Adoption of VPPAs in Treasuries

4. VPPA and Review of the GHG Protocol



Author: Federico Bellanti

January 27, 2026

VPPA and GHG Protocol review:

What could change under Scope 2 and why this is a topic Treasury should monitor

Virtual Power Purchase Agreements (VPPAs) are often viewed as “energy” instruments. In practice, however, for Finance and Treasury functions they are primarily tools for price risk management and risk allocation over time. That said, in corporate practice VPPAs are increasingly linked to sustainability objectives as well, particularly to Scope 2 emissions reduction claims.


n this context, the proposed revision of the Scope 2 standard of the GHG Protocol deserves attention: not because it challenges the VPPA as a contract, but because it may influence the conditions under which a company can support certain environmental claims in its reporting.

What's Changing in the GHG Protocol – Scope 2 (and what's not)

 The GHG Protocol has launched a public consultation to revise the Scope 2 Guidance, with the aim of improving the quality and comparability of reporting, particularly under the market-based method.


What could change

The proposal introduces more stringent requirements along three dimensions:


  1.  Temporal granularity (hourly matching)
    The attribution of renewable energy to consumption is moving away from purely “annual” matching toward more granular matching (ideally on an hourly basis). In essence, it is no longer sufficient to consider     how much renewable energy a company contracts, but also when that energy is generated relative to the temporal profile of consumption.

  2. Geographic Deliverability
    Greater emphasis is placed on the coherence between the location of generation and the location of consumption: energy (or, more precisely, environmental attributes) should originate from an electricity market area consistent with the point of consumption, reducing claims based on “remote” resources that are not plausibly deliverable.

  3. Additionality (quality of impact)
    Growing attention is being paid to whether a VPPA (or PPA) has contributed to the development of new renewable capacity (for example by making a project bankable). Additionality is not a “technical accounting” concept within Scope 2, but an increasingly relevant criterion in assessing the overall credibility of environmental claims.


What's not changing (key point)

 One point should be clarified immediately: the proposal does not concern the ownership or legal allocation of GO/GoO certificates.


It does not intervene in the functioning of certificate markets, nor does it change the fact that a company may hold GO/GoOs associated with a given plant. The issue is different: it concerns how those certificates can be used (and to what extent) to support a Scope 2 market-based claim within a more rigorous framework.

VPPA, GO/GoO and Scope 2 Claims: an Indispensable Prerequisite

To support a renewable-based Scope 2 market-based claim, the prerequisite remains unchanged:

  • the company must be assigned the environmental attributes (typically through GO/GoOs or equivalent instruments), and
  • those attributes must be retired/cancelled, so that they cannot be used by other parties.


In the absence of attribution and retirement, a VPPA may remain extremely useful as a price-stabilisation instrument, but it does not support a Scope 2 market-based claim. In other words, the revision of the GHG Protocol neither “creates” nor “removes” GO/GoOs; it reiterates that the claim is grounded in the quality and robustness of the instruments and the supporting evidence.


Why this issue is particularly relevant for “pay-as-produced” VPPAs

Many VPPAs are structured as pay-as-produced and are linked to non-dispatchable sources (e.g. solar). In these cases, temporal misalignment is structural:

  • solar generation is concentrated during daylight hours and varies according to season and weather conditions;
  • Industrial consumption is often spread over several hours (or 24/7) and includes demand not covered by solar production.


Under a more hourly-matching-oriented approach, the claim may become more “selective”: it is no longer sufficient, on an annual basis, to hold a volume of GO equal to total consumption; it becomes increasingly important which hours are covered and which are not.


This does not make the VPPA any less “valid”: it simply highlights that a VPPA can be highly effective in hedging price risk over a given profile, while not necessarily “covering” all hours of consumption from an emissions perspective.


Physical VPPAs and PPAs: a distinction that remains, but does not eliminate the issue

Although these considerations largely stem from experience with VPPAs, similar principles could, in time, also affect physical PPAs, particularly where consumption is not perfectly aligned in time with the contracted renewable production.


The core issue, therefore, is not whether a contract is “virtual” or “physical”, but the temporal and geographic coherence between renewable generation and consumption.

