Cummins has entered into a 15-year Virtual Power Purchase Agreement more commonly known in the industry as a VPPA. It guarantees the wind farm a fixed price for the power Meadow Lake VI generates, providing some certainty to the expansion that helped it move forward.
The VPPA provides Cummins with a hedge of sorts against rising energy prices. The company pays or receives the difference between the contract price and the market price of the energy the expansion produces. Cummins also receives something called renewable energy certificates, or RECs, to demonstrate its greenhouse gas reduction efforts. One of the company’s energy related goals is to promote the development of low carbon energy.
VPPAs provide the opportunity for companies to drive development of new, large-scale renewable power where it is the windiest or sunniest. While Cummins is also installing solar systems at many of its facilities, it is impossible to generate the magnitude of power onsite that’s possible at the Meadow Lake expansion, which is located along a windy stretch of northwest Indiana between Lafayette and Chicago.