CERC issues framework for virtual power purchase agreements

The Central Electricity Regulatory Commission (CERC) issued the Guidelines for Virtual Power Purchase Agreements (VPPAs) on 24 December 2025. The framework sets out how VPPAs can be used by designated consumers to meet Renewable Consumption Obligation (RCO) targets.

The guidelines are anchored in India’s broader transition towards non-fossil fuel capacity, with a national target of 500 GW by 2030. To support this goal, the Central Government specified minimum non-fossil energy consumption shares for Designated Consumers in October 2023 under the Energy Conservation Act, 2001. These RCO targets can be met either through direct procurement of renewable energy or by using Renewable Energy Certificates (RECs).

CERC examined VPPAs, drawing on international practice, as a compliance option for RCO. Following consultations with the Securities and Exchange Board of India (SEBI), the Commission concluded that VPPAs are bilateral Over The Counter (OTC) contracts that are non-tradable and non-transferable. SEBI observed that when structured as Non-Transferable Specific Delivery (NTSD) contracts, VPPAs fall within CERC’s regulatory jurisdiction and not under the Securities Contracts Regulation Act, 1956.

The guidelines have been notified under Regulation 54(3) of the Central Electricity Regulatory Commission (Power Market) Regulations, 2021, after a request from the Ministry of Power in March 2025.

Under the framework, a VPPA is defined as an NTSD-based OTC contract between a Consumer or Designated Consumer and a Renewable Energy Generating Station (REGS). The consumer agrees to a fixed VPPA strike price for the contract period. The REGS sells the physical electricity through power exchanges or other authorised routes, but not for Renewable Purchase Obligation or RCO compliance. Any difference between the VPPA strike price and the market settlement price is settled bilaterally between the two parties.

The guidelines set out key features of a VPPA. Electricity from the REGS is sold only through routes permitted under the Electricity Act, 2003, or the Power Market Regulations, 2021. RECs issued to the REGS are transferred to the consumer. The contract remains bilateral, non-tradable and non-transferable, with a minimum tenure of one year.

On implementation, consumers can enter into VPPAs with REGSs on mutually agreed commercial terms. The REGS is required to be registered under the applicable REC regulations. RECs arising from capacity tied to a VPPA are transferred to the consumer exclusively for RPO or RCO compliance and are not eligible for trading. Once used for compliance, these RECs are extinguished, while any surplus can be carried forward for future obligations.

Financial settlement under a VPPA is linked to the difference between the agreed strike price and the settlement price, as specified in the contract. Any disputes related to the agreement are to be resolved mutually by the contracting parties in line with their agreed terms.

CERC stated that the guidelines will take effect from a date to be notified separately and will be reviewed periodically.

Access the full document here.

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