The Central Electricity Regulatory Commission (CERC) has released draft guidelines for virtual power purchase agreements (VPPA), which could evolve as another instrument to enable the designated consumers to meet their renewable consumption obligation (RCO) targets.

These guidelines aim to help India achieve its goal of 500 GW of installed capacity from non-fossil fuel sources.

The Commission said that a VPPA consumer or a designated consumer may enter a long-term bilateral VPPA with a renewable energy generator at an agreed-upon price.

If the generator sells electricity components through power exchanges (in day-ahead market or real-time market segments) or any other mode authorized under the Electricity Act 2003, the consumer will receive renewable energy certificates (REC).

The consumer can use such RECs for RCO compliance or to claim green attributes. Such RECs will not be approved for trading.

A consumer can enter a VPPA directly through a trader or by listing on an over-the-counter platform granted registration by the CERC on mutually agreed terms and conditions.

The VPPA contracts are non-tradable and non-transferable, and the terms for the entire contract period will bind the contracting parties.

The difference in price from the sale of electricity through power exchanges or any other mode by the renewable energy generators and the VPPA and market prices will be settled bilaterally between the contracting parties.

Once the consumer receives the REC for the capacity contracted through the VPPA, they must inform the REC Registry about the same.

The parties must mutually settle any disputes arising from the VPPA per the contract’s terms.

Recently, CERC issued directions to power exchanges, focusing on reforming contract design, trading mechanisms, and operational transparency. Stakeholders and the Ministry of Power had flagged steep and sustained price premiums in DAC contracts beginning in October 2023.

In April this year, CERC invited stakeholder feedback by April 23, 2025, on a proposal by the Indian Energy Exchange to introduce real-time trading in renewable energy.

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