In a move to accelerate India’s clean energy transition, the Central Electricity Regulatory Commission (CERC) has released draft guidelines for Virtual Power Purchase Agreements (VPPAs). These financial contracts aim to help commercial and industrial consumers meet mandatory renewable energy obligations more efficiently.
To support its 2030 climate goals, the government in October 2023 notified Renewable Energy Consumption Obligations (RCOs) under the Energy Conservation Act, 2001. These obligations require electricity distribution licensees, open-access users, and captive power consumers to source a portion of their energy from renewables or face penalties. Consumers may offset shortfalls by purchasing Renewable Energy Certificates (RECs).
The proposed VPPAs, inspired by global best practices, offer a flexible compliance tool. Under this model, a consumer agrees to a fixed VPPA price with a renewable energy (RE) generator. The generator sells the actual electricity on power exchanges, and any difference between the market price and the VPPA price is settled financially between the two parties. The power itself is not physically delivered to the buyer.
The Securities and Exchange Board of India (SEBI) has clarified that since VPPAs are non-tradable, bilateral Over-the-Counter (OTC) contracts, they fall outside the Securities Contracts Regulation Act, and thus come under CERC’s purview.
Once the RE generator is registered under REC regulations, it may sell power on platforms like the Day-Ahead Market (DAM) or Real-Time Market (RTM). The resulting RECs are transferred directly to the VPPA buyer, allowing them to meet RCO requirements or claim green credentials. These RECs, once used, must be extinguished and cannot be traded again.
CERC’s draft rules also emphasize that VPPAs are non-transferable and non-tradable. Disputes will be resolved mutually as per contract terms, offering flexibility while ensuring accountability.
If adopted widely, VPPAs could offer RE developers revenue certainty and simplify green compliance for buyers, potentially accelerating India’s renewable energy adoption and strengthening its climate action efforts.
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