India's Green Energy Push: CERC Drafts VPPA Framework

The Central Electricity Regulatory Commission (CERC) has issued draft guidelines to establish a regulatory framework for Virtual Power Purchase Agreements (VPPAs), aiming to support enterprises and designated consumers in meeting Renewable Energy Consumption Obligations (RCO) under the Energy Conservation Act, 2001.

VPPAs are defined as non-transferable, over-the-counter (OTC) financial contracts between renewable energy (RE) generators and consumers. These contracts do not involve physical delivery of electricity. Instead, consumers pay a fixed VPPA price, while RE generators sell power on the market. The difference between the market price and the VPPA price is settled financially between the two parties. In a letter dated 3 March 2025, the Ministry of Power directed CERC to formalize this mechanism.

On 31 January 2025, SEBI clarified that since VPPAs are non-tradable OTC contracts, they fall outside the scope of the Securities Contracts Regulation Act, 1956. The draft requires RE generators to register under the REC Regulations, 2022. Renewable Energy Certificates (RECs) generated through VPPAs must be transferred to consumers and extinguished, not traded. CERC is currently inviting stakeholder feedback before finalizing the framework—an important step toward achieving India’s target of 500 GW of non-fossil fuel capacity by 2030.

News by Rahul Yelligetti.