Renewable energy (RE) adoption in India is poised for a major boost.
The Central Electricity Regulatory Commission (CERC) has released draft guidelines on ‘virtual power purchase agreements’ (VPPAs) for public comments. As many as 61 responses were received — including from global corporations such as Google and Accenture, Indian renewable developers like ACME and ReNew Power, energy exchanges, think tanks such as CEEW and Prayas Energy, and the government’s auctioning agency SECI. A public hearing has also been held. In short, India will soon have a regulatory framework for VPPAs — guaranteeing RE developers a minimum price (see box). The new regime is expected to drive the creation of more renewable capacity.
In India, merchant RE plants — projects not tied to long-term PPAs — have been slow to take off because banks hesitate to finance projects without an assured revenue. VPPAs resolve this issue by guaranteeing a minimum price.
Rohit Bajaj, Joint Managing Director, Indian Energy Exchange, believes VPPAs are “poised to enhance merchant power capacity in India”. These financial contracts, he told businessline, “serve a dual purpose — ensuring stable revenue for RE merchant generators while enabling corporates to procure green attributes cost-effectively, to offset their carbon emissions”.
While there is no authoritative data on India’s existing merchant power capacity, estimates put it at 25 GW; VPPAs are expected to increase this significantly.
CERC is now finalising the VPPA guidelines. In the meantime, it has introduced one key change — allowing the carry-forward of the renewable energy certificates (RECs) issued to a VPPA counterparty from one year to subsequent years. Beyond this, it is not clear what the final framework will look like, though the 61 comments received will undoubtedly shape the outcome.
Here’s a look at some of the key stakeholder suggestions.
Several, including ReNew, have urged the CERC to elevate the draft from guidelines to regulations, to give it a stronger legal standing.
The draft currently states: “A consumer or a designated consumer may enter into a long-term bilateral virtual power purchase agreement (VPPA) with a renewable energy (RE) generator at a mutually agreed price (VPPA price).”
ReNew and the National Solar Energy Federation of India (NSEFI) have questioned the restriction to long-term agreements, suggesting that short-term VPPAs should also be allowed. “Given the presence of merchant renewable projects, there is already a viable opportunity for short- to medium-term VPPAs, including durations as short as six to seven months,” ReNew has said.
The most common demand from stakeholders is to expand the benefits of VPPAs beyond RECs. The draft guidelines currently restrict VPPA participation to companies seeking RECs.
A VPPA is an agreement between a renewable energy company (such as ReNew) and a corporate consumer (like Google). Under this agreement, the developer does not supply energy directly to the consumer — hence the term virtual. The two parties agree on a ‘strike price’.
The developer sells power to third parties — either through long- or short-term PPAs or on energy exchanges. If the sale fetches a price lower than the strike price, the VPPA counterparty (say, Google) pays the developer the difference. If the market price is higher, the developer pays the difference to the VPPA counterparty (in a typical contract).
In return, the corporate counterparty receives the green attributes of the energy — in India’s case, these are renewable energy certificates (RECs), as specified in the draft guidelines. Purchasing these green attributes allows the company to meet its renewable purchase obligations or sustainability targets.
VPPAs thus guarantee a minimum price to the RE developer, allowing them to sell electricity on the market — via energy exchanges — without locking into long-term PPAs.
Accenture notes, “The current draft restricts VPPA buyers to consumers or designated consumers, with a focus on REC acquisition only. Expanding this to allow foreign corporations — especially those seeking energy attribute certificates (EACs) for ESG reporting — can unlock significant foreign capital and increase RE capacity deployment.”
Google echoes this, saying, “Parties should be free to agree on the type of environmental attributes (EAs) transferred under the VPPA and not be restricted to only RECs.”
It has suggested including “any other globally recognised EA registry, such as International-RECs.
Similarly, the US-India Strategic Partnership Forum argues that “limiting the use of VPPAs to compliance entities to meet renewable consumption obligations would be detrimental to the Indian renewable energy sector by constraining the availability of offtake agreements, thereby limiting financing and project development”.
Under the current draft, RECs issued under a VPPA cannot be traded — they can only be used to meet compliance obligations.
NSEFI, however, wants trading freedom for VPPA counterparties.
The Solar Energy Corporation of India (SECI), the government’s nodal agency for renewable auctions, has suggested discouraging plain solar projects in VPPAs.
SECI warns that too many solar-only projects could flood the grid during solar hours, pushing down exchange prices and creating a large gap between the VPPA strike price and the market price — ultimately imposing a financial burden on VPPA consumers.
To illustrate, the corporation noted that the average day-ahead market price between 9 am and 6 pm dropped from ₹3.22 per kWh in May 2024 to ₹1.97 per kWh in May 2025.
Published on October 27, 2025
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