HEINEKEN, Philips, Signify and Nouryon form consortium for a pan-European virtual Power Purchasing Agreement (virtual PPA) for renewable energy

What is a virtual Power Purchasing Agreement?

A virtual Power Purchase Agreement (virtual PPA) is an agreement between a company and a power generator in which the company guarantees a pre-negotiated fixed price for the generator’s energy output, without any physical energy flowing via the grid from the generator’s facilities to the company’s facilities. The output from the power generator is sold to local grid operators at a commercial rate, which continuously varies depending on local supply and demand conditions. If this rate is higher than the negotiated fixed price, the monetary difference is normally transferred from the generator to the company. If the rate is lower than the negotiated fixed price, the company makes up the difference to the generator. For renewable energy sources, such as wind or solar farms, the company typically also acquires the power generator’s Renewable Energy Certificates (RECs) or Guarantee of Origin (GoO) certificates.

Expanding renewable energy generation in Europe

The HEINEKEN, Philips, Signify and Nouryon consortium has signed a 10-year virtual PPA with windfarm company Neoen. Having the guarantee of a fixed price for its renewable electricity will help Neoen raise the investment needed to build an additional 126 Megawatt capacity in the Mutkalampi region of Finland. By negotiating directly with the windfarm developer, the consortium guarantees that for every MWhr of electrical energy its members consume, a MWhr of clean energy is generated, helping them meet their greenhouse gas emissions targets. Equally important, the agreement specifically relates to renewable energy expansion, not energy from existing renewable sources. Together, the consortium members will be securing an estimated 330 Gigawatt hours of additional renewable energy in Europe per year.

Philips’ commitments

Philips already has an interstate virtual PPA agreement to meet its renewable energy targets in the U.S., and as part of a consortium comprising Philips, Nouryon, DSM and Google, it has two long-term Power Purchase Agreements (PPAs) to purchase the output of the Bouwdokken and Krammer wind farms in the southwest of the Netherlands.

Together with today’s announcement, these agreements form part of Philips’ ESG strategy to be a purpose-driven company with an enhanced and fully integrated approach to doing business responsibly and sustainably. Its ESG pledges, which are in line with the Paris Agreement 1.5⁰C scenario, include a commitment to source 75% of the company’s total energy consumption from renewable sources by 2025.