Top 5 Benefits of Virtual PPAs for Corporates, And Why They Haven't Worked So Far

VPPA is a financial contract for difference (CfD) between a renewable energy generator, such as a solar or wind project developer, and a corporate buyer. It is redefining the way corporates procure renewable energy, especially solar, without the constraints of physical delivery, that is there is no physical delivery of electricity to the buyer in this case. 

The arrangement is purely financial, which means that the buyer pays a fixed price for the environmental attributes, typically Renewable Energy Certificates (RECs), linked to a project, while the generator sells the electricity into the market at market prices.

Why Delayed in India? 

Despite the ease, convenience and proven efficiency globally, the financial arrangement has so far made little to no progress in India. This is mostly due to a history of legal dispute between the Central Electricity Regulatory Commission (CERC) and Securities and Exchange Board of India (SEBI) contesting regulatory jurisdiction over the new market instruments, like VPPA, that ended in October 2021. 

Following this, few VPPA-based renewable projects have come up. For instance, one of India's first operational VPPA was commissioned by Cleantech Solar in September 2023. This pioneering solar plant is registered under the International Renewable Energy Certificates (I-RECs) mechanism, with green attributes being purchased by a leading FMCG company.

Apart from this legal war, some challenges persist, which India needs solving before VPPAs takeoff for good. These include, the non-binding nature of CERC draft guidelines, Industry experts note that the guidelines do not fully address critical implementation issues, and there remains uncertainty regarding government responsibility for risk mitigation if VPPA arrangements fail. 

Furthermore, the price discovery mechanism is hazy, The guidelines suggest that traders or OTC platforms can determine strike prices, but lack a defined role for power exchanges or government agencies. This absence of standardized, transparent price discovery mechanisms creates potential for market distortions and win-lose scenarios. 

If the challenges are tackled efficiently, VPPA has the potential to be an enabler for renewable energy participation by wider consumer base. Even the Central Electricity Regulatory Commission (CERC) has argued that the VPPA can serve as an enabling instrument for Designated Consumers to meet their RCO targets. In addition to releasing draft guidelines for VPPAs, CERC even sought SEBI’s opinion on the regulatory jurisdiction over VPPAs.

Building on that, we look at the top five reasons why VPPA offer a great solution to extend the renewable energy revolution to aspiring solar consumers in India.

#1 Unlocks Solar Projects at Scale

By allowing corporates to financially underwrite solar projects without handling physical power delivery, VPPAs create a massive new financing avenue.​

India’s Central Electricity Regulatory Commission (CERC) is finalising its VPPA framework to unlock financing for over 40 GW of uncontracted renewable projects a move that could significantly accelerate India’s 500 GW non-fossil energy capacity target by 2030. 

Globally, more than 80 percent of US corporate renewable energy contracts are now structured as virtual agreements, according to CRISIL Intelligence. This model’s scalability - driven by its simplicity and market flexibility - efficiently de-risks sunk capital in utility-scale solar farms and encourages faster project commissioning timelines.​

#2 Enables Green Energy Access Without Grid Bottlenecks

Traditional corporate PPAs often struggle with transmission congestion and state-level open access restrictions. Currently, around 50 GW of renewable energy capacity remains stranded across India due to transmission bottlenecks, resulting in cost overruns, delayed returns, and diminished investor confidence, a study by the Institute for Energy Economics and Financial Analysis (IEEFA) notes.

VPPAs bypass such bottlenecks by settling contracts financially, meaning that the generated solar energy is injected into the grid while the buyer receives renewable energy certificates (RECs) or equivalent credits.​

This allows companies to go 100 percent renewable without physically connecting to the project, making it especially valuable for multi-location corporates and industries in states with transmission limitations. 

In June 2025, India’s proposed Power Market Regulations explicitly highlighted that VPPAs would boost renewable trading without transmission bottlenecks, an innovation particularly useful for large industrial consumers with renewable consumption obligations (RCOs) under the Energy Conservation Act.​

#3 Encouraging Additionality in Renewable Capacity

Despite an existing surplus of RECs, VPPAs are preferred by companies seeking "additionality," meaning they specifically drive new renewable capacity additions. This makes VPPAs a credible and traceable method for supporting new solar and wind capacity development beyond existing supply.

International precedent also makes the case for VPPAs. According to Bloomberg New Energy Finance data cited in multiple sources, in 2019, approximately 100 global corporations signed clean energy contracts for 19.5 GW of capacity, with 80% structured as VPPAs. This demonstrates the mechanism's proven effectiveness in driving renewable energy investments at scale, particularly among multinational technology and e-commerce companies.

#4 Drives Corporate ESG and Net-Zero Goals

Corporations globally are under mounting scrutiny to decarbonise their operations. VPPAs offer a robust, traceable mechanism for achieving these sustainability goals. 

The renewable certificates transferred under these contracts cannot be traded, ensuring genuine green claims and strong alignment with ESG compliance frameworks.​ 

Leading Indian and global firms, from FMCG majors to tech giants, are now leveraging the model to support RE100 and Science-Based Targets (SBTi). Cleantech Solar’s maiden VPPA in India, signed with a leading FMCG company, enables it to support solar capacity expansion without owning or operating a plant, a format replicable across sectors.​

Additionally, CERC has made VPPAs eligible for Renewable Energy Consumption Obligation (RCO) compliance, effectively making them a go-to mechanism for corporates aiming to meet mandated green sourcing targets.​

#5 Offers Flexibility and Market-driven Hedging

Unlike traditional PPAs tethered to a single location or grid node, VPPAs let corporates contract with a solar generator anywhere in the country (or even globally) while remaining financially settled. 

The difference between the agreed VPPA price and the market-clearing price is adjusted through a cash settlement, turning the instrument into a market-based sustainability hedge.​

This flexibility empowers corporates to manage their energy portfolios dynamically. They can diversify solar procurement across multiple regions and sources without infrastructure lock-ins. Moreover, standardised non-transferable specific delivery (NTSD) contracts under CERC guidelines ensure transparency and reduce regulatory ambiguity—key to scaling virtual RE markets sustainably.​

Furthermore, while electricity derivatives and VPPAs both hedge against price volatility, VPPAs offer significantly broader utility. Derivatives are purely financial instruments with no renewable attribute transfer. On the other hand, VPPAs enable designated consumers to achieve two objectives simultaneously: hedge market risk and comply with Renewable Consumption Obligations (RCO). By transferring renewable attributes alongside price certainty, VPPAs function as a more complete renewable integration tool, one that addresses both financial and sustainability imperatives in a single agreement.