wind or solar). It allows corporations to document their electricity consumption from a specific renewable asset, such as a wind or solar farm, and to report on their sustainability efforts.
When procuring energy through a CPPA with Ørsted, a certificate is delivered with every MWh purchased. In this case, the certificate is directly related to the renewable asset and the amount of electricity purchased. This is a very transparent way for corporations to report on their scope 2 GHG emissions.
Certificates that aren’t tied to a PPA can be sold on the open market as an energy commodity. In this case, the price of certificates is as volatile as the market it represents. Certificates alone aren’t linked to the power that a corporation buys.
6. How is the power delivered from Ørsted to my business?
Ørsted will deliver the power to your energy supplier on your behalf. The renewable energy asset (e.g. a wind or solar farm) generates power that’s fed into the grid and will be transferred to your energy supplier. Your energy supplier will then deliver this volume to the point of consumption under your supply contract. This is referred to as a ’sleeved’ PPA.
Your energy supplier takes care of the final shaping to match your consumption and delivery of the power, while Ørsted handles the generation, price, and certification. Ørsted can also shape the delivery profile, for example to a baseload block where you’d receive the same power for every hour of every day.
7. Why choose Ørsted?
Ørsted has undergone its own transformation from a fossil fuel company to being ranked the most sustainable energy company in the world, three years in a row, by Corporate Knights' Global 100 Index. Ørsted is the global leader in offshore wind. We have extensive experience in building, owning, and operating wind farms around the world.
Our team members are experts in PPAs. We’re here to help you understand and navigate the complexities of the agreement, right from the initial contact. We can also help you gain buy-in within your organisation, for example by presenting our company to your internal stakeholders.
8. Does it matter which energy source I get my PPA from?While offshore wind has a higher capacity factor, every renewable energy asset has its advantages. We recommend choosing an energy source that most closely matches your business’s sustainability goals, as well as your annual power demand.
9. What happens if there’s no wind?With an Ørsted CPPA, we can manage this kind of risk on your behalf and guarantee a fixed delivery volume of energy (baseload). This differs from some other PPA structures where no wind would mean no power.
10. Can I claim a reduction in emissions from a PPA?
Every MWh purchased with a CPPA comes with a REGO certificate. The certificate is associated with the 1 MWh of renewable energy generated and proves that the electricity purchased is renewable and comes from a specific asset. Certificates can be used to account for a corporation’s carbon emission reduction.
Certificates show the environmental part associated with renewable energy and bear different names in different regions:
In the UK, the Office of Gas and Electricity Markets (Ofgem) issues renewable energy guarantees of origin (REGOs) to renewable energy generators.
Continental Europe: GO
A guarantee of origin (GoO or GO) is the European scheme that provides information on the renewable energy source.
In the United States, renewable energy certificates (RECs) are also known as green tags, renewable energy credits, renewable electricity certificates, or tradable renewable certificates (TRCs).
11. Is there a lower limit for the volume of energy my PPA covers?The volume doesn’t have to cover 100 % of your consumption. However, our PPAs normally have a lower total volume limit of 100 GWh. We recommend that you discuss your business need with one of our PPA experts.
12. I want to enter a PPA with Ørsted. How do I get started?
13. What is additionality in the renewable energy industry?Organisations buying a PPA with additionality are guaranteeing to purchase the offtake of a new project at a fixed price. This positively influences the financial investment decision that allows a new renewable generation project to be built, which will bring additional green energy to the grid.