How to Read the New Criteria: Practical Examples

Temporal Granularity: what It means in practice

An intuitive example is sufficient to illustrate the concept:

  • a solar plant generates significantly at 12:00 and nothing at 02:00;
  • a factory also consumes electricity at 02:00.


Under annual matching, the company can “on average” offset nighttime consumption with daytime generation. Under hourly matching, that nighttime consumption remains uncovered (or covered only if instruments exist that provide renewable attributes for those hours).


In short, the revision shifts the focus from a “volumetric” concept (annual MWh) to a temporal one (MWh by time interval).


Geographic Deliverability: why it matters

Deliverability introduces a criterion of geographic credibility: attributing renewable energy generated in a very distant electricity market may not be considered equivalent (or fully credible) compared to energy generated within a market area consistent with the point of consumption.


For companies whose renewable plants are “nearby” or within the same electricity market area as consumption, this may represent a strength, as it reinforces the geographic robustness of the claim. Conversely, cross-border or highly abstract schemes may be more exposed to future adjustment requirements.


Additionality: why it is increasingly discussed

Additionality addresses a simple question:

"Did the contract contribute to the development of new renewable capacity?"


A VPPA may be additional if, for example:

  • it supported the bankability of the project;
  • It enabled a plant that would not have been built with the same likelihood without that contract.


It is important not to confuse different layers:

  •  temporal matching and deliverability concern the “quality of the claim" according to the standard;
  • additionality concerns the “quality of impact” and the substantive credibility of the energy strategy.


Even though additionality does not replace (nor automatically “offset”) temporal mismatch, it is an element increasingly considered by stakeholders, investors and ESG rating agencies when assessing the overall robustness of a company’s strategy.


Dual reporting: what it means for corporate reporting

A frequently overlooked but essential aspect is the dual reporting required by the GHG Protocol:

  • Location-based: emissions calculated using average local grid emission factors (reflecting the physical reality of the grid mix);
  • Market-based: emissions calculated considering contractual instruments and environmental attributes (GO/GoOs, PPAs/VPPAs, etc.).


The proposed revision primarily affects how the market-based method is constructed and substantiated. Looking ahead, greater temporal granularity may increase the likelihood that:

  • part of consumption remains covered only under the location-based approach (or residual mix), while
  • only a portion is “matchable” under the market-based method with more stringent requirements.


What Could be Done if the Context Were to Evolve?

Should the proposals under consultation translate into stricter criteria, companies could consider — gradually and selectively — instruments and mechanisms designed to reduce the temporal misalignment between renewable generation and electricity consumption. By way of illustration only:


  • Combining sources with different temporal profiles
    Pairing renewable technologies with different production curves (e.g. solar and wind) can increase the number of hours in which renewable generation is consistent with the consumption profile.

  • Shaping products or firming solutions
    Certain contractual structures allow intermittent production to be transformed into a more regular profile, improving coverage during hours not directly served by the primary renewable source.

  • Storage systems
    In some cases, storage is referenced as a conceptual mechanism to improve the temporal alignment between renewable generation and electricity consumption. In the context of VPPAs, however, such solutions are relevant only in     specific and non-standard configurations, typically where storage is integrated upstream within the project perimeter or the producer’s portfolio and is consistent with the contractual measurement and settlement framework. For this reason, references to storage should be understood as theoretical in nature, and their practical applicability requires dedicated technical and contractual assessment.

These options do not represent mandatory or immediate responses, but examples of how the issue of  temporal matching quality could be addressed should the reporting framework evolve in the direction currently under discussion.

Key Message for Treasury and Finance

The revision of the GHG Protocol:

  • does not change the economic nature of VPPAs as price-risk management instruments;
  • does not alter the legal logic governing the attribution of GO/GoOs;
  • may, however, influence the narrative and measurement of environmental benefits in Scope 2 reporting, particularly where there is temporal misalignment between renewable generation and consumption.


For this reason, Treasury functions as well should view the topic as part of the broader context to be monitored — not to revisit contracts already in place, but to anticipate potential developments in reporting practices and stakeholder expectations.


In an evolving landscape, understanding the implications of these changes at an early stage can make a real difference: Studio Bellanti supports companies in analysing and interpreting these dynamics.