Electrify America, the EV charging company created by Volkswagen in the aftermath of its diesel emissions scandal, said on Tuesday that a new, 75 megawatt solar farm in Southern California is now up and running.
Electrify America isn’t operating this solar farm. Instead, the company struck a 15-year virtual power purchase agreement (VPPA) with renewable energy developer Terra-Gen. It’s the latest development in Electrify America’s efforts to link itself to renewable energy projects. The firms broke ground on the plant back in February.
Your typical VPPA involves a buyer, which pays a fixed price for whatever energy is generated, and a seller, which generates the energy and sells it via the grid for the buyer at market rates. The buyer assumes some risk, because the seller might wind up selling the energy below the fixed rate. Yet, the buyer could also see the upside if market prices trend above the fixed rate.
In other words: Electrify America is taking on some risk with this deal, and in exchange it gets to say it’s helping clean up the grid while potentially benefiting from rising energy prices.
Renewable energy developers play a crucial role in decarbonizing the grid, but just how far do VPPAs go in mitigating climate change? This seems to be an open question. Even Electrify America’s press release leaves some wiggle room on this front: “This brand new construction contributes to ‘additionality,’ by producing new renewable energy that may not otherwise be available,” the company said in a statement (emphasis ours).
Might another buyer have stepped in if Electrify America hadn’t? Like any offset-related deal, it’s difficult to say whether the agreement is facilitating something that definitively would not have happened otherwise. (If you are aware of any academic studies on the environmental impact of VPPAs, please get in touch at email@example.com.)
For its part, Electrify America states that the peak energy its investment will generate is “comparable to the power drawn by 500 EVs charging at once at an average speed of 150 kilowatts.” The solar farm’s annual “production is projected at 225 Gigawatt-hours,” Electrify America adds. In an earlier press release, the firm claimed the outcome of this deal will be “comparable to the carbon sequestered by planting nearly 40 million trees.”