CERC Finalises Regulatory Framework for Virtual Power Purchase Agreements in India

India’s VPPA Framework Signals a Major Shift Toward Financially Structured Renewable Energy Procurement The Update Finally, CERC has developed the Guidelines for the Virtual Power Purchasing Arrangement which brings a set of rules on the implementation of the VPPA in India and seeks to include the mechanism within the Indian renewables-powersystem context. A Virtual Power Purchase Agreement is a type of financial contract that has a link to renewable energy generation.

Key Takeaways

• India’s VPPA Framework Signals a Major Shift Toward Financially Structured Renewable Energy Procurement The Update Finally, CERC has developed the Guidelines for the Virtual Power Purchasing Arrangement which brings a set of rules on the implementation of the VPPA in India and seeks to include the mechanism within the Indian renewables-powersystem context.
• After that with this clarification, the Ministry of Power advised CERC to constitute a formal Vice President Purchase Agreement (VPPA) system, resulting in the final VPPA Guidelines in 2026.
• A Virtual Power Purchase Agreement is a type of financial contract that has a link to renewable energy generation.
• Different from standard power purchase agreements, VPPAs do not require a direct physical delivery of electricity from the renewable sources of power to the customer.
• CERC by formally recognizing Virtual PPA and aligning it with REC regulations and power market structure through CERC regulations has established a regulated route for long-term purchase of renewable energy using financial settlement mechanisms.

India’s VPPA Framework Signals a Major Shift Toward Financially Structured Renewable Energy Procurement

The Update

Finally, CERC has developed the Guidelines for the Virtual Power Purchasing Arrangement which brings a set of rules on the implementation of the VPPA in India and seeks to include the mechanism within the Indian renewables-powersystem context.

The Impact

The mechanism establishes a formal way for consumer and designated consumer to fulfill renewable energy requirements and meanwhile to maintain the investment in long-term renewable energy projects and avoid price fluctuation.

The Action

All business, RE projects developer and obligated entities needs to be scrutinised the VPPAs structures as India's renewable compliance and green procurement market emergences.

Background Behind the VPPA Framework

The VPPA construct evolved incrementally through a series of regulations and policy developments from 2022 to 2026. Revamped Energy Conservation Act, 2001: as per the revised Energy Conservation Act, Government laid down the Renewable Consumption Obligation obligations for specified consumers encouraging consumption of non-fossil energy. Simultaneously, doubts began emerging about the regulator that would be overseeing VPPAs in India.

It was unclear whether the contracts would be regulated under securities law or the electricity markets regulation. In January 2025 SEBI clarified that VPPAs would also be note as falling outside securities regulation if these were designed as non-transferable specific delivery based OTC contracts. After that with this clarification, the Ministry of Power advised CERC to constitute a formal Vice President Purchase Agreement (VPPA) system, resulting in the final VPPA Guidelines in 2026.

What Exactly is a Virtual Power Purchase Agreement?

A Virtual Power Purchase Agreement is a type of financial contract that has a link to renewable energy generation. Different from standard power purchase agreements, VPPAs do not require a direct physical delivery of electricity from the renewable sources of power to the customer. But, the arrangement is structured on a financial basis in the form of a contract-for-difference. The electricity from the renewable energy generating station will have a physical electricity component that is sold on approved market pathways.

The customer and generator establish a predetermined "VPPA Strike Price". If the market settlement prices are not matched up against the agreed strike price, a monetary exchange takes place between the two parties. Simultaneously, any renewable energy certificates due to the system nature tied to the generated electricity are assigned to the consumption site for renewable compliance reasons. This enables a business to capture the renewable electricity attributes and hedge electricity prices volatility without the need for physical link to the generation asset.

Key Features of the VPPA Guidelines

The final set of VPPA Guidelines published by CERC stipulate these are the key terms and conditions that any agreement has to fulfill to become a valid VPP in India. First, the transaction needs to be one which involves an actual physical delivery of electricity produced by a renewable energy source via an authorized market channel. Secondly, the Renewable Energy Certificates (REC) assigned to this generator are transferred to the contracting consumer or designated consumer.

