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In May 2025, the Central Electricity Regulatory Commission (CERC) released for virtual power purchase agreements (VPPAs), a significant step towards integrating renewable energy into 含羞草社区 power sector. These guidelines propose a regulatory framework, allowing companies to align contractually with renewable energy generation, claim associated environmental attributes and advance their sustainability objectives. All this will be done without procuring electricity physically.

VPPAs are financial contracts between a renewable energy generator and a corporate buyer. A VPPA fixes the price the buyer pays for renewable energy, while the generator sells the electricity into the market. Typically, if the market price exceeds the fixed price, the generator pays the difference to the buyer and should the market price fall below the fixed price, the buyer pays the difference to the generator. This allows companies to support renewable energy projects and hedge against market price volatility without altering their physical electricity supply arrangements.

The renewable energy certificate (REC) framework of the CERC (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation) Regulations, 2022 (REC regulations), provides a market-based route for renewable purchase obligations (RPO) compliance. In 2023, the Ministry of Power (MoP) introduced renewable energy consumption obligations (RCO) under the Energy Conservation Act, 2001. These opened mandatory renewable energy procurement to more categories of consumers such as distribution licensees, open access consumers and captive users.

Because contracts began to include financial instruments such as VPPAs, the Securities and Exchange Board of India (SEBI) and the CERC clashed over jurisdiction. The Supreme Court decided that contracts for the physical delivery of electricity, particularly non-transferable specific delivery contracts, are within the CERC’s jurisdiction. Whereas purely financial instruments are under the SEBI’s oversight. The CERC and the SEBI agreed in January 2025 that VPPAs, as bilateral, non-transferable and non-tradable over the counter contracts, shall be governed by the CERC. To develop a comprehensive VPPA regulatory framework, the CERC released these draft guidelines. They will let VPPAs operate as legitimate mechanisms for RCO compliance. VPPAs are defined as long-term, non-transferable, specific delivery contracts executed bilaterally over the counter (OTC) between a renewable energy (RE) generator and a consumer. The VPPA price, mutually agreed, is the financial basis of the agreement. The RE generator sells electricity through power exchanges, either day-ahead or real-time markets, or any other route authorised under the Electricity Act, 2003. The consumer receives RECs derived from market sales. These can be used for RCO compliance or to claim green credits.

Consumers and designated consumers, as defined in the Electricity Act, 2003 and the Energy Conservation Act, 2001 respectively, may enter into VPPAs either directly, through registered traders, or by listing contracts on OTC platforms recognised by the CERC under the Power Market Regulations, 2021. All RE projects in VPPAs must be registered under the REC Regulations.

Although the generator sells electricity into the market, the difference between the VPPA price and the actual market realisation is settled through mutually agreed terms. This gives RE generators revenue certainty and consumers price visibility, without a physical connection.

The RECs generated from the sale of electricity are directly transferred to the consumer or designated consumer and may not be used for further trading. On receipt, the consumer must inform the REC Registry, which then voids the RECs. This ensures the authenticity of the environmental attributes and aligns with particular compliance requirements.

Disputes are resolved in accordance with contractual terms. This minimises regulatory involvement and supports autonomy. These guidelines are pivotal for renewable energy by introducing a flexible procurement mechanism giving greater access to green attributes and supporting decarbonisation goals. Feedback on the draft is vital to ensure this forward-looking framework is one that balances innovation, compliance and long-term sustainability.

Rahul Bangia is a senior associate and Utkarsh Mishra is an associate at Sarthak Advocates & Solicitors