Third, the VPPA must trade as a bilateral over-the-counter contract and be non-transferable/tradable. Finally, it must have a lead-time of at least 1 year. The model So makes it explicit that several renewable resources e.g. projects with battery energy storage systems are all eligible for participation in the VPPA. This technology-neutral route is anticipated to pave the way for wider application across various renewable energy sectors rather than solely targeting solar or wind projects.

How RECs and Compliance Will Work?

RECs are the foundation of the VPPA structure. In the new scheme, generators of renewable energy sending station that enters into VPPAs will procure RECs for the up-to-deemed-eligible generation, and those certificates will be deemed transferred to the contracting consumer or the standing consumer of the advance authorization. The Certificates would be nullified through the registration system (similar as used today for the compliance of the current Renewable Consumption Obligation or the of the current Renewable Purchase Obligation) once transferred and used for an RPPC. 10. A further significant aspect of this structure is strict non-tradability. Any excess RECs acquired under VPPAs are not tradable or sellable through exchanges.

They can be carried forward until they are used for next year's compliance. CERC clarified that international renewable certificate schemes, like I-RECs, do not fall within the purview of the VPPA Guidelines now as the structure is meant mainly to facilitate domestic renewable compliance and capacity addition in India.

Role of CERC, SEBI, and Power Exchanges

In addition, the clustering of the various international institutions that compose the VPPA gives a mutually reinforcing, rather than competitive, set of institutional regulators. CERC is the definitive regulator for the overarching regulations and for market integration issues. The clarification by SEBI earlier on dispelled the doubt on jurisdiction as it stood that if VPPAs (ie combinations of structures and forms of VPPAs) were designed appropriately they would not attract securities market regulation.

Power trades still occur as renewable energy projects can trade physical energy within sanctioned market segments while some of the 'green' market segments don't receive REC issuance in VPPA case. Grid India will also be responsible for the registry accounting monitoring and extinguishment processes on RECs in the VPPA ecosystem.

Why VPPAs Matter for India’s Energy Transition?

The conclusive writing of VPPA regulation is significant because it establishes a financially scalable model for the rapid adoption of renewable energy in India. For renewable energy developers, VPPAs offer long term revenue certainty through secure, contracted strike prices. This assists in the bankability and financing the project. The structure brings customers with a structured approach for satisfying their renewable energy requirements and giving long-term protection to electricity prices.

The model is aligned with India's other ambitious renewable energy targets as it brings into the loop corporate players to procure clean energy without the need for such cumbersome physical delivery arrangements. Policywise, the structure extends India's power market by integrating increasely sophisticated financial layers that are tied to renewable generation and environmental requirements.

SECI’s Proposed VPPA Initiative

The Solar Energy Corporation of India has taken the first step toward operational implementation of the VPPA ecosystem. In April 2026, SECI issued EoIz for the eligible consumers and designated consumers that aimed at renewable energy purchases from a VPPA. The goal is to evaluate market demand, aggregate procurement needs, and ultimately to develop a competitive bidding process for VPPA strike price discovery. SECI is an important participant given that its action may encourage the standardization of procurement structure, minimizing the transaction costs and opening a faster time-to-market for the VPPAs. This also shows that VPPAs are no longer only policy discussion concepts but instead are in the process of being operationalised in the renewable energy market in India.

Conclusion

The signing of an India's VPPA system can be seen as a significant step forward in the realms of renewable energy and electricity market in India. CERC by formally recognizing Virtual PPA and aligning it with REC regulations and power market structure through CERC regulations has established a regulated route for long-term purchase of renewable energy using financial settlement mechanisms. This setup will probably promote renewables investment, enhance compliance mechanisms and achieve India's overall decarbonization goals. Many more questions related to implementation and scope of the market may be resolved over time But the VPPA Guidelines provide a strong indication of the transition India is making to a more mature and financially integrated renewable energy market ecosystem.

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